Arizona will use up to $30 million in federal COVID relief funds to pay off up to $2 billion in medical bills owed by state residents.
Jeff Smedsrud, a board member of RIP Medical Debt, said Monday his charity will use the money from the state to buy up unpaid medical bills from hospitals, health-care providers and debt collectors.
He said his organization can usually do that for pennies on the dollar, meaning the state’s money effectively is multiplied.
Jeff Smedsrud, a board member of RIP Medical Debt, explains Monday how his organization uses donations to pay off medical bills for patients who meet certain income limits.
The program, announced by Smedsrud and Gov. Katie Hobbs, is designed to benefit anyone with medical debt whose income is less than 400% of the federal poverty level. That is currently $124,800 for a family of four.
Also eligible are those whose debt is 5% or more of their annual income. That would aid those who have higher income levels than the cutoff but much higher debt than they may be able to handle.
Those are the only qualifications, said Smedsrud, a Scottsdale resident.
“We don’t pick elderly people versus younger people, people of color versus not,” he said.
Most significant, no one needs to apply. In fact, you can’t.
"We work with TransUnion Healthcare, a subsidiary of FinThrive, one of the main reporting agencies,'' said Daniel Lempert, a spokesman for RIP. "We buy relevant income data from them to confirm who qualifies for our program in the files we review from providers of past-due medical debts.''
Smedsrud said only after the debt is paid off does the patient get a note that the debt is gone and that the credit bureaus have been notified.
He also said the patients are not told who has provided the money. That anonymous donation, Smedsrud said, means the debt relief does not become a taxable event for the recipient.
At that point “a beautiful thing happens,’’ he said. “Those for whom the debt is erased begin to engage in preventive care, which saves money. They begin to lead a healthier life. They become more likely to start a business, which is good for the economy.’’
Smedsrud said that since the organization was founded in 2014 it has erased nearly $11 billion in medical debt owed by about seven million individuals, some through individual donations and some through partnerships with local governments including Cook County, Illinois, where Chicago is located.
The Arizona deal, he said, is the largest in the organization’s history.
There already are programs for the poor, including the Arizona Health Care Cost Containment System, the state’s Medicaid program. But it provides state-funded insurance only for those earning up to 133% of the federal poverty level, or about $42,000 a year for a family of four.
“Hardworking, middle-class Arizonans should not be forced to have those difficult kitchen table conversations because of medical debt from conditions they cannot control,’’ Hobbs said.
The governor said there’s nothing illegal about the state using money it received from the federal government to pay off the medical debts of private Arizonans. That’s even though a provision of the Arizona Constitution makes it illegal to “make any donation or grant, by subsidy or otherwise, to any individual, association or corporation.’’
“I can assure you we would not be taking this action if we weren’t fully confident in the legality of it,’’ Hobbs said. She said her legal counsel was involved in developing the contract with RIP Medical Debt, and added that Arizona won’t be the first jurisdiction to use COVID dollars from the American Rescue Plan Act in this way.
Hobbs invited two people who are dealing with medical debt to the news conference Monday announcing the plan, presumably individuals who would be eligible for relief.
Jim Baker of Sun City said his problems began when he was diagnosed with stage 4 large B-cell lymphoma. He said the treatment of that over several years led to other medical conditions.
“As I ran out of resources, I began to have to put most of my medical expenses on credit cards because I could not find medical care that would bill me and allow me to pay over time,’’ Baker said.
Other medical conditions ensued, he said, and the debt accumulated. He’s ended up using the St. Mary’s Food Bank for food and thrift stores for clothes as he said he tries to get ahead of the credit card debt, which currently stands at $30,000, and to live off of his Social Security.
“It makes me feel less than,’’ Baker said. “I’ve gone from being a contributing member of the community and always feeling that I paid my way to not being able to pay my way and having to ask for help.’’
The number of Americans dealing with medical debt dropped significantly over the last two years. New numbers show nearly 8 million fewer people have medical debt on their credit reports.
