Drowning in medical debt? Your city might cancel it. N'dea YanceyBragg, USA TODAYOctober 28, 2025 at 8:33 PM 5 More than $135 million in medical debt owed by thousands of New Yorkers has been erased, Mayor Eric Adams announced Oct.
- - Drowning in medical debt? Your city might cancel it.
N'dea Yancey-Bragg, USA TODAYOctober 28, 2025 at 8:33 PM
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More than $135 million in medical debt owed by thousands of New Yorkers has been erased, Mayor Eric Adams announced Oct. 22, marking the latest effort to chip away at the massive financial burden weighing on millions of Americans.
The city partnered with Undue Medical Debt in 2024 to invest $18 million over the course of three years and relieve medical debt for 500,000 residents worth over $2 billion. The nonprofit specializes in buying debt portfolios from hospitals, health care providers and collections agencies at a fraction of the cost and forgiving it.
About 100 million Americans owe over $220 billion in medical debt, according to recent analysis of Census data by The Peterson Center on Healthcare and KFF. Even people who have insurance report they struggle to pay for health care, a 2023 survey by The Commonwealth Fund found, leading some to cut back on necessities like food, heat and rent or skip or delay medical care altogether.
With an estimated 10 million Americans poised to lose health insurance if the Medicaid cuts and Obamacare subsidy expiration at the center of the government shutdown battle moves forward, mitigating these costs may be more important than ever.
"We hear from the constituents that we help every single day that access to health care is on their minds and that it's unaffordable and that that's a really hard, hard pill to swallow," Undue Medical Debt president and CEO Allison Sesso said. "And this system is really broken."
More cities, states forgive medical debt
New York is one of a growing number of cities and states that are working to address the problem by forgiving mass amounts of medical debt.
Cook County in Illinois, which includes Chicago, became one of the first localities to use American Rescue Plan Act recovery funds to eliminate medical debt in July 2022, according to a report from the Institute on Race, Power and Political Economy. In the years since, at least 26 state and local governments have pledged to use public funds to relieve medical debt.
More: Americans borrowed $74 billion to cover medical bills. Here's who paid the most.
Connecticut became the first state to launch a medical debt relief initiative in 2023, according to the report, followed by Michigan, Arizona, New Jersey, Illinois, Rhode Island and North Carolina, which reportedly has the widest-reaching program targeting $6.5 billion in debt for 2.5 million residents. Similar programs proposed in Pennsylvania ‒ as well as the cities of St. Louis and Barberton, Ohio ‒ have stalled.
In all of these efforts, governments partnered with Undue Medical Debt, with the exception of a program in Columbus, Ohio, according to the report.
There's no application process to get the one-time relief. The nonprofit uses a proprietary "debt engine" to comb through medical debt portfolios and identify those who qualify, typically people who make below 400% of the federal poverty level or whose debt is equal to at least 5% of their household income, according to Sesso. Undue Medical Debt then purchases the debt using money from charitable donors or public funds provided by local governments.
Debt relief alone isn't enough, proponents say
Many recipients say debt forgiveness comes as a huge, unexpected relief, Sesso said, but some "continue to be fearful of the future." She acknowledged that immediate debt relief doesn't address the root of the issue or prevent them from incurring future debts.
"We don't pretend like what we're doing is solving the problem," Sesso said. "It's solving the problem for individuals, and I think that's necessary and needed and a great thing to do."
Allison Sesso, president and CEO of New York-based Undue Medical Debt
The debt relief must be paired with policy changes, she said, like limiting interest rates and preventing medical debt from appearing on consumer credit reports.
When consumers owe medical debt, it's often turned over to collection agencies and displayed on credit reports, which can make it difficult for people to buy a house or finance a car. The Biden administration proposed a federal rule barring unpaid medical debt from appearing on consumers' credit reports, but a judge granted a request from the Trump administration and two financial industry groups to strike down the rule.
Some states have stepped in to adopt medical debt credit reporting bans and enact additional protections, including incentivizing medical providers to adopt debt mitigation policies. Lawmakers in Ohio, for example, recently proposed a bill that would cap interest rates at 3% and ban the practice of wage garnishment for medical debt.
Maryland, California, Maine, New York and Colorado ranked among the states with the best regulations protecting consumers from medical debt and its consequences, according to a policy analysis from Innovation for Justice and researchers at the University of Arizona and the University of Utah.
"I do think that states are increasingly interested in doing something," Sesso said. "And I'm hopeful that that we'll see more movement in terms of protections for patients."
Contributing: Ken Alltucker, USA TODAY; Reuters
This article originally appeared on USA TODAY: Cities, states offer hope for people drowning in medical debt
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