New funding arises to eliminate medical debt for NOLa. residents

By Meghan Holmes
Contributing Writer

New Orleans residents could soon see around $130 million in medical debt erased, as a collaboration between the New Orleans City Council and a national nonprofit called RIP Medical Debt moves forward.

RIP Medical Debt works directly with medical providers to purchase qualified debt for pennies on the dollar. City Council president Helena Moreno, working with New Orleans Health Director Dr. Jennifer Avengo, plans to utilize $1.3 million in federal funds from the American Rescue Plan Act to purchase an estimated $130 million in debt.

“This is a tremendous way to spend one-time federal dollars to help many New Orleanians needing assistance for financial stability,” said Moreno. “Being sick or injured shouldn’t put anyone in debt or lead them to go broke. Medical debt can happen to anyone, but the toll is especially high among Black adults. As we know, communities of color have also been disproportionately impacted financially and medically by COVID-19. I hope this can provide relief and a financial reset for many families needing this boost.”

New Orleanians, as well as Louisianans in general, carry a larger medical debt burden than the rest of the country. According to the census bureau, 16 percent of people around the nation have medical debt in collections, but that number rises to 27 percent statewide. Things are less dire in New Orleans, though still higher than the national average, with 19 percent of people having medical debt in collection. People of color disproportionately bear the burden of this debt, with 22 percent having qualifying debt on average citywide.

Should the City Council approve the use of American Rescue Plan Act funds to relieve medical debt in New Orleans, it will be the first time the city government has worked directly with RIP Medical Debt, but not the first time the organization has had a local impact. On a much smaller scale, local organizers raised $19,000 for the nonprofit in 2020 and cleared $1.9 million in debt – the debt burden of almost 600 residents. That same year, Saints wide receiver Michael Thomas partnered with the organization to eliminate $2 million in medical debt.

“We are very excited by the City of New Orleans’ enthusiasm – and that of all local partners – to tackle the persisting problem of medical debt,” said RIP Medical Debt President and CEO Allison Sesso. “We’re committed to doing our due diligence to ensure our model is viable and set up for success in every area we work. We look forward to furthering conversations with local leaders and provider partners to determine what’s possible in New Orleans.”

RIP Medical Debt uses the money the organization receives to purchase bundled medical debt portfolios on the secondary debt market and from hospitals, and then forgives that debt for pennies on the dollar. Debt relief recipients receive yellow envelopes from the nonprofit informing them that their debt has been bought by a third party and erased with no strings attached. They owe nothing on the debt and do not face a tax penalty.

“This initiative advances the city’s Community Health Improvement Plan goals of improving access to health care and increasing economic stability for New Orleans residents,” said New Orleans Health Director Dr. Jennifer Avegno. “Data shows that about one in seven people with debt say they’ve been denied access to a hospital, doctor, or other providers because of unpaid bills. And what’s even more devastating is that many families must choose between paying off medical debt, buying food, or paying their bills.”

RIP Medical Debt focuses on helping people who cannot afford to pay off their debt, including individuals beneath an income limit of twice the poverty line ($25,000 for one person or around $51,500 for a family of four) as well as individuals who owe at least five percent of their income, with their debts exceeding their assets. The purchased debt is typically also several years old, making it easier to negotiate a low purchase price.

This article originally published in the December 19, 2022 print edition of The Louisiana Weekly newspaper.