City reaches deal with Ochsner to eliminate $59M in medical debt
26th August 2024 · 0 Comments
By Katie Jane Fernelius
Contributing Writer
(Veritenews.org) — Nearly two years after first announcing a program to eliminate $130 million in residents’ medical debt, the city of New Orleans said Monday (Aug. 19) that it has reached a deal with Ochsner Health, the largest hospital system in the state, to erase $59 million in old debt.
The deal was reached after negotiations between Ochsner and the nonprofit group Undue Medical Debt, formerly known as RIP Medical Debt.
City Councilmember Helena Moreno announced the partnership with the group – which has worked with other local governments including Toledo, Ohio, and Cook County, Illinois, to eliminate debt – in late 2022. Under a contract signed the following spring, the city agreed to allocate $1.3 million to the nonprofit, which would use the money to buy old debt for as little as one cent on the dollar and then forgive it. According to city officials, as much as $130 million in debt could be erased with the funds.
The new debt forgiveness deal will impact an estimated 66,000 qualifying patients living in New Orleans. Those residents will receive a letter in the coming weeks letting them know that some or all of their medical debts with the Ochsner Health System have been forgiven.
“This initiative was created to help New Orleans residents who have past medical debt, especially those who have been disproportionately impacted financially and medically by COVID-19,” Moreno said in a news release. “This will provide financial reset for families and is a tremendous way to spend one-time federal dollars. I appreciate Ochsner’s leadership and partnership on this important initiative.”
The agreement is the most substantial tranche of medical debt forgiveness since late 2022, when the City Council first announced its intent to use American Rescue Plan Act funds to buy and forgive medical debt in the city. The effort was modeled after similar medical debt relief efforts across the country.
The program was slow to launch, though.
The city had originally drafted a plan to forgive $40 million of medical debt in 2023, $50 million in 2024, and $40 million in 2025. But 2023 passed without any announcements or forgiveness.
Then, in early 2024, the city announced its first medical debt relief deal – a plan to erase $3.4 million in ambulance debt with private emergency medical service provider Acadian Ambulance. But the bulk of the $130 million in debt the city sought to erase is held by large health care chains.
Typically, Undue Medical Debt works with collection agencies that purchase debt from hospitals. But the two largest hospital systems in the city, Ochsner and LCMC Health, hold their own debt instead of selling it to collecting agencies. This made direct negotiation the only pathway to any extensive medical debt relief program.
Those negotiations dragged on for months.
The deal with Ochsner Health, announced today, will bring the city nearly halfway to its goal.
Debt relief negotiations with the city’s other major hospital network are ongoing, LCMC Health Assistant Vice President of Government Affairs John Pourciau said in a written statement.
“At LCMC Health, we remain committed to helping to build a healthier and stronger New Orleans,” the statement read. “We have been engaged in conversations with stakeholders about our participation in the program to eliminate medical debt for several months. Those conversations are progressing, and we hope to have an agreement finalized very soon.
Medical debt is the leading driver of bankruptcy filings in the United States. According to the Consumer Financial Protection Bureau, Louisianians carry almost $2 billion in medical debt, with an average household medical debt of approximately $2,000.
Proponents of medical debt forgiveness say that such debt can discourage patients from seeking necessary health care out of anxiety about the cost. They also point to the impact of medical debt on people’s credit scores. But a study released just a few months ago has questioned whether forgiving medical debt is the most impactful way to improve credit scores, mental health and the likelihood that someone visits the doctor.
“You cannot expect a program like this to absolve all of the economic sins of the American health care system,” Dr. Jennifer Avegno, director of the New Orleans Health Department, previously told Verite News. “However, it is still real and impactful to those with medical debt.”
This article originally published in the August 26, 2024 print edition of The Louisiana Weekly newspaper.
