by Nikita Biryukov, New Jersey Monitor
New Jersey will use federal dollars to purchase and forgive $100 million in medical debt held by more than 46,000 residents, Gov. Phil Murphy announced Tuesday.
The state will use roughly $550,000 in federal American Rescue Plan funds to purchase the debt through a partnership with Undue Medical Debt, a Long Island-based nonprofit that purchases patients’ debts but does not move to collect them.
“Medical debt accumulates very quickly and can follow a person for decades. With this strategic investment and our partnership with Undue, we are wiping the slate clean for thousands of New Jersey families, eliminating their debt, and making a real, tangible impact on their lives,” Murphy said in a statement.
The bulk of the debt relief, $61.6 million, will target patient debt held by Prime Healthcare through a partnership with the nonprofit. Prime Healthcare operates the country’s fifth-largest hospital network and runs hospitals in Newark, Denville, Dover, and Passaic.
The remaining $38.4 million will be purchased off the secondary debt market, primarily from debt collectors, the governor said.
Eligible residents must earn no more than four times the federal poverty level — $60,240 for a single adult and $124,800 for a family of four in 2024 — or hold debts that total 5% or more of their annual income.
Because the debt is purchased directly from creditors, there is no application for medical debt relief under the program, nor can it be requested.
“We hope the tens of thousands of recipients in this first wave of medical debt relief are encouraged to re-engage with the health care system and feel both financial and emotional relief,” said Allison Sesso, the nonprofit’s CEO.
The Gothamist first reported Murphy’s debt relief announcement.
The move comes roughly a month after Murphy signed legislation that barred the reporting of most medical debt to credit-rating agencies and capped interest on such debt to 3%.
The law, dubbed the Louisa Carman Medical Debt Relief Act after a Murphy administration health care staffer who died in a January car crash, requires creditors to offer payment plans, creates new grace periods for late payment, and bars wage garnishment to pay medical debts for residents making less than 600% of the federal poverty level.
Provisions barring credit reporting of medical debt went into effect immediately after Murphy signed the bill, though the rest of the statute will remain inactive until July 22, 2025.
“Today’s announcement will lift the burden of medical debt from tens of thousands of NJ residents and families, and with the Governor’s signing, just last month, of the Louisa Carman Medical Debt Relief Act, more New Jerseyans are shielded against the unfair consequences of credit reporting of medical debt,” said Shabnam Salih, director of the state’s health care affordability and transparency office.