Nearly five months after the New Orleans City Council approved a contract to forgive $130 million in residents’ medical debt, the city’s two largest hospital systems still haven’t agreed to participate in the deal.
The council allocated $1.3 million in federal pandemic relief dollars last year toward the debt-erasure effort. The city set a goal of abolishing $40 million in medical debt by the end of this year — followed by $50 million in 2024 and $40 million in 2025.
But that aim depends on Ochsner Health and LCMC Health’s cooperation with RIP Medical Debt, a New York-based nonprofit that buys outstanding medical debt from health care providers and collection agencies at a penny on the dollar.
Both hospital systems have previously confirmed that they don’t sell their debt to collections agencies, meaning they hold all the patient debts themselves. The debt relief program hinges on whether the hospitals will agree to give or cheaply sell patient debts to the nonprofit.
Allison Sesso, the CEO of RIP Medical Debt, said that negotiations between the nonprofit and the hospitals are “moving in a positive direction,” but that Oschner and LCMC have not yet signed the business associate agreements that can initiate the actual relief process.
“We’re spending a lot of time trying to finalize the agreements and move this process forward,” Sesso said.
Representatives from Oschner and LCMC declined to comment. A representative for City Councilmember Helena Moreno, who spearheaded the effort, directed a reporter to the city’s health department.
“We promised in the beginning that we would have something by the end of the year,” said Isis Casanova, the spokesperson for the New Orleans Health Department.
Last year, when Moreno first announced the debt relief plan, she pointed to the potential toll of medical debt on communities of color disproportionately impacted by COVID-19.
“Being sick or injured shouldn’t put anyone in debt,” Moreno said in a statement at the time.
A 2021 report by the Consumer Financial Protection Bureau found that almost 22 percent of Louisianians have medical debt, with an average debt of $2,150 and a statewide total debt of over $1.9 billion. Studies show that medical debt makes people less likely to seek health care, worsens credit scores and poses barriers for employment.
RIP Medical Debt has worked with local governments in Ohio, Pennsylvania, and Illinois, among others. And every city is different when it comes to the timeline of relieving debt, Sesso said.
For example, in Cook County, Illinois, home to Chicago, RIP Medical Debt was able to begin relieving debt for residents about six months after signing an agreement with the local government, according to the nonprofit.
While New Orleans is approaching the six-month mark since the council approved a contract with RIP Medical Debt, Sesso said the city is “squarely within the norm.”
“It does often take time to get those hospitals engaged,” Sesso said.
Once the hospitals sign business associate and nondisclosure agreements, they can then give RIP Medical Debt a debt portfolio to determine who qualifies for relief. To be eligible for the program, residents must have a household income that does not exceed 400 percent of the federal poverty level or have medical debt greater than five percent of their annual income. According to RIP Medical Debt, the group has relieved over $10 billion in medical debt for more than 7 million families since its founding in 2014. The nonprofit can relieve such a large sum because it purchases the debt at a steep discount.
When RIP Medical Debt began operating, it relied on private sector donations. More recently it’s been turning to local governments’ pandemic aid dollars.
Cook County allocated $12 million in American Rescue Plan Act funds with the possibility of relieving up to $1 billion in medical debt for its residents. In November, Toledo, Ohio and the surrounding Lucas County committed $1.6 million in ARPA funds to abolish up to $240 million of medical debt. By May, the program was eliminating nearly $80 million debt for almost 73,000 people.
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