Cook County hopes to eliminate $1 billion in medical debt for residents.  That is how.

Starting this fall, residents across Cook County will receive a note in the mail with a simple message: Your medical debt is covered.

Debtors will not need to apply for relief, nor will debt forgiveness count against them when they file their taxes.

Picking up the tab: Cook County government, which will pay nonprofit group RIP Medical Debt $12 million over the next three years to buy medical debt accruing from hospitals across Cook County for pennies on the dollar.

Instead of trying to collect that debt, the group will forgive it and work to erase that debt from credit reports. Because medical debt can often be purchased for pennies on the dollar compared to the original charge, the county hopes to abolish $1 billion in medical debt that could date back years.

The money comes from the county’s $1 billion pool of funds from the American Bailout Act. The program still needs to be approved by the Cook County Board, and local hospitals must consent to participate, but Cook County Board President Toni Preckwinkle and partners on the project hope both will happen.

The same goes for the White House: Preckwinkle will be recognized along with other government officials at an event Thursday with Gene Sperling, President Biden’s ARP coordinator and senior adviser, for his creative use of ARP dollars.

next to the county $42 million guaranteed income program and plans to fund new behavioral health offerings at county-run hospitals and clinics, Preckwinkle told the Tribune he hopes the medical debt abolition program will help improve families’ long-term financial security and encourage people to to seek medical care without worrying about being hounded by overdue bills.

Eligible persons will be Cook County residents who have a household income less than four times the federal poverty level or who have medical debt that is 5% or more of their annual income. Debt accounts will be between 18 months and seven years or more. The account balances will have been written off as bad debts and the hospitals will consider the accounts dormant. RIP plans to buy that debt directly from the hospitals in packages.

Residents will not be able to apply for the program. Rather, beneficiaries will be determined on a “random” basis through hospitals’ willingness to work with RIP to access their debt accounts and find those who qualify for the relief program. RIP will then notify people “which accounts of theirs are no longer owed. That letter will be the first notice that a debt has been abolished,” said a RIP representative.

The county expects “hundreds of thousands” of residents to get debt relief over the three years of the agreement.

Creditors like hospitals, ambulance operators, or private doctors write off debts after a few years and put them up for sale to third-party collection agencies, which can buy millions of dollars worth of charges at a fraction of the original cost in hopes of collecting. at least some bills due. The older the debt, the cheaper it is to buy. Instead of collecting those debts, RIP Medical Debt uses donations to forgive them.

Medical debt is a persistent problem nationwide: It’s the number one contributor to personal bankruptcies. Between 17% and 35% of American adults have medical debt, according to the Consumer Financial Protection Bureau, with black and Hispanic people, young adults, and low-income people having rates higher than the national average.

“Medical debt can also cause people to avoid medical care, develop physical and mental health problems, and face adverse financial consequences such as lawsuits, wage and bank account garnishments, home liens, and bankruptcy,” said the recent report from the CFPB. “Given the widespread impact of COVID-19, addressing medical debt is an urgent priority.”

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RIP, which was founded by two former debt collection executives, has worked in Chicago before. In 2019, a network of area churches used them to eliminate more than $5.3 million in debt from nearly 6,000 residents in the Englewood, Roseland, Auburn-Gresham, Washington Heights and West Pullman neighborhoods.

To the best of their knowledge, Cook County is the only government using its federal COVID-19 relief money in this way, said county officials and RIP President and CEO Allison Sesso. Other than a $50 million donation from McKenzie Scott, the billionaire philanthropist, this is the largest infusion the organization has received from him.

Sesso said his group partners with hospitals to receive files on their debtors, which are then “fed into our debt engine. We match it with data we buy from an accrediting agency like TransUnion. That gives us the information of whether or not people are eligible,” she says. That can be further narrowed down to zip codes within Cook County. “What I like most about our model is that it is really blind to any other attribute of the individual. It really focuses only on your income and whether or not we have access to your debt.”

The group made national headlines in 2016, when TV host John Oliver teamed up with them after buying $15 million of medical debt. Oliver’s trick continued a long segment on the predatory nature of many debt buyers, who may attempt to collect overdue bills long after clients or patients are legally responsible for them.

By 2021, RIP had abolished $2.7 billion worth of debt for 1.3 million people, according to its annual report, and purchased debt directly from 12 health care providers.

The two hospitals that Cook County runs, Stroger and Provident, are not eligible to participate in the county program due to ARPA spending restrictions, county officials say. But RIP will use privately raised dollars “to support any debt relief” associated with Cook County hospitals, Sesso said.

“We’re aiming for late fall to pull this off,” said Preckwinkle’s deputy chief of staff, Otis Story. “So there is good news on the horizon.”

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