Starting this week, tens of thousands of New Jersey residents struggling with piling medical bills are going to receive a letter in the mail saying that some or all of their debt will disappear
On Tuesday, Gov. Phil Murphy is expected to announce that his administration is using $100 million in federal American Rescue Plan funds to wipe out medical debt for nearly 50,000 New Jerseyans.
By doing so, the Garden State will become the first state in the country to forgive at least $100 million in medical debt, according to the administration.
Shabnam Salih, the director of Murphy’s Health Care Affordability and Transparency Office, told Gothamist that eligible people would start receiving letters in the mail as early as Aug. 19.
In New Jersey, about one in 10 people have medical debt that has been referred to collection agencies due to lack of payment as mounting bills become overwhelming, according to Salih. She said this number is “about double” for Black and brown communities across the state.
Salih said that debt burdened individuals are less likely to seek out care when they need it, according to discussions the governor’s office had with residents.
“People have told us even if we know we can go to the hospital or the doctor or that we might really need to, that financial strain that weighs on them is heavy,” she said.
According to the Murphy administration, the state is partnering with Undue Medical Debt, a national nonprofit, to give residents some reprieve from their health bills. Previously known as RIP Medical Debt, Undue Medical Debt is a national nonprofit that identifies healthcare providers around the nation and buys up large, bundled portfolios of qualifying medical debt.
The governor’s office said it is relieving debt for nearly 18,000 New Jersey residents who owed a combined $61.6 million to Prime Healthcare hospitals, a major healthcare provider in North Jersey.
An additional nearly 32,000 residents owing more than $38.4 million to other providers, primarily through collection agencies, are also getting relief.
Governor Murphy noted in a statement Tuesday how medical debt can accumulate “very quickly” and follow a person for years, if not decades.
“New Jerseyans should not have to scrimp and save to ensure their basic health care needs are met, or to pay down lofty medical debts resulting from tragic accidents or devastating diagnoses,” said Murphy.
Murphy has touted his intention to do more to alleviate medical debt for New Jersey residents in his last two annual State of the State addresses. Today’s move comes less than a month after the governor signed the Louisa Carmen Medical Debt Relief Act, a new law that prohibits the reporting of most of a patient’s medical debt to credit-rating agencies and caps interest on that debt at 3%.
The bill was named after a staff member in Murphy’s Health Care Affordability and Transparency Office who died in a car crash just weeks before the governor gave his 2024 State of the State address.
Salih said there is ample evidence showing medical debt is not necessarily a strong indicator of an individual’s credit worthiness.
“What we do know is that reporting of medical debt detrimentally impacts a lot of residents in terms of housing prospects, job prospects, and their ability to acquire credit as needed for a whole host of things,” she said.
For the individuals who will get relief as part of the administration announcement, there was no application necessary. Salih said Undue Medical Debt worked with providers to identify eligible people proactively.
She said those who qualify are those at or below four times the federal poverty level or have medical debts that equal 5% or more of their annual income.