New Jersey Joins States With Medical Debt Relief Programs

New Jersey’s program follows a trend of states forgiving eligible residents’ medical debt using federal funds and services of Undue Medical Debt.

Several states have announced various medical debt relief programs in recent months, with New Jersey being the latest.

New Jersey Gov. Phil Murphy said the state is using over $550,000 in its American Rescue Plan, an economic stimulus bill passed during the COVID-19 pandemic, state funds, and partnering with Undue Medical Debt to provide millions of dollars of medical debt relief to eligible residents, according to a news release.

Undue Medical Debt (formerly RIP Medical Debt) is an example of a nonprofit organization that purchases debt for forgiveness. It uses data to find the debt at households most in need based on their earnings compared to the FPL and debt ratio to their annual income, according to the organization’s website. There is also no tax liability or penalties, according to the site.

New Jersey’s federal funds and the partnership with Undue will allow the state to provide relief to 17,905 residents who had owed $61.6 million to Prime Healthcare hospitals. An additional 31,748 residents are eligible for about $38 million in relief for bills owed to other providers through the “secondary debt market, primarily collection agencies,” according to the governor’s news release.

Prime Healthcare partnered with Undue Medical Debt to sell its qualifying accounts for resolution.

Residents who qualify for the relief have incomes either at four times or below the federal poverty level or have medical debts that equal 5% or more of their annual earnings. They do not apply for relief.

New Jersey also enacted legislation this year to prohibit medical debt credit reporting by debt collectors and creditors, among other requirements, ACA International previously reported.

Gov. Murphy signed the law in July, joining around a dozen other states with medical debt legislation this year.

ACA’s Take

Similar medical debt relief efforts are underway in North Carolina, Pennsylvania and Connecticut.

Pennsylvania announced a medical debt relief plan as part of Gov. Josh Shapiro’s budget proposal earlier this year, days after Connecticut’s governor shared similar goals, ACA previously reported.

Pennsylvania would also contract with an organization like Undue Medical Debt.

Connecticut Gov. Ned Lamont said in an interview on “Good Morning America” in February that the state will remove about $1 billion in medical debt using $6.5 million in funds from the American Rescue Plan Act, ACA previously reported.

North Carolina’s plan is to relieve medical debt for qualifying patients using the state’s Medicaid program as an incentive for hospitals to relieve more than a decade of medical debt for eligible residents, ACA previously reported.

The governor’s office and the North Carolina Department of Health and Human Services (NCDHHS) crafted the plan, which was approved by the U.S. Center for Medicare and Medicaid Services.

Similar efforts have occurred at the municipal level across the U.S., such as in New York City.

The plans underway in Connecticut, New Jersey and North Carolina shed light on debt forgiveness processes for qualifying patients and how providers can tailor their own policies.

The Affordable Care Act requires that nonprofit hospitals establish charity care— essentially financial assistance policies—for patients unable to cover their expenses. IRS Regulation 501(r) addresses extraordinary collection activities, such as credit reporting and legal remedies. For providers in many states, ACA members have seen the threshold at 200% or 300% of the FPL as the starting point before any copays or deductibles need to be paid to a non-profit provider. Consistent with the Connecticut program, patients who earn 400% or more of the FPL would be expected to pay their co-pays and deductibles in full while providers continue to offer charity care options for patients making less than that amount.

Oregon is the first state in the nation to mandate required charity care discounts for nonprofit providers. In Oregon, health care is free from nonprofit providers for patients living at 200% or below of the FPL, there are significant discounts for those living between 200% and 400% of the FPL, and no discounts required for patients living above 400% of the FPL.