LA County launches program that could erase your medical bills

If you have unpaid medical bills in Los Angeles County, that could get abolished soon.

The county’s new medical debt relief program launches today, focusing on people with low incomes.

It comes after a report found Angelenos have over $2.9 billion in unpaid medical bills as of 2022, which is the leading cause of bankruptcy in the U.S.

“No one should have to go into poverty to get the health care they need, and yet that's exactly what's happening,” county Supervisor Janice Hahn said at a news conference on Monday. “Medical debt is crushing families across our communities.”

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Roughly 785,000 people, or about 1 in 10 adults in the county, have medical debt.

How your bills could get paid

The program works differently than other debt relief programs because people aren’t able to apply.

Instead, the public health department has partnered with the national nonprofit Undue Medical Debt to select and pay off the debts through participating hospitals, physicians' groups and other entities that own medical debt and share their data. Jonathan Wiggs, a board member with Undue, said locating medical debt is a tougher task than you might think.

“It’s hard to find this,” Wiggs said. “There’s no open resource out there other than the debt providers, the debt collectors in order to be able to acquire and execute this debt on behalf of our patients.”

The initial hospitals up for patient debt cancellation include MLK Community Hospital and Adventist Health White Memorial Hospital. There are hospitals in L.A. County that have not joined the program yet, and some may want to participate anonymously.

If your debt is chosen, you’ll get a letter from the nonprofit and L.A. County saying that it’s been canceled. Those letters will start going out as soon as January.

That’s it. No strings attached. And since this is through a charitable foundation, you won’t have to pay taxes on the debt cancellation.

The program rules

Your medical debt should qualify if you meet certain criteria.

You must be an L.A. County resident with a past due bill (that’s not on a payment plan) from a participating provider, and be in one of these two financial situations:

• You earn less than or equal to 400% of the federal poverty level (for a family of 4 this year, that’s $124,800)
• You owe the hospital 5% or more of your annual household income

One caveat to remember is that even if your debt is chosen, it may not erase all of the medical debt you have. For other debts you need help with, the public health department is directing Angelenos to its resource hub on medical debt.

You can learn more about how the program works here.

Under a new law signed by Gov. Gavin Newsom, SB 1061, medical debt is also no longer allowed to show up on consumer credit reports, and it can’t be used as a negative factor for credit decisions.

Where the money is coming from

County supervisors approved $5 million earlier this year for a pilot program to pay off medical debts, with money coming from carryover funding from the 2023 to 2024 fiscal year.

According to Hahn, L.A. Care Health Plan contributed another $2 million to the program, as well as $1 million from the L.A. County Medical Association.

Medical debt can be purchased for pennies on the dollar, so with now $8 million at its disposal, Hahn said the program should be able to erase up to $800 million worth of debt for nearly 200,000 Angelenos.

It’s possible the pilot could cancel more debts in the future. The public health department estimates it would take $24 million to cancel $2 billion in medical debt.