For roughly 352,000 Arizonans, though, the heavy weight of outstanding medical bills is about to get a lot lighter. On Wednesday, Gov. Katie Hobbs announced that her administration partnered with nonprofit Undue Medical Debt to wipe away $429 million in medical debt for residents of the state.
“Medical debt deprives our fellow Arizonans of their basic dignity, prevents our families and neighbors from living happy and productive lives, and endangers the Arizona Promise,” Hobbs said in a written statement. “By erasing debt for hundreds of thousands of people across our state, we are creating pathways to economic security and empowering them to realize their full potential.”
The current total mountain of medical debt in Arizona is estimated at $2.4 billion. That means Wednesday’s announcement covers nearly 18% of all medical debt in the state.
“This is directly related to public health, especially for low-income people and even for middle-income families,” Will Humble, executive director of the nonprofit Arizona Public Health Association, told Phoenix New Times. “It affects everything about that person’s life — their ability to make ends meet, pay rent or their enormous electric bill that keeps getting worse every year. When you have that kind of debt, you have to make less healthy choices and the stress of having that debt hanging over your head has physical effects on people.”
Humble said that while Hobbs’ action is “a nice thing” and a good use of pandemic relief funds, it was a temporary fix and not a systemic one. He also noted that 2022’s Proposition 209 — which was pushed by grassroots organizers and approved by voters — was the landmark event for systematically reducing medical debt. Prop. 209 placed a limit on interest rates for medical debt.
Humble added that the medical debt Hobbs is canceling is most likely “really bad debt” that collection companies — who he said tend to buy debt for about 15 cents on the dollar — are unlikely to be paid back.
Here’s how the program will work, and how to tell if you’ll qualify.
How will Arizona erase medical debt?
Arizona contracted with Undue Medical Debt to buy up medical debt with funds from the American Rescue Plan ACT, former President Joe Biden’s signature economic stimulus bill passed in 2021. After buying the debt from hospitals and collections agencies “for pennies on the dollar,” a Hobbs press release said — basically, after buying the right to be paid back by debtors — Undue Medical Debt simply cancels the debt entirely.“This investment demonstrates Arizona's commitment to ensuring that no one should face financial ruin for seeking care, and we're grateful to work with providers across the state who recognize that removing these unpayable debts of necessity helps their communities thrive,” Undue Medical Debt CEO and president Allison Sesso said in a written statement.
So far, Undue Medical Debt has spent $2 million to wipe out the $429 million in debt announced by Hobbs. That’s about $200 in relief for every $1 the nonprofit has spent.
“It’s pretty easy to figure out what was going on,” Humble said. “This was really, really bad debt that had a really, really low likelihood of being collected. Otherwise, they wouldn’t have sold it for that amount.”
Who can get their medical debt forgiven in Arizona?
Anyone in Arizona whose medical debt is greater than 5% of their annual income is eligible for forgiveness. Additionally, anyone making 400% of the federal poverty level or below — which comes to $62,600 for a single person or $128,600 for a family of four — will have their medical debt canceled.Do I need to apply for medical debt forgiveness?
Nope! Medical debt for qualified residents is forgiven automatically. The people benefiting from debt cancellation will receive a letter in the mail from Undue Medical Debt that looks like this:
According to the governor’s office, some people have already received a letter, while others will arrive “in the next few weeks.” No action needs to be taken once you’ve received the letter.
