Another $200 million in Arizona medical debt has been wiped out

Another $200 million in medical debt has been wiped out for Arizonans.

The governor’s office says almost $650 million has been erased so far.

Gov. Katie Hobbs worked on a deal with the nonprofit Undue Medical Debt last year.

The organization buys up past-due medical debt from lenders for pennies on the dollar for families whose income is below four times the federal poverty level, or if their medical debt is 5% or more of their income.

People cannot apply to have their debt paid off. Instead, Undue buys what it calls relevant data from credit reporting agencies.

Letters sent by mail to the more than 140,000 Arizonans in the latest round will let them know the debt has been paid off and the credit bureau has been notified.

Allison Sesso is the president and CEO of Undue Medical Debt, a company that agreed earlier this year to use some $10 million in state American Rescue Plan COVID relief dollars to buy up medical debt from hospitals and doctors for a few pennies on the dollar, eliminating a negative mark on the credit reports of those who racked up the bills.

What's behind all this is a program that United Medical has been offering across the nation.

Established in 2014, it uses government funds and private donations to acquire portfolios of medical debt from health care providers or debt buyers.

What makes the money go farther, according to company officials, is the debt has reached the point where those holding the rights are willing to sell them for pennies on the dollar.

The deal Hobbs cut with the charity when she first signed the deal in 2024 requires that beneficiaries know that the financial relief is happening because governor's action: It spells out that any fliers, advertisements, press releases or other marketing materials to include "logos or insignia as required by the governor's office and approved by the governor's office before publication."

Gubernatorial press aide Christian Slater, in defending that provision when the program was announced in July, said that is appropriate. He said the letters are designed to tell people not just that their medical debt was relieved but "how it happened."

Undue Medical Debt said what's also crucial is that the patient starts over again, free and clear of any obligation.

Generally speaking, when a debt is forgiven, it can be considered income for tax purposes. But Courtney Story, the charity's vice president of government initiatives, said in July that doesn't apply when the money comes from a "disinterested third party."

"Because we're a nonprofit, we're not part of the health care system, we count as a disinterested third party, as does the government," she said. Ditto, Story said, with private donors, though they have the option of remaining anonymous or disclosing their names to recipients.