New Jersey cancels $100M in medical debt for almost 50,000 patients

New Jersey Governor Phil Murphy announced on Wednesday that thousands of eligible individuals and families across the state will have some or all of their medical debt cancelled as part of a major initiative to make health care more affordable and accessible. The initiative comes as other states and federal regulators have moved to lessen the burden of medical debt.

Similarly to how Connecticut cancelled medical debt in February, New Jersey leveraged funds from the 2021 American Rescue Plan Act in the amount of $550,000. NJ also partnered with Undue Medical Debt to deliver relief to 17,905 New Jersey residents who had owed $61.6 million to Prime Healthcare hospitals and an additional 31,748 residents owing more than $38.4 million to other providers through the secondary debt market, primarily collections agencies.

The announcement builds on a growing national movement that began several years ago in Cook County, Illinois, aided by another non-profit organization, RIP Medical Debt, which buys bundled medical debt portfolios from providers, including hospitals and commercial debt buyers. Illinois recently passed two laws that would allocate about $10 million to purchase outstanding medical debt and make debt ineligible to include in a credit report.

Six other local governments have since followed suit along with RIP, including Akron, Cleveland and Toledo, Ohio; New Orleans; Wayne County, Mich.; Washington, D.C.; and New York City, which wiped out $2 billion in medical debt for 500,000 patients in January.

Gov. Murphy’s announcement also follows a pledge from Democratic presidential nominee Vice President  Kamala Harris to forgive medical debt for millions of Americans

“When someone is sick or injured, they should be able to focus on what matters most – getting better – rather than worrying about how they will pay for the life-saving care and services rendered to them. 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 Governor Murphy. “Medical debt accumulates very quickly and can follow a person for decades … we are wiping the slate clean for thousands of New Jersey families, eliminating their debt, and making a real, tangible impact on their lives…”

“We are supporting NJ residents and families through immediate and direct relief while also changing policy to ensure systemic and lasting change and protections,” said Shabnam Salih, Director of the Office of Health Care Affordability and Transparency. This announcement in New Jersey follows the signing last month of the Louisa Carman Medical Debt Relief Act, which safeguards families from accumulating medical debt, protects against predatory medical debt collectors, and prohibits the reporting of medical debt to credit reporting agencies. New Jersey is one of only five states in the nation that both prohibits medical debt reporting to credit agencies and has allocated funding to provide residents with direct medical debt relief.

Related: New York joins other cities, wiping out $2 billion in medical debt for 500k patients

“As the leader of a nonprofit based in the tri-state area it’s thrilling to see this magnitude of medical debt relief for New Jersey residents across the state,” said Allison Sesso, CEO and president of Undue Medical Debt. “We hope the tens of thousands of recipients in this first wave of medical debt relief are encouraged to re-engage with the health care system and feel both financial and emotional relief. No one chooses to get sick, be in an accident or have a chronic illness and we look forward to helping even more people over the course of this partnership with New Jersey government.”

Undue works with hospital systems across the country to purchase large, bundled portfolios of past-due medical debt belonging to those least able to pay. Instead of trying to collect, Undue erases the debt. Undue has worked with Prime Healthcare and other New Jersey-based health care providers to identify unpaid medical debts that qualify for cancellation.