Counties pay off medical debt

Unpaid medical debt often gets sent to collections -- similar to other forms of unpaid debt. If collectors assess the probability of being able to recover the debt as low, they frequently mark down the value of the debt so that it might become considered paid in full, even if only a fraction is paid. KFF Health News reported on Los Angeles County and Cook County (in Illinois) as deciding on setting aside money to wipe out unpaid medical debt of their residents.

On paper, the counties seem to be getting good value: Los Angeles County plans on spending $5 million to wipe out $500 million of debt (a ratio of one cent for one dollar) for 150,000 residents. At a similar ratio, Cook County is reported to have spent $12 million to eliminate $1 billion in debt in 2022. While the debt relief will certainly help those who were indebted, taxpayers can reasonably ask whether that money could have been better spent to help avoid the medical debt in the first place. For example, the article mentions that most of the affected patients likely qualified for financial aid from hospitals, but might not have known about such programs. However, it is unclear what the return on investment would be for the longer term fixes. Managing the tradeoffs between short-term relief with more systemic fixes can indeed be challenging.