Arizona Erases Medical Debt For Nearly 1 Million Residents, Prompting Nationwide Credit Score Updates

In a major move that is set to provide relief to nearly 1 million residents, Arizona has taken significant steps toward abolishing medical debt.

Arizona Gov. Katie Hobbs, as documented by Business Insider, recently revealed a partnership with the nonprofit group, RIP Medical Debt. Facilitated by $30 million from the American Rescue Plan, this initiative aims to eradicate medical debt for Arizona’s residents. According to Jeff Smedsrud, a board member of RIP Medical Debt, this wholesale relief is equivalent to roughly $2 billion in medical debt, marking it as the “largest public-private initiative ever” of this nature in the U.S.

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Impacted residents will promptly receive notifications regarding this significant removal from their medical bills. Their credit scores also will be automatically revised to echo this relief. Residents eligible for this aid include those earning less than 400% of the federal poverty line or individuals with medical expenses exceeding 5% of their yearly income.

In February, Connecticut Gov. Ned Lamont initiated a comparable move, forgiving $650 million in medical debt. This action impacted about 250,000 residents. In addition, New Jersey Gov. Phil Murphy has hinted at plans to extend a similar medical debt-relief scheme.

For many people, like Jim Baker who is a cancer patient, this relief comes as a much-needed respite as mounting medical debts had led him to feel “less than.”

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As healthcare costs continue to increase and insurance protections remain uncertain, medical debt has become a significant issue across the United States. Arizona’s novel initiative, the largest of its kind, sets a precedent for public-private cooperation in addressing this crisis. It also offers potential for similar programs in other states, as evidenced by the actions of Connecticut and New Jersey.

The rectification of credit scores — as a direct consequence of this initiative — drastically impacts many residents, presenting new financial opportunities. This landmark move could herald widespread changes in approaches to medical debt relief across the U.S. and underscore the importance of healthcare reform as a key policy issue.

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