Last Tuesday, Jan. 21, Treasurer Mike Pieciak, Senator Ginny Lyons, and Representative Alyssa Black announced a proposal to provide medical debt relief to thousands of Vermonters. The proposal would eliminate up to $100 million in medical debt for a one-time investment of $1 million. Further, the proposal would protect Vermonters’ credit scores by eliminating the reporting of medical debt to credit agencies.
As the cost of health care grows in Vermont, more and more Vermonters are at risk of accumulating medical debt. Currently, an estimated 62,000 Vermonters hold medical debt, over 1 in 10 adults.
“Medical debt is impacting working families all across Vermont, and it is holding them back from achieving financial security,” Treasurer Pieciak said. “This proposal is a commonsense way to eliminate tens of millions in outstanding medical debt at very low cost. In doing so, we are directly investing in Vermonters, reducing their costs, and making Vermont more affordable for them.”
The chairs of the House and Senate health care committees are serving as the lead legislative sponsors for the proposal. Senator Lyons, Chair of the Senate Health and Welfare Committee, discussed the financial benefits of the proposal.
“Eliminating medical debt provides freedom from the stress and anxiety of high health care costs,” she said. “The proposal will limit the impact of overwhelming medical bills, giving people opportunities to buy homes, save for the future, and support their families. I’m proud to partner with Treasurer Pieciak to make this proposal a reality.”
Representative Alyssa Black, chair of the House Health Care Committee, highlighted the benefits the proposal would have on Vermonter’s credit reports.
“Medical debt doesn’t reflect someone’s financial responsibility. It’s a reflection of the gaps in our health care system,” she said. “By removing it from credit reports, we’re giving people a chance to rebuild their lives without medical debt holding them back.”
Overview of the proposal
Under the proposal, the Treasurer’s Office would partner with a nonprofit organization to eliminate up to $100 million of Vermonters’ medical debt at a cost of just $1 million. Vermonters would be eligible for debt relief if they (1) have debts in “terminal bad debt status” and (2) are in a household at or below 400% of the Federal Poverty Level (currently, $60,240 for a single person and $124,800 for a family of four) or owe medical debt equal to or exceeding 5% of household income.
The nonprofit would negotiate with health care providers across the state to purchase the medical debt of eligible individuals. They will then abolish the debt at no cost to the individual and any adverse information resulting from the medical debt is removed from a consumer credit report by the health care provider.
The program is automatic for those whose medical debt is purchased. There is no need to apply—no forms, no hassle. The nonprofit will take on the administrative work of negotiating with providers and informing eligible debtors that their debt has been forgiven. There is no need for additional state positions to implement the proposal.
There is also no need for increased spending, taxes, or fees to implement the proposal. Treasurer Pieciak is proposing to use a portion of funds previously appropriated to his office to buy down outstanding state bonds for the proposal.
The Treasurer’s proposal would also protect individuals’ credit scores by preventing health care providers and hospitals from reporting medical debt to credit agencies. Improving Vermonters’ credit scores will make it more affordable to buy a car, find housing, or hold consumer debt.
Medical debt is a unique form of consumer debt. Unlike other consumer debt, consumers often have no idea of the cost of medical care before they receive it, and the consumer often has no choice as to whether to incur the cost. Because of this, medical debt is not a good indicator of someone’s financial responsibility.
And medical debt is not just a financial issue—it’s a public health issue. Medical debt is linked to stress and anxiety, which can lead to higher risks of health issues.
Moreover, too many Vermonters avoid necessary care because they fear the bills that will follow. The Vermont Dept. of Health’s 2021 Vermont Household Health Insurance Survey found that a fear of medical debt impacted the health care decisions of 85,000 Vermonters. Relieving the burden of medical debt will help people focus on making the best decisions for their health.
Reaction from stakeholders
Treasurer Pieciak was joined at the press conference by a number of important stakeholders, including Rhode Island State Treasurer James Diossa, who is implementing a similar relief program.
“Whether it be in Rhode Island, Vermont, or any other state in the union, no one chooses to go into medical debt,” Treasurer Diossa said. “Building a healthier future means addressing this burden that weighs heavily on families across our states. By investing in targeted relief programs, Treasurer Pieciak and Vermont are not only alleviating financial strain but creating a landscape where access to care doesn’t lead to financial hardship.”
Michael Del Trecco, president & CEO of the Vermont Association of Hospitals and Health Systems, also joined the Treasurer to speak on behalf of Vermont’s hospitals in support of the proposal.
“We’re proud to be working with the Treasurer to bring this important relief to patients across the state,” he said. “This proposal will help Vermonters get the care they need and improve the health of our communities.”
Treasurer Pieciak was also joined by the Chief Health Care Advocate and the president of UVMMC Support Staff United, who both spoke in favor of the proposal.
“Relieving the burden of medical debt will help people focus on their health, not their bank accounts,” said Chief Health Care Advocate Mike Fisher. “This means more people getting care at the right time, leading to better health outcomes for individuals.”
“Our members wake up every day to care for Vermonters, often while carrying medical debt of their own,” said Heather Bauman, president of UVMMC Support Staff United. “We know that this proposal will be life-changing for working families across the state.”
Kathryn Van Haste, state director at the office of Senator Bernie Sanders, also spoke on the Senator’s work to address medical debt at the federal level through his introduction of the Medical Debt Cancellation Act as Ranking Member of the Health, Education, Labor and Pensions Committee.
“Senator Sanders knows that medical debt is a symptom of a broken health care system. He introduced the Medical Debt Cancellation Act to eliminate debt at the federal level because no one should go bankrupt, be unable to buy a house or go to college, or delay seeking care because of medical costs. Senator Sanders commends Treasurer Pieciak for taking this important step to help Vermonters as he works to pass this legislation to help all Americans.”
Treasurer Pieciak concluded the announcement by emphasizing the importance of reducing the cost of health care for all Vermonters. “This is a step forward, but there remains a lot of work to make health care in Vermont more affordable, so fewer people fall into the grip of medical debt to begin with,” Pieciak said.
