Pieciak is proposing a one-time, $1 million relief program through which the state would purchase the debts for pennies on the dollar, then forgive them. It is an attempt to reduce the burden of unpaid medical bills at a time when ballooning health care costs are forcing some people to think twice before seeking care.
“The benefits of this proposal will be felt in every corner of the state,” Pieciak said at a press conference on Tuesday.
An estimated 60,000 Vermonters have medical debt that amounts to $155 million, according to Pieciak. That’s in part because while almost every resident has some form of health insurance, roughly a third of Vermonters are considered “underinsured,” meaning their policies may not be sufficient to cover either their current expenses or serious medical events.
Mike Fisher, Vermont’s health care advocate, said he routinely hears from people who are anxious and even ashamed because of bills they can’t pay.
“Medical debt is a structural outcome,” Fisher said. “It’s something we know will happen based on the way our health care system is structured.”
Democratic lawmakers plan to introduce a bill in the coming days to give Pieciak the authority to launch the program. No new taxes or fees would be necessary. Instead, Pieciak has proposed using money already appropriated to his office for the purpose of buying down state bonds.
“This program would have a bigger direct impact on Vermonters financially, from a health perspective and from an emotional perspective,” he said in an interview.
The program would be run by Undue Medical Debt, a national nonprofit that has overseen similar programs in 20 other cities and states.
About two-thirds of the total medical debt held in Vermont may be eligible for relief, according to the treasurer’s office. Undue Medical Debt typically targets long-standing debts, or those between 18 months and 7 years old. Beneficiaries must meet certain eligibility requirements, such as that they earn either less than four times the federal poverty level — about $100,000 for a family of three — or hold debts that exceed 5 percent of their income.
“Medical debts are bought and sold in this country like a commodity, and they tend to be extremely inexpensive to purchase, especially when you buy in bulk,” said Daniel Lempert, Undue Medical Debt’s vice president of communications and marketing, in a phone call.
Health care providers aren’t required to participate in the program, but they have good reason to do so, Lempert added, because the longer bills languish, the less likely they are to ever get paid.
“It’s a win-win,” Lempert said.
Mike Del Trecco, president and CEO of the Vermont Association of Hospitals and Health Systems, said hospitals are eager to learn more about the program and find ways to participate. “It’s a top priority,” he said.
The debt cancellations would occur automatically — meaning no cumbersome application process — and residents would learn through the mail that their debts were eliminated.
Last year, the National Bureau of Economic Research published a working paper that suggested medical debt relief failed to significantly improve the mental health of those who received help from Undue Medical Debt, the New York Times reported. The study’s authors noted that people who received relief typically had other kinds of debt, and erasing one didn’t make a huge difference. The study also found people free of medical debt were just as likely to forgo care as those with unpaid bills.
The nonprofit says it has changed its approach since that study concluded in 2020 and hears daily from people who say the debt relief was hugely impactful.
Pieciak also wants lawmakers to prohibit health care providers from reporting unpaid medical bills to credit bureaus — something eight other states have already done.
Many credit rating agencies have already removed them from reports if they’re under $500. And the Biden administration recently implemented rules to stop unpaid medical bills from affecting credit scores entirely, though it is unclear whether the Trump administration will maintain the changes.
“There certainly remains a lot of work to make sure health care in Vermont is more affordable, so fewer people fall into the grip of medical debt to begin with,” Pieciak said. “But this is an exciting step in the right direction.”
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