No more medical debt factored in credit report scores
On Tuesday two pieces of legislation were signed by Governor JB Pritzker targeted at reducing the negative impact of medical debt. HB5290, the medical debt forgiveness bill, dedicates approximately $10 million in state funding to purchase outstanding Illinois medical debt with the goal of erasing nearly $1 billion of medical debt in collections for Illinois residents. SB2933 makes medical debt ineligible to be included on a credit report, an action that is also being proposed at the federal level by the Biden administration.
“No Illinoisan should face financial ruin after receiving the medical care they need,” said Governor Pritzker. “These two pieces of legislation work to ensure that medical debt is not a lifetime sentence of poverty, and that Illinoisans who are struggling under current debts have an opportunity to get back on a strong financial path as they heal.”
Governor Pritzker first proposed a medical debt buyback program during his FY25 State of the State and Budget Address. Because outstanding medical debt can be purchased from creditors for pennies on the dollar, a $10 million state investment will have a return of nearly 100 dollars for each dollar spent on buying back debt. This program is anticipated to impact over 340,000 low-income people. In 2022, Cook County President Toni Preckwinkle created the Cook County Medical Debt Relief Initiative to abolish more than $382 million in medical debt for over 213,000 county residents.
The state will partner with Undue Medical Debt to negotiate the sale of debt portfolios, the same organization used by Cook County and governments across the country for similar debt forgiveness programs. Medical debt disproportionately affects people of color—Black Illinoisans are 50% more likely to accrue medical debt than their white peers.
This FY25 investment in medical debt relief will be distributed following individual negotiations with hospital systems and other medical debt holders in a first-of-its-kind State program administered by the Illinois Department of Healthcare and Family Services. Illinois residents will not need to apply for this benefit; impacted households will receive notification letters after their debts have been erased, likely starting in the Fall of 2024.
More than 1.75 million Illinois residents (earning 400% or less of Federal Poverty Limits or whose medical debt exceeds 5% of their annual household income) carry an estimated $4 billion of erasable medical debt.
In addition to the financial and psychological burden of medical debt, the outstanding debts can also have a serious impact on credit reports, affecting one’s ability to rent, obtain a loan, or apply for a line of credit. SB2933 amends the Consumer Fraud and Deceptive Business Practice Act to prohibit credit agencies from including negative information about medical debt in credit reports. Both bills received bipartisan support from the General Assembly and will go into immediate effect.
“These pieces of legislation represent a monumental step forward in addressing the critical issue of medical debt,” said Cook County Board President Toni Preckwinkle. “By erasing medical debt and ensuring it doesn’t impact credit scores, we are promoting equity and justice for all Illinoisans, especially our Black and Brown communities who are disproportionately affected. This initiative mirrors the success of the Cook County Medical Debt Relief Initiative, and I am proud to see the state expanding on these efforts. Every individual deserves the dignity of financial security and the right to heal without the looming threat of debt.”
News@thetimesweekly.com