Wayne County could be the next local government to pursue plans to erase hundreds of millions in medical debt for an estimated 300,000 residents, the county’s top health officials said.

Nearly one in 6 residents in Wayne County – or 14.5% of the county’s population – holds outstanding medical debt according to Wayne County Health Director Dr. Abdul El-Sayed. The figures place the county 8th in the nation for the number of residents burdened by medical debt, but the vast majority of that debt could be wiped out, he said, if the county approves a two-year, $5 million contract with New York-based nonprofit RIP Medical Debt. 

El-Sayed said unlike debts residents choose to buy homes, cars or for educational costs, medical debt is an “albatross” that is “incurred at the proverbial edge of a gun.”

“This is a situation where you only go to see a doc when worried for your life or your function or that you are plagued with profound pain,” he said. “So this is debt that folks took on to relieve themselves of a circumstance that could potentially have killed them.”

Estimates provided Thursday by El-Sayed suggest around $700 million in outstanding medical debt is held by Wayne County residents eligible for medical debt relief. In order to qualify, a person must have medical debt greater than 5% of their annual income, or earn an annual income below 400% of the federal poverty line ($60,240 for a single person). The income threshold is about double for a family of four. 

The proposed contract will be sent to Wayne County commissioners before the body meets again next Thursday. The majority of the contract would be paid for with funds generated through airport and cigarette taxes. A small portion, about 13%, would be paid out of the county’s general fund. After the two-year contract period ends, the county could authorize an additional $2 million to serve more residents.

If the contract is approved, El-Sayed estimated 300,000 people would have their medical debts erased. 

RIP Medical Debt has partnered with other local governments in the last few years for the same purpose. Cook County, Illinois, was the first to partner with the organization. Last fall, Oakland County announced it would use $2 million in American Rescue Plan Act funding to partner with the same nonprofit to wipe out $200 million of medical debt for up to 80,000 of its residents. Kalamazoo County also earmarked $500,000 in its 2024 budget to erase $89 million for its residents.

El-Sayed said the county feels it’s “an opportunity that we cannot pass up.” He noted Oakland County’s efforts as well as others in New York City and the state of Connecticut. The county’s proposed contract includes extension provisions allowing for an overall cost of up to $7 million.

“It is our turn and I think it’s an opportunity for us to really serve our communities,” he added. 

Since 2014, the organization says it has wiped out $10.4 billion of medical debt for over 7 million people. 

How does it work? 

According to the organization’s website, RIP Medical Debt can relieve $10,000 of medical debt for a whopping $100. 

The value of an outstanding medical bill is substantially less once it’s sent to collections. Instead of selling it to a debt collector, the company negotiates with healthcare providers before buying the debt for pennies on the dollar. Once outstanding bills are bundled and purchased, the organization writes off the balance and sends a letter to the patient notifying them of the resolved debt. 

Rather than requiring that each individual submit an application to have their debt erased, the nonprofit works directly with healthcare providers to negotiate the outstanding balance. Income and debt information is verified through a partnership with TransUnion which allows them to verify income, liabilities and assets. 

Some commissioners said Thursday that they are eager to move forward with the agreement. Other members of the board however expressed frustration about having no paperwork on the contracts before them and argued that they needed more time to vet the concept and raised questions about fees and costs and other concerns. 

Commissioner Jonathan Kinloch noted Thursday that the idea had been brought forward during budget hearings and that the proposed contract is “quite less” than what the county anticipated.

“I am glad that we are here now,” he said. “I am looking forward to this program being implemented.”

But Commissioner Terry Marecki said the commission hadn’t yet received any information on the proposed contract. She inquired about the fee structure, funding mechanism and whether there would be support for residents to help them avoid future debts, among other things. 

“Are people going to be able to have some kind of help afterwards to try to avoid their medical debt again,” she asked El-Sayed.

“I’d love to explore that, it’s not within the scope of the contract,” he said. 

Keith Hearle, an advisor to RIP, said during the meeting that there is a 15% indirect cost rate. 

The medical debt problem isn’t limited to the uninsured, according to El-Sayed, who told county commissioners during a Thursday committee of the whole meeting “In a world where 50% of all medical debt is owned by people who are already insured, it tells you that our insurance system is fundamentally failing.” 

El-Sayed didn’t blame residents for their debts, however, and instead placed blame on a burdensome healthcare system that fails to adequately serve both uninsured and insured patients. 

El-Sayed referred to the current Medicaid system as an example and said the program is a “fantastic safety net,” but people find themselves trapped in the net more than they’re saved. 

“If you’re a Medicaid recipient you are, by definition, a second or third-class healthcare consumer. So a lot of primary care doctors don’t want to see you because you reimburse at half the rate,” El-Sayed explained. With nowhere else to go, he noted, patients seek care in emergency rooms, where the cost of healthcare skyrockets. 

El-Sayed spoke enthusiastically about the economic opportunities that would become available for residents if their medical debt no longer existed. For residents who struggle to raise their credit score to purchase a home, medical debts can be a significant barrier.