New York City looks to clear $2 billion in unpaid medical bills for 500,000

New York City will purchase millions of dollars of medical debt and then erase it in effort to help as many as 500,000 residents, Mayor Eric Adams announced on Monday.

The program involves partnering with a nonprofit organization, RIP Medical Debt, that buys unpaid medical debt from hospitals at a steep discount and then clears it. The city will invest $18 million to relieve more than $2 billion in medical debt for hundreds of thousands of New Yorkers, Adams said.

Affected New Yorkers will be notified that their medical debt has been relieved, as there is no application process for the one-time debt relief program, which will launch early this year and run for three years. 

"No one chooses to go into medical debt — if you're sick or injured, you need to seek care. But no New Yorker should have to choose between paying rent or for other essentials and paying off their medical debt," Adams said in a statement.

The program is aimed at New Yorkers whose unpaid medical bills are at least 5% of their annual household income or those in households with an income under four times the federal poverty line, which is $31,200 for a family of four. 

Medical debt is the single-largest cause of bankruptcy in the United States, and disproportionately affects low-income Americans and those without health insurance or who are underinsured.

New York Governor Kathy Hochul in December signed legislation that bars health care professionals and ambulances from reporting medical debt to credit agencies. 

A New York charity started in 2014, RIP Medical has abolished more than $10.4 billion in medical debt for more than 7 million people since its inception, according to its website. 

Kate Gibson

Kate Gibson is a reporter for CBS MoneyWatch in New York.