NYC Mayor to Relieve Over $2 Billion in Medical Debt for Hundreds of Thousands

[pizzadude]

New York City Mayor Eric Adams and New York City Department of Health and Mental Hygiene (DOHMH) Commissioner Dr. Ashwin Vasan today announced a pioneering medical debt relief program, that will invest $18 million over three years to relieve over $2 billion in medical debt for hundreds of thousands of working-class New Yorkers. Medical debt – the number one cause of bankruptcy in the United States – disproportionately affects uninsured, under-insured, and low-income households, and the city's program would wipe out debt for up to 500,000 New Yorkers on a one-time basis

https://www.nyc.gov/office-of-the-mayor/news/062-24/mayor-adams-relieve-2-billion-medical-debt-hundr...

[MarkintheHV]

Between the student loan forgiveness and now the medical forgiveness, they seem to think that the taxpayer is just an ATM.  To some out there being responsible means you get screwed.  Tax payers are just about tapped out.

[fuzzle]

What are they going to do, not pay? There is no tax forgiveness.  

[ThomasJNewton]

I am curious about a few things that are not clear from referenced post that maybe someone here knows:

• It was my understanding that one cannot purchase the debt of specific individuals, just large bundles of debt. Is that incorrect?
• If it is large bundles of debt, then they would be required to match purchased debt to debtors and then would be required to look at people's other financial data. Is a creditor allowed to look up one's other financial data without permission?
• Why is this forgiven debt not treated as ordinary income by the IRS like other forgiven debt?

[pizzadude]

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@ThomasJNewton wrote:

I am curious about a few things that are not clear from referenced post that maybe someone here knows:

• It was my understanding that one cannot purchase the debt of specific individuals, just large bundles of debt. Is that incorrect?
• If it is large bundles of debt, then they would be required to match purchased debt to debtors and then would be required to look at people's other financial data. Is a creditor allowed to look up one's other financial data without permission?
• Why is this forgiven debt not treated as ordinary income by the IRS like other forgiven debt?

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These are excellent questions and I've wondered the same.   I think that medical ( and other ) debts are frequently sold off in large blocks to collection agencies, for pennies on the dollar.   So being able to purchase a single individuals's debt may not be feasible. 

Guessing that since this is the city of NYC, they already have a bunch of information on people who fall into these categories?

I'm guessing this would qualify as forgiven debt according to the IRS so maybe they'll be issuing 1099s ?

[pizzadude]

I didn't read all the way through the article, it answers the above questions:

RIP Medical Debt will purchase bundled medical debt portfolios from providers like hospitals and commercial debt buyers to then abolish that debt at pennies on the dollar. Debt relief recipients will then be notified that their debt has been bought by a third party and erased, with no strings attached. Recipients owe nothing on the debt and face no tax penalty. New Yorkers who fit one of the two eligibility criteria will qualify for the debt relief announced today, if their debt has been acquired: 1) having annual household income at or below 400 percent of the Federal Poverty Line or 2) having medical debt equal 5 percent or more of their annual household income

[GreatLife]

😔

[CorpCrMgr1]

In the very early days of my finance/credit/collection career, I turned down a job with a charity hospital. At the end of the day, medical bills would be written off if the debtor did nit have the means to pay. I'm certain government run hospitals are the same.

[ThomasJNewton]

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@pizzadude wrote:

I didn't read all the way through the article, it answers the above questions:

Having read the article to the end, it does not answer any of the questions I asked, it just raises them all.

RIP Medical Debt will purchase bundled medical debt portfolios from providers like hospitals and commercial debt buyers to then abolish that debt at pennies on the dollar.

This does not answer how they will get debt only from New York residents that qualify under their income restrictions, just that they plan a stunt like John Oliver did when he did exactly the same thing.

Recipients owe nothing on the debt and face no tax penalty.

How can New York City forgive other debt without the recipients incurring federal tax liability for it? Maybe the city is not planning to add tax liability, but that does not explain how other income taxing bodies will respond.

New Yorkers who fit one of the two eligibility criteria will qualify for the debt relief announced today, if their debt has been acquired: 1) having annual household income at or below 400 percent of the Federal Poverty Line or 2) having medical debt equal 5 percent or more of their annual household income

How do they find the debtor’s income? Are they allowed to look that up without permission? (There seems to be conflicting opinions as to whether they can do hard pulls or not.) What happens to the debt they purchase from non-qualifying people? What about those who would qualify but no longer live (or never lived) in NYC?

[ThomasJNewton]

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@CorpCrMgr1 wrote:

In the very early days of my finance/credit/collection career, I turned down a job with a charity hospital. At the end of the day, medical bills would be written off if the debtor did nit have the means to pay. I'm certain government run hospitals are the same.

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None of this talks about government run hospitals. This is about buying medical debt from for New Yorkers (maybe), from whatever source.