Vermont legislation prohibits medical debt sales by large healthcare facilities

The Vermont State Legislature has introduced Senate Bill 27, a significant piece of legislation aimed at addressing the growing issue of medical debt among residents. Introduced on January 31, 2025, this bill seeks to provide relief to individuals burdened by medical expenses, a concern that has increasingly affected many families across the state.

At the heart of Senate Bill 27 is a provision that prohibits large healthcare facilities from selling medical debt, except under specific circumstances. Notably, these facilities may transfer medical debt to tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code, allowing these organizations to cancel the debts of patients. This approach aims to alleviate the financial strain on individuals who often find themselves unable to pay for necessary medical care.

Another critical aspect of the bill is its prohibition on reporting medical debt to credit agencies. By preventing large healthcare facilities and debt collectors from reporting such debts, the bill seeks to protect individuals' credit scores, which can be severely impacted by medical debt. This provision is particularly significant as it addresses the long-term financial repercussions that medical debt can impose on individuals, potentially affecting their ability to secure loans or housing.

The introduction of Senate Bill 27 has sparked discussions among lawmakers and community advocates about the implications of medical debt on public health and economic stability. Supporters argue that the bill is a necessary step toward ensuring that healthcare remains accessible and affordable for all Vermonters, particularly those from low-income backgrounds. Critics, however, have raised concerns about the potential financial impact on healthcare facilities and the broader healthcare system.

As the bill moves through the legislative process, experts suggest that its passage could lead to a significant reduction in medical debt-related stress for many residents. By providing a framework for debt cancellation and protecting individuals from negative credit reporting, Senate Bill 27 could pave the way for a healthier and more financially secure community.

The bill is set to take effect on July 1, 2025, marking a pivotal moment in Vermont's approach to healthcare and financial assistance. As discussions continue, the focus remains on how this legislation will ultimately benefit residents and reshape the landscape of medical debt in the state.