Treasurer proposes $1 million for statewide medical‑debt buyback and credit‑report protections, plans partnership with nonprofit

The state treasurer told the House Committee on Health Care that S.27 would pair a one‑time medical‑debt purchase program with a ban on reporting medical debt to consumer credit bureaus, and proposed using $1 million in reallocated funds to purchase qualifying debt through a contract with Undue (formerly RIP Medical Debt).

The treasurer described medical debt as distinct from other debts because patients often have no opportunity to delay care or shop for lower prices. The treasurer said the proposed program would target Vermonters at or below 400% of the federal poverty level and would focus on eligible debts that are at least 12 months old and have completed billing and collection steps.

How the program would work

- Contract and outreach: The treasurer said the office would contract with Undue to negotiate with participating providers (hospitals and other liable providers), receive de‑identified debt files, and evaluate accounts for eligibility based on income and age of account.

- Purchase and abolition: Undue would propose purchase offers for qualifying debt, typically at very low purchase prices (often described as pennies on the dollar). Participating providers would accept offers and transfer those debt accounts; Undue would then notify affected patients that their debt has been forgiven.

- Scale and cost: The treasurer estimated about 60,000 Vermont residents hold medical debt meeting the program's eligibility criteria and said Undue estimated around $100 million in face‑value medical debt could be eligible. The treasurer proposed a $1,000,000 appropriation, consistent with purchase ratios used in other jurisdictions; that sum would cover the purchase cost plus Undue's administrative fee.

Why the treasurer and proponents say the program is needed

Treasury staff argued that medical debt is a major barrier to health and financial stability, can deter people from seeking care and disproportionately affects low‑income, rural and other vulnerable populations. The treasurer pointed to recent federal Consumer Financial Protection Bureau activity on medical‑debt reporting but said a state program would protect residents even if federal actions change.

Voluntary provider participation and scope

The treasurer said provider participation would be voluntary. Hospitals and other providers would choose to provide debt files for review; some providers in other jurisdictions have also chosen to donate the debt rather than accept purchase funds. The treasurer said Undue has worked with nonprofit hospitals and other providers in many states and cities and that the nonprofit has experience processing large debt files and conducting eligibility screening.

Implementation details raised in questioning

Committee members asked how much of the $1,000,000 would go to Undue for administrative fees; the treasurer said Undue typically charges a percentage of the purchase amount and that the program design anticipates that administrative costs are included within the $1,000,000 estimate. The treasurer also said hospitals often receive a small payment when debt is sold (for example, a check for $1 on a low‑value account) and sometimes choose to donate proceeds back into patient programs.

The treasurer characterized the proposal as a one‑time, targeted effort and said the treasury had identified $1,000,000 previously appropriated for bond buy‑down that was available to reallocate to this program; the office said reallocating that money would produce greater immediate benefit to vulnerable Vermonters than the original bond buy‑down purpose.

No vote was taken during the hearing. The treasurer said the office would return with more implementation detail if the committee asked and anticipated negotiating participation and confidentiality agreements with providers before purchases occur.