Committee reviews S.27 to buy and abolish medical debt and bar reporting to credit bureaus

At a House Health Care Committee hearing, lawmakers reviewed S.27, a bill that would appropriate $1,000,000 to the state treasurer to contract with a nonprofit to acquire and abolish certain medical debts for eligible Vermont residents and prohibit credit reporting of medical debt.

The bill would require the treasurer to contract with a nonprofit that will purchase medical debt from health care providers at fair market value, cancel the debt at no cost or tax consequence to the debtor and coordinate removal of adverse information from consumer credit reports. Eligible debtors must be Vermont residents with household income at or below 400 percent of the federal poverty level or who owe medical debt equal to 5 percent or more of household income and whose patient accounts still show an outstanding balance after routine collection efforts.

Jen Carby, staff from the Office of Legislative Council, summarized the bill’s structure, noting that Sections 1 and 2 together provide the $1 million appropriation and identify a funding offset: a reduction in a previously appropriated bond-redemption appropriation (discussed in the bill text as a reduction from $20,000,000 to $19,000,000, though witnesses said that number has been moved in other bills). “Section 1 appropriates $1,000,000 to the state treasurer from the general fund in fiscal year 2026 for the purpose of contracting with a nonprofit entity to acquire and repay certain medical debts incurred by Vermont residents,” Carby said.

The bill would also add new reporting prohibitions in Title 9 and amend provisions in Title 18 to bar large health care facilities — defined in the existing subchapter as hospitals, hospital-affiliated outpatient clinics and ambulatory surgical centers — from selling medical debt, except to a nonprofit whose purpose is abolition. The bill would take effect July 1.

Witnesses broadly supported the concept but urged clarifications and operational details. Mike Fisher of the Office of the Health Care Advocate said the office supports S.27 while noting the measure does not address underlying structural drivers of medical debt. “While we support it, we also want to recognize it doesn’t address the structural problems,” Fisher said, and recommended adding a notice requirement so people whose debts are forgiven also receive information about hospital financial assistance programs.

That operational point was echoed in testimony from nonprofit and advocacy witnesses. Anna Zavas, a health policy analyst with the Office of the Health Care Advocate, recommended that letters notifying recipients of debt abolition also explain how to access existing hospital financial assistance. Undue Medical Debt (the nonprofit model cited in testimony) typically conducts a soft credit pull to identify eligible debts; witnesses emphasized that the bill’s exemption for a 501(c)(3) to request consumer credit reports is intended to permit such soft pulls but warned against enabling hospitals to resume using credit pulls to screen applicants for financial assistance.

Ernie Davis, senior director of state government affairs for the Leukemia & Lymphoma Society, cited national data on the cost of treatment and the Consumer Financial Protection Bureau’s finding that medical debt is a leading cause of personal bankruptcy. “When patients can afford their medical treatment, health outcomes do improve,” Davis said, urging passage of S.27 and noting that similar reporting prohibitions have passed in other states.

Representatives of provider groups supported the bill’s intent but flagged implementation concerns. Devin Green of the Vermont Association of Hospitals and Health Systems said the association supports S.27 as written and was amenable to a notice requirement, but cautioned against immediate new operational mandates such as proactive hospital screening before billing because of administrative burden. Green also urged care in any future prohibition on “extraordinary collection activities,” noting hospitals must balance patient protections with the ability to pursue legitimate collections for large, collectible accounts.

Chris Delia, with the bankers’ association, supported the bill’s definition of medical debt and said the language should avoid treating general credit-card or home-equity debt as medical debt because end use of such loans is often indistinguishable years later.

Stakeholders asked the committee to clarify several items in the draft language: how the treasurer’s contract will identify and coordinate with providers, whether the nonprofit should be encouraged to include non-hospital providers and out-of-state hospitals that serve Vermonters, explicit limits so hospitals cannot pull credit reports for financial-assistance screening, and whether the bill’s definition of health care services should omit the word “behavioral” (a recommended removal discussed by witnesses).

No formal vote on S.27 was recorded at the hearing; the committee heard that the State Treasurer plans to testify at a later session to provide operational details and answers about how the appropriation would be administered and how providers would participate.

The committee also heard background on Act 119 (2022), which standardized hospital financial assistance policies and prohibited sale of medical debt by large health care facilities; witnesses noted Act 119 took full effect July 1, 2024, and set minimum financial-assistance standards (free care eligibility and a minimum 40 percent discount for certain income bands). Those prior reforms frame the committee discussion about whether and how S.27 should connect to hospital financial-assistance outreach and long-term policy changes.

The committee left the record open for further information and expected the treasurer’s office to detail contracting plans and administrative processes in a future appearance.