Senate committee hears bill to spend $1M to buy and abolish medical debt, bar reporting to credit bureaus

Senate Health and Welfare opened its Feb. 12 hearing on S.27, legislation that would appropriate $1,000,000 to the state treasurer for contracting with a nonprofit to acquire and abolish qualifying medical debt for Vermonters and add a state prohibition on reporting medical debt to consumer credit agencies.

Jennifer Carvey of the Office of Legislative Counsel read the bill’s provisions for the committee: “This is S.27 … an act relating to medical debt relief and excluding medical debt from credit reports. It starts off with a section appropriating $1,000,000 to the state treasurer … for the purpose of contracting with a nonprofit entity to acquire and repay certain medical debts to be verified Vermont residents as set forth in this section.”

The bill sets two eligibility paths: a household income at or below 400 percent of the federal poverty level for the household size, or medical debt equal to 5 percent or more of household income, and requires that the patient account still shows an outstanding balance after routine collection efforts. The proposed contract would require the treasurer’s contractor to buy medical debt at fair market value from health care providers, abolish the debt with no tax consequences for the debtor, and coordinate with providers and collectors to ensure adverse information is removed from credit reports following purchase and abolition.

State Treasurer Mike Pieciak described how his office would administer the contract and the funding source. “For the record, Mike Pieciak, state treasurer,” he told the committee. He said the $1,000,000 could be taken from an existing trust the treasurer has held to redeem general…