ÃÛÌÒÓ°ÏñAV

The new figure was announced Monday by Allison Sesso, the president and CEO of Undue Medical Debt. The nonprofit charity agreed earlier this year to use some $10 million in state American Rescue Plan COVID relief dollars to buy up medical debt from hospitals and doctors for a few pennies on the dollar, eliminating a negative mark on the credit reports of those who racked up the bills.

All totaled, according to the Governor's Office, the program has so far erased $642 million owed by more than 485,000 Arizonans.

Under a deal the state cut with Undue Medical Debt, the beneficiaries all get letters crediting not just the organization but also Gov. Katie Hobbs. 

One testimonial in the governor's news release Monday is attributed to an anonymous Sierra Vista resident who wrote of struggling with debt of previous and current hospital bills.

"It was hard to catch up or even make a payment, especially at times when other bills are due or start to pile up,'' that resident said, adding that after receiving the letter about the debt relief, "I was truly happy and grateful.''

In another, a Sun City resident spoke of "drowning in medical debt'' after being diagnosed with multiple myeloma.

Undue Medical Debt says a key factor of the program is that the patient starts over again, free and clear of any obligation.

Generally speaking, when a debt is forgiven, it can be considered income for tax purposes. But Courtney Story, the charity's vice president of government initiatives, has said that doesn't apply when the money comes from a "disinterested third party.''

"Because we're a nonprofit, we're not part of the health-care system, we count as a disinterested third party, as does the government,'' she said. 

Undue Medical Debt has been offering its program across the nation. Established in 2014, it uses government funds and private donations to acquire portfolios of medical debt from healthcare providers or debt buyers.

The money goes farther, according to company officials, because the debt has reached the point where those holding the rights are willing to sell them for pennies on the dollar.

People can't apply for the relief. Instead, Undue Medical has to find them.

The program is aimed at those whose income is less than 400% of the federal poverty level. That is currently $128,600 for a family of four.

Also eligible are those whose medical debt is 5% or more of their annual income. That would aid those who have higher income levels than the cutoff, but much higher debt than they may be able to handle.

Undue Medical Debt works with a credit reporting agency, buying what it calls "relevant income data'' from them. That's how it gets the names of individuals who owe money.

That is then compared with the information it gets from medical providers and others who are the holders of past-due debts.

Once the bills have been paid off, the patient gets a letter in an Undue Medical Debt envelope informing for the first time that the obligation has been wiped out and the credit bureau has been notified.

The deal Hobbs cut with the charity when she first signed the deal in 2024 also requires that beneficiaries be told the financial relief is happening because of the governor's action: It spells out that any fliers, advertisements, press releases or other marketing materials include "logos or insignia as required by the governor's office and approved by the governor's office before publication.''

Gubernatorial press aide Christian Slater, in defending that provision when the program was announced in July, said that is appropriate. He said the letters are designed to tell people not just that their medical debt was relieved but "how it happened."

"The medical debt relief would not be possible without the governor's leadership and focus on lowering costs and delivering economic opportunity for every Arizonan,'' Slater said.  

In the news release Monday, Hobbs included the anonymous comments of three Arizonans who said they were thankful the debt had been wiped out.

The contract the state has with Undue Medical Debt says, "patient stories and related insights shall be shared with the governor's office on a regular basis."

As to what the governor can do with those testimonials, a company spokesman said when the program was announced that, "to my knowledge, there isn't a restriction on how they can be used.''

In unveiling the plan in 2024, Hobbs said there's nothing illegal about the state using money it received from the federal government to pay off the medical debts of private Arizonans.

A provision of the Arizona Constitution makes it illegal to "make any donation or grant, by subsidy or otherwise, to any individual, association or corporation.''

"I can assure you we would not be taking this action if we weren't fully confident in the legality of it,'' Hobbs said. Anyway, she said, Arizona wouldn't be the first jurisdiction to use COVID dollars from the American Rescue Plan Act in this way.

Undue Medical Debt has provided news releases from other jurisdictions that have taken advantage of the program, with recent releases from Delaware Gov. Matt Meyer, Gov. Ned Lamont of Connecticut, Illinois Gov. JB Pritzker, and one from the Los Angeles County Board of Supervisors for a local program.