Illinois to erase nearly $1 billion in medical debt under new law

Illinois Gov. J.B. Pritzker signed a bill this week that will purchase and forgive medical debt for hundreds of thousands of state residents.

According to the text of HB 5290, known as the Medical Debt Relief Act, the Department of Healthcare and Family Services (DHFS) will establish a pilot program to discharge medical debt for low-income households, providing relief to more than 300,000 state residents.

State Sen. Mike Simmons, who sponsored the bill, praised its passage and the relief it will provide to low-income families.

“Countless households and families will finally experience the long-awaited relief from extremely burdensome debts,” he said in a statement. “The Medical Debt Relief Act will have a profoundly broad impact on people across our state who are struggling with medical debt. At least 90% of Illinoisans burdened by medical debt live under 400% of the federal poverty level. This law will allow people to live a more prosperous life.”

Under the terms of the bill, individuals will qualify for the program if their household income is below 400% of the federal poverty level, or if they possess medical debt amounting to 5% or more of their annual household income.

The DHFS will be tasked with starting up the pilot program and to review applications by Jan. 1, 2025.

The program works by purchasing medical debt from hospitals, health care providers, and collection agencies, which is often available for pennies on the dollar. That debt will then be forgiven, meaning that residents will not have to pay the balance that the state purchases.

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According to the bill, the department will provide reports to the governor and General Assembly each year on the number of eligible residents who received relief and how much debt was forgiven.