Americans to Have $1,000s of Medical Debt Wiped in $135 Million Deal – No Application Needed

Medical debt has become one of the most crushing financial burdens facing American families, with millions struggling to pay bills from unexpected illnesses, accidents, and routine healthcare. In a landmark relief effort, New York City has canceled nearly $135 million in medical debt for over 75,000 residents, representing one of the largest municipal medical debt forgiveness programs in the nation. The best part? Eligible New Yorkers don’t need to apply—relief comes automatically.

The $135 Million Medical Debt Relief Program Explained

New York City Mayor Eric Adams launched a pioneering program that will relieve medical debt for 500,000 working-class New Yorkers on a one-time basis through an $18 million investment by the city over three years, totaling over $2 billion in eliminated debt. This initiative addresses a crisis that affects millions nationwide, where families face impossible choices between paying medical bills and covering basic necessities like rent and food.

The program works through a partnership with Undue Medical Debt, a nonprofit organization that purchases medical debt at significantly reduced rates and then forgives it. Undue Medical Debt pioneered its debt relief strategy a decade ago, using charitable donations to buy medical debt from debt trading companies at steeply discounted prices and then freeing patients from the obligation to pay.

This model has proven remarkably effective. By purchasing debt for pennies on the dollar, relatively modest public investments can erase massive amounts of medical bills. The New York City program demonstrates this power—an $18 million investment will eliminate over $2 billion in debt, providing life-changing relief to half a million residents.

Who Qualifies for Automatic Debt Relief

The program targets New Yorkers who meet one of two eligibility criteria: an annual household income at or below 400% of the federal poverty line, or medical debt equal to 5% or more of annual household income. These thresholds ensure relief reaches those most burdened by healthcare costs.

For context, 400% of the federal poverty line represents approximately $128,600 for a family of four in 2025, meaning the program extends well beyond those in extreme poverty to include working-class and middle-class families struggling with medical bills.

The beauty of this program lies in its simplicity. There is no application process for this program—affected New Yorkers will be notified by Undue Medical Debt. Eligible residents will receive letters in the mail informing them that their qualifying medical debts have been forgiven. This automatic approach removes bureaucratic barriers that often prevent people from accessing relief programs.

The Broader Medical Debt Crisis in America

New York City’s initiative addresses a nationwide emergency. More than 100 million Americans hold some amount of medical debt, with the total amount nationwide exceeding $220 billion. This staggering figure represents countless families facing financial ruin through no fault of their own—simply because they or a loved one got sick or injured.

Nationally, roughly 20 million adults carry at least some medical debt over $250, and about 14 million owe more than $1,000. These debts accumulate from emergency room visits, surgeries, childbirth, cancer treatments, and chronic disease management. Even people with insurance find themselves drowning in medical bills due to high deductibles, out-of-pocket maximums, and services not covered by their plans.

Medical debt disproportionately impacts vulnerable communities. Black and Latino communities are 50 percent and 35 percent, respectively, more likely to hold medical debt than their white counterparts, and while medical debt may be held by those without insurance, even those with insurance are at risk of carrying medical debt.

Similar Programs Across the United States

New York City isn’t alone in tackling medical debt. States and municipalities nationwide are implementing innovative relief programs:

North Carolina’s Comprehensive Approach

As of October 2025, more than 2.5 million North Carolinians have had more than $6.5 billion in medical debt relieved through the state’s Medical Debt Relief Program. The state requires participating hospitals to forgive past debts and implement new policies preventing future medical debt accumulation for low and middle-income consumers.

All Medicaid enrollees who were enrolled in Medicaid on July 1, 2025 will have all outstanding medical debt dating back to January 1, 2014 that is owed to participating hospitals relieved. Additionally, other consumers with incomes at or below 350% of the Federal Poverty Level will have medical debt older than two years forgiven.

Michigan’s Investment

Thanks to a $4.5 million investment in the state budget for the 2024 fiscal year, nearly 210,000 Michiganders have had their medical debt forgiven through a partnership with Undue Medical Debt, totaling approximately $144 million in relief.

Los Angeles County

In June 2024, the Los Angeles County Supervisors committed $5 million in County funds to purchase medical debt for pennies on the dollar, and with additional funds from LA Care Health Plan and the LA County Medical Association, the program can retire more than half a billion dollars in medical debt. As of October 2025, over $363 million of medical debt has been erased for over 171,000 residents.

New Jersey’s Bold Move

New Jersey recently appropriated $10 million, which may be sufficient to cancel up to $1 billion in medical debt, demonstrating how strategic debt purchasing can multiply the impact of public investments.

Federal Actions on Medical Debt

The federal government has also taken steps to address medical debt’s devastating impact on American families. Vice President Harris announced a final rule removing medical debt from all credit reports, which will remove $49 billion in outstanding medical bills from the credit reports of 15 million impacted Americans.

This regulation represents a significant shift in how medical debt affects people’s financial lives. Previously, unpaid medical bills could tank credit scores, making it harder to rent apartments, secure car loans, or qualify for mortgages—compounding the financial consequences of illness or injury.

The Consumer Financial Protection Bureau determined that medical bills appearing on credit reports poorly predict whether someone will repay loans, yet these entries contributed to thousands of denied mortgage applications annually. Removing this barrier helps families recover financially from health crises.

The Economic Impact of Medical Debt Relief

Medical debt relief delivers benefits extending far beyond individual balance sheets. When families are freed from crushing healthcare bills, they can:

Improve Credit Scores and Financial Stability

Without medical debt dragging down credit scores, people can access better interest rates on loans, qualify for housing, and build financial security. Carrying medical debt can undermine financial stability and mobility, as it can affect credit scores and put individuals and families in difficult positions to choose between care and other necessary expenses.

Increase Economic Activity

Money previously dedicated to medical debt payments can flow back into local economies. Families can afford groceries, pay rent on time, invest in their children’s education, and make necessary home repairs. This economic stimulation benefits entire communities.

Reduce Stress and Improve Health

Financial stress from medical debt creates a vicious cycle—anxiety about bills can worsen health conditions, leading to more medical expenses. Financial stress is itself a social determinant of health and access, affecting patients’ willingness to seek preventive care or follow treatment plans.

How Medical Debt Forgiveness Works

The mechanics of these debt relief programs reveal why they’re so cost-effective:

1. Debt Accumulation: When patients cannot pay medical bills, hospitals and providers eventually sell these debts to collection agencies for a fraction of their face value—often just 1-5 cents per dollar.

2. Strategic Purchasing: Organizations like Undue Medical Debt purchase these bundled debt portfolios at similar discounted rates, but instead of pursuing collection, they forgive the debts entirely.

3. Notification: Eligible individuals receive letters informing them their specific medical debts have been canceled, with no action required on their part.

4. Credit Report Updates: Forgiven debts are removed from credit reports, providing immediate financial relief and improved creditworthiness.

What This Means for Affected Americans

For the 75,000 New Yorkers who have already received relief through the $135 million program, the impact is immediate and profound. Families who spent years anxiously avoiding collection calls can finally breathe easier. Parents no longer face the agonizing choice between paying medical bills and buying groceries for their children.

One recipient expressed gratitude for the program’s life-changing impact, noting how medical debt had prevented moving forward financially. These aren’t abstract statistics—they’re real families regaining stability and hope.

As the program continues, an additional 425,000 New Yorkers will receive similar relief over the coming years, with the city working toward its goal of eliminating $2 billion in medical debt.

Additional Support Through Financial Empowerment Centers

New York City has complemented debt relief with prevention strategies. Mayor Adams celebrated the opening of eight new NYC Financial Empowerment Centers run by the New York City Department of Consumer and Worker Protection at select NYC Health + Hospitals locations across the health system to help New Yorkers better manage finances and avoid future medical debt.

These centers provide free one-on-one financial counseling services in multiple languages, helping residents improve credit, reduce debt, and increase savings. Since the start of the Adams administration, DCWP’s Financial Empowerment Centers have helped tens of thousands of New Yorkers improve their credit, reduce their debt by more than $45.1 million, and increase their savings by $5.1 million.

Looking Ahead: The Future of Medical Debt Relief

While these programs provide critical relief, advocates emphasize they’re not permanent solutions. Undue Medical Debt CEO Allison Sesso stated, “This is not a final solution to the problem of medical debt, but it certainly is a good solution for the people that are impacted today”.

Comprehensive healthcare reform addressing the root causes of medical debt—high costs, inadequate insurance coverage, and predatory billing practices—remains essential. However, until systemic changes occur, debt relief programs offer tangible help to millions of Americans.

The $135 million in relief already provided to New Yorkers, along with billions more being forgiven across the country, represents a growing movement recognizing that healthcare debt shouldn’t destroy families’ financial futures. As more cities, counties, and states implement similar programs, millions of Americans will find themselves freed from the burden of medical bills they could never afford to pay.

For those wondering whether they qualify, the key message is simple: if you’re eligible, relief will come automatically. No applications, no bureaucracy—just a letter in the mail announcing that your medical debt has been forgiven, giving you and your family a fresh financial start.

In another related article, Best Debt Relief Programs in Atlanta for 2026: A Comprehensive Guide