A New Mexico congressman has proposed a federal pilot program for medical debt relief

Sep. 7—New Mexico Congressman Gabe Vasquez is pushing legislation that would take inspiration from a 2021 state law that protects people from certain medical debt collecting practices and would go a step further by paying off some medical debt.

Organizations in the state that work with people in poverty are strong proponents of the bill, but it is unlikely to pass until the next Congress is seated.

There are eight co-sponsors officially signed on to the Patient Debt Relief Act, which Vasquez introduced in July. Vasquez held a roundtable on Wednesday to discuss the bill with proponents, like representatives from the New Mexico Center on Law and Poverty and New Mexico Legal Aid.

Here are three things to know about the proposed legislation:

Bill would designate $100M for debt relief

The Patient Debt Relief Act would create a federal pilot program for using government dollars to pay off medical debt for people who are at or below 250% of the poverty level or who have medical debt that exceeds 5% of their annual income. There would be no cap on the dollar amount of debt that could be forgiven.

In 2024, the federal poverty level is $15,060 annually for an individual and $31,200 annually for a family of four, so 250% of the federal poverty level would be $37,650 annually for an individual and $78,000 for a family of four.

The bill would create a $100 million fund to pay off medical debt, which would be managed by a nonprofit. Vasquez has been working with nonprofit Undue Medical Debt to develop the legislation. The nonprofit does debt forgiveness by purchasing medical debt in bulk from hospitals then paying it off and notifying the person with the debt by mail that their debt has been forgiven. Hospitals typically are not willing to sell an individual's medical debt but will sell bulk medical debt for pennies on the dollar, said Vasquez staff member Emily Hartshorn.

The bill would allow the federal government to do a similar process.

"Now that's a life-changing opportunity for so many New Mexicans who don't have access to credit because of the medical debt that they've incurred, who don't seek treatment, because of that stigma of, 'Oh, I still owe thousands of dollars, so I'm not going to go to the doctor, even though something is often wrong,'" Vasquez said.

NM's medical debt collection law has been

difficult to enforce

The New Mexico Patients Debt Collection Act protects people who make less than 200% of the federal poverty level from medical debt collection actions, including placing a lien on their home, garnishing their wages or selling the debt to a third-party collection agency. It also requires hospitals to screen patients for public insurance coverage and eligibility for assistance programs before trying to get payments for necessary or emergency medical care.

The proposed federal bill would take those restrictions national for people at or below 250% of the federal poverty level. The bill would also require hospitals to offer a repayment program first before sending medical bills to collection agencies for all patients.

The New Mexico law has been difficult to enforce, according to Dr. Anjali Taneja, executive director of Casa de Salud, a nonprofit health clinic based in the South Valley.

"We're still playing catch up with hospitals — like, 'You're not screening people, so how are you assessing whether they qualify for collections or not based on their income?'" Taneja said.

Streamlining the screening process might help hospitals comply, Taneja said.

The federal legislation could offer a bigger enforcement "stick" to get hospitals to comply with the requirements. In its current state, the bill would tie hospital compliance with eligibility for Medicare funding.

The federal bill has a "big stick" to try to get hospitals to comply, said Hartshorn. Hospitals that do not follow the requirements will not be eligible for Medicaid funding. That enforcement measure could change by the time a new version of the bill is introduced.

Part of a bid to retake the House, maintain control of the White HouseA congressional election stands between Vasquez and the next Congress. Vasquez is running for reelection in a very tight race against former Republican Congresswoman Yvette Herrell.

Vasquez said that he believes he can reintroduce the bill in the next Congress and get it passed if there is a Democratic majority. He said that U.S. Rep. Frank Pallone, D-N.J., the ranking member of the House Energy and Commerce Committee, will make passing the medical debt relief bill a top priority if Democrats are able to retake the House.

In June, Vice President Kamala Harris and the Consumer Financial Protection Bureau proposed rules that would prevent credit agencies from putting medical debt on credit reports.

"Under the CFPB proposed rule, there would be zero Americans with medical debt listed on their credit reports, down from 46 million in 2020," the White House announcement said.

The economic plan that Harris released in August as part of her presidential campaign also includes a proposal for the federal government to work with states to forgive medical debt.