More than 32,000 St. Paul residents with unpaid medical debt ranging from $268 to more than $272,000 have had their debt erased, thanks to a city partnership with Fairview Health Services and Undue Medical Debt. Nearly $37 million in medical debt has been paid for pennies on the dollar.

Residents who've had their debt forgiven will receive a notice in the mail, likely this week, officials said. Notices were postmarked Wednesday.

Jennifer Lor, a spokeswoman for St. Paul Mayor Melvin Carter, said Wednesday that this is just the first wave of a partnership that officials hope will erase unpaid medical debt for thousands more St. Paul residents. Officials hope to announce similar partnerships with other health systems in the months to come.

This is the first debt relief package of the Medical Debt Reset Initiative, which Carter first announced during his 2024 budget address in August 2023. In all, the city plans to use $1.1 million in American Rescue Plan dollars to erase an estimated $110 million in medical debt.

More than $100,000 of that money has been spent so far, Lor said.

"Medical debt is a major barrier holding our neighbors back from prioritizing their health," Carter said in a statement Tuesday. "By removing the burden of debt, we invest in the long-term health of our entire community."

How it works

Basically, St. Paul is using money approved by the City Council last year to help buy residents' unpaid medical debt. Undue Medical Debt, a nonprofit working in partnership with the city, will negotiate with various health systems to buy unpaid debt for pennies on the dollar. Fairview was the first health system to participate, but officials said it will not be the last.

Residents do not need to take any action to be included. Undue Medical Debt will determine which St. Paul residents qualify.

First, they must live in St. Paul. Then, their incomes must be no more than 400% of current Federal Poverty Guidelines — about $120,000/year for a family of four — or their medical debt must be 5% or more of their annual income. Also, only debt owed to participating providers like hospitals will qualify for the program.

"Health is not only about buildings, hospitals, or clinics — health care is about meeting the needs of patients where they are and doing whatever we can to improve health outcomes and decrease cost," Fairview Health Services President and CEO James Hereford said in a statement.

Undue Medical Debt CEO and President Allison Sesso also issued a statement, which read, in part: "Medical debt is a psychological burden, in addition to a financial one, that can cause patients to avoid necessary care."

She added: "Simply having medical debt creates stress which undermines people's health."

Officials said national medical debt has reached about $220 billion and affects more than 100 million Americans. About 54% of insured adults carry medical debt, officials said, while 41% of people without insurance face even greater challenges, often delaying necessary care in order to pay for food and housing.

In Minnesota, the Debt Fairness Act that recently went into effect bans medical debt from being reported to credit reporting agencies. It also ensures medical providers cannot withhold medical care despite unpaid debt. St. Paul and Undue Medical Debt officials said they hope to partner with the Minnesota Attorney General's Office to explore ways to build on the Debt Fairness Act.