Tzedek DC Offers Residents Credit Report-Related Support; Relief Recipients to Receive Debt Cancellation Letters Starting Today
Tzedek DC applauds the cancellation of about $42 million of medical debt for more than 62,000 District of Columbia residents.
The relief is due to a public dollars investment by the DC Government, which Tzedek DC recommended and catalyzed. This investment has made DC the first state-level government to invest in the large-scale purchase and cancellation of medical debt. Over 80 percent of residents benefiting from the cancellation live in zip codes that are majority Black or community members of color.
Beginning today, August 30, residents whose medical debt has been erased will receive a letter from Undue Medical Debt, a national nonprofit that acquires medical debt in bulk from providers like hospitals and then erases it. To help residents navigate, Tzedek DC is now providing free follow-on services to support residents with questions related to this relief, including how it relates to their credit report. More information is available here.
“This is a big win for DC residents. We applaud Mayor Muriel Bowser and Deputy Mayor Wayne Turnage for this choice to invest in large-scale medical debt cancellation as an anti-poverty strategy and in response to the health equity problems that medical debt presents and perpetuates. We look forward to working further with the Mayor’s team and the DC Council to ensure fewer DC families are burdened by medical debt going forward,” said Ariel Levinson-Waldman, Tzedek DC’s Founding Director. “We also deeply appreciate the systemic relief work of Undue Medical Debt. We urge residents to open envelopes coming to them from Undue Medical Debt so they know that their medical debt has been canceled and can take steps to ensure their credit report reflects that fact.”
“We know that in DC and across the country, medical debt has become a burden that follows too many families around and holds people back from ever getting their fair shot—especially people of color,” said Mayor Muriel Bowser. “Erasing medical debt just makes sense—this is a way for us to get life-changing financial help to a large number of people, in the most efficient way possible. We’re grateful for our partners who worked with us to relieve tens of thousands of Washingtonians from the burden of medical debt.”
Medical debt is the leading cause of bankruptcy in the United States, burdening an estimated 100 million Americans. The White House has heralded the large-scale purchase and cancellation of medical debt.
Estimates suggest that prior to DC’s cancelation initiative, more than 90,000 DC residents may have had outstanding medical debt. As in the rest of the country, the burden of this medical debt falls disproportionately on DC residents who are Black or persons of color, who are, on average, three times more likely to be burdened by medical debt than white DC residents. As a result, in an effort culminating in 2023, the Tzedek DC team, including medical debt project leader attorney Jennifer Holloway, advocated to the DC Council and Mayor, highlighting the crisis of medical debt and, along with allied organizations, urging medical debt cancelation through public investment to improve the lives of some of the District’s most vulnerable residents. Tzedek DC’s testimony is available here.
Working with Undue Medical Debt, the DC government’s resulting investment has provided the funding for this impactful medical debt cancelation program. Using DC-provided grant dollars, Undue Medical Debt has purchased debt directly from a DC hospital system and eliminated that debt. In addition, Undue Medical Debt has taken steps to have these debts removed from patients’ credit reports maintained by major credit reporting agencies (Experian, Equifax, Transunion).
Medical debt cancelation from Undue Medical Debt cannot be requested and is source-based, meaning that this program can only erase qualifying medical debts the organization is able to acquire from providers like hospitals or physicians’ groups. The criteria for relief are those who are four times the federal poverty level (FPL) or below or those with medical debt that is 5% or more of their annual income. Medical debts are bought and sold in large, bundled portfolios for a fraction of their face value, meaning one donated dollar can erase, on average, $100 of medical debt, providing an impactful return on investment to governmental funders or for private philanthropic efforts. Those benefiting from DC’s medical debt relief will receive a branded envelope from Undue Medical Debt in the mail starting today and over the next several weeks, outlining which of their medical debts have been erased.
Canceling medical debt provides immediate financial relief to DC families. Studies from the Urban Institute and the CFPB have found that medical debt cancellation increases an individual’s credit score and their total amount of available revolving credit (i.e., credit card limits). After medical debt is removed from a credit report, the studies found that an individual’s credit score could increase by as much as 32 points.
Medical debt is also a social determinant of health, and relieving medical debt can improve mental health, physical health, and financial stability. Because families of color are three times more likely to have medical debt than their white neighbors, this cancellation effort advances health and financial equity in DC.
This development was featured in the Washington Post.
About Tzedek DC, Our Medical Debt Work, and the Health Equity Fund
Tzedek DC’s name is drawn from the ancient Jewish teaching “Tzedek, tzedek tirdof,” or “Justice, justice you shall pursue.” Headquartered at the University of the District of Columbia David A. Clarke School of Law, and with offices also in Ward 8, Tzedek DC is a nonprofit organization. Our mission is to safeguard the legal rights and financial health of DC residents with lower incomes facing the often-devastating consequences of debt collection and credit-related obstacles, including those arising from medical debt. This mission is carried out as anti-racism work in response to the massive wealth gaps tracking race in DC and nationwide. Tzedek DC seeks to serve and empower its client base, which is comprised of 90% Black residents, 60% women, and 25% disabled community members. Our strategic approach combines three synergistic activities: (i) free direct services—legal representation and advice, and financial counseling; (ii) working in coalition to make systemic change; and (iii) providing bilingual community legal education on debt collection, identity theft, and credit management. Since 2017, Tzedek DC has served over 4,000 client households in legal matters and catalyzed systemic reforms benefiting hundreds of thousands of DC residents.
A portion of Tzedek DC’s medical debt work is funded by the Health Equity Fund, as administered by the Greater Washington Community Foundation in partnership with the Health Equity Committee. The Health Equity Fund is designated to improve the health outcomes and health equity of residents of the District of Columbia. The historic fund is one of the largest philanthropic funds of any kind focused on community-based nonprofits that serve District residents. Given that 80 percent of DC’s health outcomes are driven by social, economic, and other factors, compared to just 20 percent by clinical care, the Health Equity Fund adopts an economic mobility frame to address the root causes of health inequity and advances a sustainable network of people, organizations, and projects to ensure equitable health outcomes for Black, Brown, Indigenous, People of Color and other marginalized populations in DC.
We are especially grateful to the Health Equity Fund for the support and shared vision of health equity and racial and economic justice.