A Milestone in Financial Relief
New Jersey has wiped out over $1.1 billion in medical debt for 776,000 residents, marking a significant step in addressing the financial toll of healthcare costs. The state’s partnership with Undue Medical Debt, a nonprofit that buys and forgives medical debt, has delivered relief to hundreds of thousands of households since August 2024. The latest round, announced this month, retired $927 million in debt for 629,000 people, funded by $5.8 million from the American Rescue Plan Act (ARPA).
This initiative targets those least able to pay, including individuals earning up to four times the federal poverty level or with medical debts exceeding 5% of their annual income. Recipients, who face no application process, are notified by mail when their debt is erased. For many, the relief comes unexpectedly, lifting a burden that often forces tough choices between healthcare and basic needs.
How the Program Works
The state collaborates with Undue Medical Debt to purchase large portfolios of delinquent medical debt at a fraction of their value, often from hospitals or secondary markets like collection agencies. Instead of pursuing repayment, Undue cancels the debt outright. This model allows a small investment—$5.8 million in the latest round—to erase exponentially larger sums, providing immediate financial relief to those who qualify.
New Jersey’s program is notable for its scale and efficiency. By leveraging federal funds, the state has positioned itself as a leader in direct debt relief, joining only a handful of states with similar initiatives. The process relies on healthcare providers, like RWJBarnabas Health, the state’s largest hospital system, which has sold qualifying debt to Undue for cancellation.
Broader Efforts to Protect Consumers
Beyond debt forgiveness, New Jersey has enacted robust consumer protections to prevent medical debt from derailing financial stability. The Louisa Carman Medical Debt Relief Act, passed in 2024, bans most medical debt from appearing on credit reports, caps interest rates on medical bills at 3%, and limits aggressive collection practices, such as wage garnishment for low-income residents. These measures aim to shield families from long-term economic harm.
The state has also tackled healthcare affordability through other channels. Caps on out-of-pocket costs for insulin and asthma inhalers, alongside reforms to increase transparency in pharmaceutical pricing, reflect a comprehensive approach to reducing financial barriers to care. These policies complement the debt relief program, addressing both immediate and systemic challenges.
A National Crisis in Focus
New Jersey’s efforts come amid a national medical debt crisis affecting roughly 100 million Americans. High healthcare costs, gaps in insurance coverage, and complex billing practices drive the problem, with nearly half of working-age adults owing significant medical or dental debt. Even insured individuals face high deductibles and surprise bills, which can lead to financial hardship and deter people from seeking care.
The crisis disproportionately harms low-income households and communities of color, deepening economic and health disparities. Nationally, the Consumer Financial Protection Bureau finalized a rule in January 2025 to remove most medical debt from credit reports, a move expected to benefit 15 million Americans. However, legal challenges have delayed its implementation until mid-2025, underscoring the urgency of state-level action like New Jersey’s.
Weighing the Impact
For recipients, the relief can be life-changing, freeing up resources for essentials like housing and food. Early data suggest New Jersey’s program disproportionately benefits low-income and minority communities, aligning with its goal of reducing inequities. Yet, some question whether debt forgiveness addresses the root causes of the crisis, such as high healthcare costs and inadequate insurance coverage.
Healthcare providers, particularly rural hospitals, face their own challenges. Forgiving debt or restricting collections could strain their finances, potentially leading to reduced services or higher upfront payment requirements. Balancing consumer relief with the sustainability of healthcare systems remains a delicate task, and New Jersey’s approach will likely inform debates in other states.
Looking Ahead
New Jersey’s milestone highlights the potential of targeted interventions to ease the burden of medical debt, but the scale of the national crisis demands broader solutions. States like Colorado and Massachusetts are experimenting with public insurance options and drug price reforms, while nonprofits like Undue Medical Debt continue to scale their efforts, recently erasing $30 billion in debt nationwide. These initiatives point to a growing recognition of the need for both immediate relief and systemic change.
As New Jersey expands its program and refines its consumer protections, its experience offers a blueprint for others. The relief provided to nearly 800,000 residents underscores the impact of innovative policy, but the persistence of medical debt nationwide suggests the work is far from over. For now, thousands of New Jerseyans can breathe easier, knowing their financial future is a little less uncertain.