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MONTPELIER — A new law will wipe away medical debt for Vermonters and clear it from credit scores.
Treasurer Mike Pieciak plans to share updates regular updates on the purchase and forgiveness of medical debt from local providers.
On Thursday, Gov. Phil Scott signed the bill into law but shared his concerns with lawmakers.
“First, we should recognize much of this debt has already been written off by health care providers as uncollectable and built into higher rates for ratepayers,” Scott wrote in a letter to the Legislature. “Second, with a looming healthcare crisis and our growing crisis of affordability in Vermont, we should anticipate this debt financing program to grow, which raises significant concerns about future appropriations and where the funding will come from.”
Scott said he worries the program “may be disincentivizing repayment because of a misperception that ‘the State’ will eventually pay for it.”
“Again, I very much appreciate the intent and immediate benefits of S.27 to Vermonters, but we will need to manage this program effectively and pair it with real reforms,” he wrote.
Previously, lawmakers unanimously passed the bill. Proposed by Treasurer Mike Pieciak, the initiative is aimed at eliminating up to $100 million in medical debt for middle- and working-class Vermonters, and removing medical debt from credit scores. No additional taxes or fees will need to be raised under his plan.
Pieciak thanked lawmakers and Scott for “supporting this important investment in a healthier, more secure future for our state.”
“Rising health care costs are pushing Vermonters to a breaking point, leaving too many with medical bills they can’t afford,” Pieciak said Friday in an announcement. “This program will relieve tens of thousands of Vermonters of their medical debt—freeing them to invest in their futures without raising taxes.”
Sen. Ginny Lyons, chairperson of the Senate Health and Welfare Committee, called the one-time program “a smart, one-time investment that will deliver immediate relief.”
“This bill offers a hand up to those who need it most — helping them move forward with their lives without medical debt holding them back,” Lyons said in the announcement.
Rep. Alyssa Black, chairperson of the House Health Care Committee, said the bill “passed with unanimous support for a reason — we’re all one health emergency away from a lifetime of financial ruin.”
“This bill is an important step in ensuring that when someone is sick or injured, their focus can remain on their health — not their finances,” Black said.
Medical debt is described in the announcement as “the leading cause of bankruptcy in the U.S., burdening over 60,000 Vermonters.” With patients rarely knowing the cost of care upfront and often having no choice but to incur it, medical debt can be difficult to avoid, according to the announcement.
“Individuals who carry medical debt are less likely to seek care when they need it, leading to worse health outcomes, more expensive care in the future, and missed time at work,” the announcement states.
About 85,000 Vermonters delayed or avoided care due to fear of medical debt, according to a 2021 survey by the Vermont Department of Health cited in the announcement.
Mike Del Trecco, president of the Vermont Association of Hospitals and Health Systems, noted medical debt affects the entire health care system in Vermont. He said the bill “helps break this harmful cycle — supporting better health outcomes and the long-term stability of care in our state.”
Partnering with a nonprofit, the state will purchase medical debt from providers at “pennies on the dollar of its original cost,” according to the announcement.
“Once acquired, the debt will be forgiven and any negative impacts to the debtor’s credit will be removed,” the announcement states. “Vermonters will be automatically enrolled in the program — no forms, no hassle.”
Eligible are Vermonters with debts in “terminal bad debt status,” in a household at or below 400 percent of the Federal Poverty Level (currently $60,240 for an individual, $124,800 for a family of four), or having medical debt that equals or exceeds 5 percent of their household income. The debt will be purchased using a $1 million investment from funds previously appropriated to the Treasurer’s Office to buy down outstanding state bonds.
More work still is needed to fix Vermont’s broken health care system, Pieciak said.
“Vermonters already pay some of the highest health care costs in the country, and year after year, they’re asked to pay more — even as access to care becomes less certain,” Pieciak said in the announcement. “To ensure Vermonters can access the care they need — when they need it — without going bankrupt, we must invest in bold, long-term solutions that make our health care system more affordable, accessible and high quality for all.”
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