Medical Debt Relief 2025: How Cities And States Are Erasing Bills By The Millions
If you’ve ever opened a hospital bill and wondered how you’ll pay it, you’re not alone.
But, this year, more cities and states are stepping in to help by buying up medical debt and forgiving it entirely, sometimes without people even knowing it until the letter arrives in the mail.
A Fresh Start for New Yorkers
This fall, a NYC medical debt relief took center stage when the city announced that about $135 million in unpaid bills had been wiped out for more than 75,000 residents.
Over the next three years, the program plans to clear over $2 billion in medical debt for roughly half a million people.
It’s part of a growing effort to give Americans a real shot at financial recovery after illness.
How The Process Works
Most of these programs team up with Undue Medical Debt, a nonprofit that buys bundles of unpaid hospital bills for a few cents on the dollar, then cancels them.
There’s no form to fill out and no sign-up list. If your account qualifies, the debt is forgiven and you’ll get a letter confirming it.
It’s a simple idea with a huge impact: turn impossible bills into clean slates.
Other States Following Suit
New York isn’t alone. North Carolina medical debt relief has made headlines, too. The state combined debt cancellation with new hospital policies and Medicaid incentives, helping wipe out about $6.5 billion in medical bills for 2.5 million people so far.
Cook County, Illinois, has expanded its own initiative using federal funds, and other cities are close behind.
All told, at least 26 local and state governments have launched similar projects since 2022, a sign this model is catching on fast.
The Bigger Picture
The push for medical debt relief in 2025 comes as millions of Americans still carry healthcare debt that’s weighing down their credit scores and budgets.
Many people with insurance say they still struggle to cover bills, and some skip needed care to stay afloat.
It’s become one of the country’s biggest personal finance headaches, and policymakers are finally taking notice.
Credit Scores Get A Break
A big shift came in January 2025, when the Consumer Financial Protection Bureau (CFPB) medical debt rule officially kicked in.
The new rule removes medical bills from credit reports and bars lenders from factoring that debt into loan decisions.
Experts say that change could lift credit scores for about 15 million people and erase roughly $49 billion in recorded debt overnight.
Some states are building on that rule with their own protections, exploring new laws to stop medical bills from hurting borrowers in the future.
It’s one of the first major policy moves that tackles medical debt from the credit side instead of the hospital side.
What It All Adds Up To
For New York City, the move goes beyond the numbers.
The city has pledged $18 million over three years to fund debt purchases and is also expanding financial-counseling services in public hospitals to help residents avoid falling back into debt.
Other cities are watching closely and considering whether this kind of government medical debt cancellation could work for them, too.
There’s still plenty more to do, but the message is spreading: relief is possible, even if the healthcare system isn’t fixed yet. And what’s better than a little dash of hope?