MUSKEGON, Mich. (WOOD) — Thanks to the American Rescue Plan Act, nearly $2 trillion dollars in federal aid has been injected into the nation to help the public bounce back from the COVID-19 pandemic.

Virtually every state, county and municipality has put together task forces to figure out the best ways to spend the one-time federal funds. But a couple of communities have taken an outside-of-the-box approach, trying to find the most bang for their buck while helping their residents. Cook County in Illinois and the city of Toledo in Ohio have dedicated a portion of their ARPA funds to a nonprofit organization that buys up and forgives medical debt at a tiny fraction of the price.

The organization is called RIP Medical Debt. According to CEO Allison Sesso, the nonprofit takes the same basic model as the for-profit debt collectors and uses it to help the community.

“(Debt buyers can) give you an amount of money and bet that once they own it, they can go and follow up with those individuals and those people who now owe them money,” Sesso told News 8. “But most of these people don’t have the means to pay that debt. So in order for that bet to be profitable, the price of that portfolio has to be super low. Otherwise, it doesn’t make economic sense. … Sometimes it ends up being a million-dollar payment, but it’s for like $300 million worth of debt. But that $300 million worth of debt is basically worthless to the hospital.”

RIP Medical Debt built what it calls a “debt engine” — a formula that helps comb through debt bundles or any pieces of debt up for sale to see how they could help those who need it most. To qualify for help, you either need to be 400% below the poverty line or hold medical debt that adds up to 5% or more of your overall income. Sesso said that on average, 80% to 90% of outstanding debt holders qualify under RIP Medical Debt’s model.

“It’s mostly people who really can’t or couldn’t pay their debts or are struggling to,” Sesso said. “So we’re leveraging these for-profit debt markets and the pricing that they have established, which is pennies on the dollar.”

How far can that money stretch? Since RIP Medical Debt was founded in 2014, the group has wiped away more than $7.3 billion in medical debt across the United States, helping more than 4.2 million people. The organization expects those numbers to rise drastically in the coming years.

“We hit the $1 billion mark in late 2019. So I think that’s important because a lot of this has happened in the later years. It takes a little while for a nonprofit to get its motor running. That just shows our growth trajectory,” Sesso said.

Numbers from the Consumer Financial Protection Bureau show just how widespread the problem is for Americans. Consumer credit records from June 2021 show that Americans had $88 billion of medical debt in collections. The actual number is likely higher because not all medical debts in collections are furnished to consumer reporting companies. As of 2021, 58% of all third-party debt collections were for medical debt.

A 2022 survey published by the Kaiser Family Foundation found that an estimated 41% of Americans have some form of medical debt. Of those with medical debt, 63% are forced to cut spending on food, clothes or other basics to try and pay. Nearly half were forced to use up all or most of their savings to pay the debt and 19% were forced to move.

Medical debt isn’t just an economic hindrance. According to Sesso, it also circles back to health.

“Increasingly, medical debt is seen as a social deterrent of health, meaning just the fact that you have medical debt puts you in a worse position in terms of your likelihood of being a healthy individual. It creates mental health stresses and stress on your body creates physical outcomes,” Sesso said. “Plus, you tend to not go to the doctor when you have medical debt. … And on top of that, you tend to cut your budget down, which means you (are more likely) buy less-healthy food. So there’s a whole ripple effect of what happens with medical debt in terms of its impact on your health.”

Previously, RIP Medical Debt worked in the private field, taking donations and building campaigns through churches and other nonprofits. But Toledo and Cook County have given the organization a new way to make a big impact.

According to a report from WNWO, the NBC affiliate in Toledo, the city council and the Lucas County Board of Commissioners will each contribute $800,000 in ARPA funds to tackle medical debt for people in their communities. That $1.6 million is expected to help eliminate up to $240 million in medical debt across the county.

Last July, Cook County in Illinois voted to use $12 million in ARPA funds to invest with RIP Medical Debt. The estimated debt savings for the people of Cook County: $1 billion.

Right now, RIP Medical Debt is running a public campaign to help people across Michigan. The organization hopes to raise $1.5 million, which would eliminate an estimated $181 million in medical debt. Sesso said the people of Michigan hold more than $181 million in debt but said that’s likely “a pretty large portion of it.”

So will any Michigan lawmakers or communities get on board with a plan? We will see. RIP Medical Debt already has a partnership with Access Health in Muskegon County. Samantha Cornell, the director of Community-Based Services for Access Health, told News 8 that it is considering supporting the idea. ARPA funds are distributed through counties and municipalities, not nonprofits like Access Health, but medical debt is one of the key problems that Access Health is working to address.

“We just had our elections and then folks being sworn in, so we’re kind of just at that timeline where (RIP Medical Debt) is working their process. We’re watching that. But that is something that is definitely a topic of discussion. We’re just not to the point of having had those discussions yet,” Cornell told News 8.

Access Health and RIP Medical Debt formally announced a two-year partnership last August, working together to understand community needs and better identify barriers to accessible affordable coverage.

Every year, Access Health takes part in a 100-day challenge called the Livability Lab in which members of the community are called together to look at their biggest needs and tries to develop solutions. Cornell says medical debt has been on their radar for a while.

“This is happening locally here in Muskegon. But it’s not happening just here in Muskegon. It’s a nationwide problem and it’s something that we need a solution to,” she said.

Cornell believes the partnership can go deeper and have a big impact because the two groups are on the opposite end of major problem and can work together to reach the solution.

“They come at it from, ‘How can we fix a problem that’s already happened?’ And we’re coming at it from, ‘Great. Awesome. Yes, we need those solutions, but how can we make changes to (prevent the problem from happening)?’” Cornell said.