Illinois has wiped out more than half a billion dollars in medical debt for over 500,000 residents through a state-funded program that buys outstanding medical bills on the secondary market and cancels them outright. The effort, run by the Department of Healthcare and Family Services, requires no application from the people it helps, and it is part of a broader wave of government-led debt relief programs now operating in multiple states and major cities. As medical bills remain one of the most common reasons Americans face collections actions and credit damage, these programs are testing whether public dollars can meaningfully reduce a financial burden that touches millions of households.
How Illinois Buys and Cancels Medical Debt
The mechanics of the Illinois program are straightforward but unusual for government spending. The state committed $10 million and contracted with the nonprofit Undue Medical Debt, which specializes in purchasing portfolios of delinquent medical bills from hospitals and collection agencies for pennies on the dollar. Once purchased, the debt is simply abolished. Recipients do not need to apply; instead, they are notified by mail that their balance has been eliminated. The program is administered by the Illinois Department of Healthcare and Family Services, known as HFS, as part of a broader push to use public funds in ways that directly improve financial stability for low- and moderate-income residents.
Eligibility is determined automatically based on two criteria: a household income at or below 400% of the federal poverty level, or medical debt that equals 5% or more of annual income. Because the debt is bought in bulk from portfolios that match those financial profiles, individual residents never interact with the program directly. The State of Illinois designed the initiative so that the relief arrives without bureaucratic hurdles, a deliberate choice that distinguishes it from many traditional assistance programs requiring lengthy verification processes. That design also reduces administrative costs, since the state is not processing individual applications but instead relying on financial data embedded in the portfolios it buys.
Cook County’s Parallel Effort Adds Hundreds of Millions More
The statewide program is not the only debt relief effort operating in Illinois. Cook County, which includes Chicago and surrounding suburbs, has been running its own medical debt relief initiative since 2022. That program has abolished $664,744,470.53 in medical debt benefiting 556,815 Cook County residents. The county effort uses a similar model, purchasing debt portfolios and canceling them, and it was funded in part through American Rescue Plan allocations directed to local governments during the pandemic recovery period. By leveraging the low purchase price of distressed medical bills, Cook County has managed to turn a relatively modest public investment into a very large amount of canceled obligations.
The overlap between the county and state programs raises a practical question: are some residents benefiting from both? The programs operate independently, with separate funding streams and separate contracts, so there is no centralized way to track whether a given bill was cleared by the county or the state. But together, they represent well over $1 billion in canceled medical obligations across Illinois alone. The county’s use of federal pandemic recovery money and the state’s $10 million commitment reflect a layered approach, with different levels of government attacking the same problem through the same nonprofit intermediary. For residents caught between hospital bills and household budgets, the source of the relief matters far less than the result: less pressure from collectors and more room to pay for rent, food, and other essentials.
New York and North Carolina Show the Model Is Spreading
Illinois is not experimenting alone. New York City announced that it has canceled nearly $135 million in medical debt for more than 75,000 New Yorkers, with plans to invest $18 million over three years to relieve up to $2 billion in debt for as many as 500,000 residents. The city also works with Undue Medical Debt, making the nonprofit a common thread across most of these government programs. That partnership model allows local governments to tap into an existing infrastructure for identifying, purchasing, and abolishing medical debt, rather than building such systems from scratch inside city agencies.
North Carolina, meanwhile, has taken a different route entirely. On July 26, 2024, the Centers for Medicare and Medicaid Services approved a model in which North Carolina uses Medicaid reimbursement incentives to encourage hospitals to forgive patient debt directly, rather than purchasing it on the secondary market. The North Carolina approach, as reported by The Associated Press, exchanges higher Medicaid payments to hospitals in return for those facilities writing off patient balances. This distinction matters because it targets the debt before it reaches collections, potentially preventing credit damage rather than cleaning it up after the fact. The two models, portfolio purchase versus hospital reimbursement exchange, represent genuinely different policy bets on where in the billing cycle government money does the most good.
The National Scale of Medical Debt
These local and state programs exist against a staggering national backdrop. A White House fact sheet archived by The American Presidency Project cited $49 billion in medical debt affecting 15 million people across the country, and noted that states and localities had eliminated more than $1 billion in medical debt for over 700,000 Americans using American Rescue Plan funds as of January 2025. Illinois’ program and Cook County’s initiative together account for a significant share of that national total, which means a handful of jurisdictions are doing most of the heavy lifting. The numbers also underscore how far there is to go: even a billion dollars in canceled bills represents only a small fraction of the overall medical debt burden.
The Consumer Financial Protection Bureau has separately studied how medical debt overly penalizes consumer credit scores, finding that even relatively small balances can depress access to mainstream loans and raise borrowing costs. While that federal research is not specific to Illinois, it helps explain why state and local leaders see value in pairing debt relief with broader consumer protection efforts. The Biden administration has moved to limit the role of medical collections in credit reporting, and those regulatory changes, combined with local abolition programs, may together reduce the long-term damage that an unexpected hospital stay can inflict on a family’s financial life.
What Comes Next for Illinois Residents
For Illinoisans wondering whether they might be helped by these efforts, the most important point is that the state program does not require any sign-up. When eligible debt is purchased and canceled, residents receive a letter explaining that the balance has been wiped away. People seeking other forms of aid, however, can still turn to state resources: the main services portal lists benefits and assistance programs, and the directory of state agencies can help residents find the right office for questions about health coverage, billing disputes, or consumer rights. Those tools do not duplicate the automatic debt relief, but they can help households navigate the broader landscape of healthcare and financial assistance.
Hospitals and clinics in Illinois also interact with the state through technical systems that shape how care is billed and paid for. The state’s Medicaid enrollment platform underpins eligibility and payment for many low-income patients, and changes to that infrastructure can influence how much medical debt accumulates in the first place. Advocates for patients argue that pairing back-end relief (like the purchase and cancellation of old bills) with front-end reforms to billing, charity care, and Medicaid enrollment will be essential if Illinois is to keep medical debt from simply rebuilding over time. For now, though, the combination of state and county initiatives has already erased balances for hundreds of thousands of people, offering a concrete example of how government can intervene in a part of the healthcare system that has long seemed intractable.
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*This article was researched with the help of AI, with human editors creating the final content.
Cole Whitaker focuses on the fundamentals of money management, helping readers make smarter decisions around income, spending, saving, and long-term financial stability. His writing emphasizes clarity, discipline, and practical systems that work in real life. At The Daily Overview, Cole breaks down personal finance topics into straightforward guidance readers can apply immediately.
