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…