More than 43,000 people in St. Paul can expect to have their medical debt cleared under a new plan approved by the City Council.

Mayor Melvin Carter first announced a medical debt forgiveness plan in August. He proposed using $1.1 million in unspent American Rescue Plan funds to pay for the program.

The council passed the plan in a 4-3 vote Wednesday night while considering amendments to the 2024 budget.

“I think it’s a great program. I’m excited to see the results. I think it will be very meaningful for the people it touches,” St. Paul City Council President Amy Brendmoen said.

Under the new initiative, the city will partner with a national nonprofit, RIP Medical Debt, which has been doing this type of work for nearly a decade in other parts of the country.

St. Paul will be the first city Minnesota city to partner with the nonprofit.

“We are excited to be doing this in St. Paul,” RIP Medical Debt President and CEO Allison Sesso said. “It really does matter that people get this debt taken off their plate.”

The nonprofit buys medical debt in bulk from hospitals and then frees qualifying patients of any obligation to that debt.

A patient will qualify for the program if their household income is at less than 400% of the federal poverty level or if their medical debt makes up 5% or more of their household income.

Sesso told 5 EYEWITNESS NEWS the nonprofit can purchase bundles of debt from hospitals at a 100:1 ratio, meaning every dollar spent can cancel $100 in medical debt.

“The people who owe that money can’t pay it. They don’t have the means, so it is severely marked down, and that’s the magic of our model,” Sesso said.

That means the $1.1 million invested by the city of St. Paul has the potential to wipe out $110 million in residents’ medical bills.

Several large hospital systems in the Twin Cities have signed on to this plan, including Children’s Minnesota.

“I think it’s a really good use of one-time American Rescue Plan dollars,” St. Paul City Council Member Chris Tolbert said.

The plan, however, only passed by the slimmest of margins Wednesday.

Jane Prince was one of the City Council members who voted against it, arguing the American Rescue Plan funding should be spent on other things.

“It is preposterous to say that the city doesn’t have $1.1 million in needs that this money could be spent on except for medical debt, just preposterous,” Prince said during Wednesday’s meeting.

She said it seems “random” for the city to dabble in private medical bills instead of using the money for core government services, such as addressing the homelessness crisis.

“We’re not keeping up with the role of the city in providing basic city services that people expect right now, so we shouldn’t be adopting a new area of endeavor that doesn’t relate to the core mission and services that the city should be providing,” Prince said. “A million dollars would go a long way toward helping the city in a number of different areas.”

Prince said she understands the desire to help residents with medical debt but believes other avenues should be explored for accomplishing that.

“If this is a goal we want to achieve, let’s do it with the parts of our government that deal with health care,” Prince said. “And did we ever engage with the hospitals in saying, isn’t this something you could do without us?”

Other city council members agreed during Wednesday night’s debate.

“I have concerns and I’ve heard concerns from my constituents about spending public dollars on private individuals’ medical bills,” City Council Member Rebecca Noecker said.

The mayor, meanwhile, provided this statement to 5 EYEWITNESS NEWS about the passage of the 2024 budget:

“From public safety to medical debt, this budget makes bold investments in our future while maintaining the discipline behind our city’s perfect credit rating. I appreciate the Council passing it.”

RIP Medical Debt said there is no firm timeline for when medical debt will start to be cleared for St. Paul residents but noted the work with the city and local hospitals will begin immediately.

“I ask people to be patient. It will happen but it does take some time,” Sesso said.