In November 2022, Arizona voters overwhelmingly approved Proposition 209, the Predatory Debt Collection Protection Act which protect families from spiraling medical debt and aggressive collection practices.
Prop 209 passed by a remarkable 72 % to 28 % margin, showing strong bipartisan support across the state.
AzPHA vocally supported the measure and went up against debt buyers and sellers during the campaign.
What Prop 209 Did
Prop 209 put in place common-sense reforms that matter for health and economic stability:
- Capped the interest rate on medical debt at the lesser of 3 % per year or the weekly average one-year Treasury yield, significantly how fast medical debt grows.
- Expanded exemptions from debt collection including higher protections for home equity, vehicles, bank accounts, and household goods so that families are less likely to lose those when a medical emergency strikes.
- Reduced wage garnishment exposure so that only up to 10 % of disposable earnings can be taken to pay unsecured debts, leaving more income available for rent, food, and care.
Hobbs’ Action: Cancelling Medical Debt Using Federal Funds
Last week Governor Katie Hobbs recently announced a medical debt cancellation initiative that brings real relief to nearly 500,000 Arizonans with medical debt. The creative plan used federal pandemic relief funds to buy up and cancel medical debt at one penny on the dollar.
Because medical debt portfolios can be bought for a fraction of their face value, state dollars go far often buying down hundreds of dollars of debt for every dollar spent… which is why the debt could be bought for so cheap.
Debt cancellation through this initiative offers real, measurable gains:
- Improved access to care: Without overwhelming debt hanging over them, families are more likely to seek preventive care and fill prescriptions lowering long-term health risks.
- Reduced stress: Financial strain is a well-documented risk factor for poorer mental and physical health. Eliminating medical debt can lessen chronic stress and its associated harm.
- Greater economic stability: With wage garnishment reduced and debt erased, families keep more income for essentials such as housing, utilities, and food — all critical social determinants of health.
- Preservation of assets: Prop 209’s exemptions, paired with debt cancellation, mean families are less likely to lose a car, home, or savings due to an emergency health event.
Proposition 209 and the Hobbs’ debt-buyout program represent a two-pronged strategy: one prevention-oriented (through reforming debt collection law) and one relief-oriented (through targeted cancellation).
Editorial Note: The timing of Hobbs debt buyout comes just as people who get their health insurance via the Marketplace are making decisions about their plans. Because the enhanced advanced premium tax credits are now gone – many will be buying high-deductible bronze plans – which are often the source of medical debt… people who buy high-deductible plans to reduce their premium.
