California Lawmakers Propose $2.5 Million Statewide Medical Debt Relief Plan

TL;DR: California legislators introduced a $2.5 million plan to erase medical debt statewide, building on a Los Angeles County pilot that cleared $363 million for over 171,000 residents. About 40% of Californians report struggling with medical bills even when they have insurance.

Medical debt forces many households to choose between paying bills and covering basics like rent or food. Unpaid balances can damage credit, limit housing options, and affect mental health. Assembly Majority Leader Cecilia Aguiar-Curry highlighted that the issue persists regardless of insurance status.

The Los Angeles County pilot, launched in 2024, used $5 million to buy debt at a fraction of its value and erase it for qualifying residents. By December 2024, the program had removed $363 million of debt for more than 171,000 people, aiming eventually to clear $500 million of the county’s $2.9 billion outstanding medical debt.

The new statewide proposal, called the Medical Debt Relief Act of 2026, would appropriate $2.5 million from the state’s general fund, its main operating account, to the California Health Facilities Financing Authority, the state agency that finances health facilities. The authority would purchase and forgive debt for Californians whose income is at or below 400% of the federal poverty level, a government measure of income, or whose medical bills exceed 5% of annual income.

Aguiar-Curry said roughly 40% of Californians face medical debt, a figure that includes both insured and uninsured individuals.

The Los Angeles County effort demonstrates that targeting debt purchase can relieve large volumes of obligations quickly.

The statewide plan allocates $2.5 million, a fraction of the pilot’s $5 million investment but intended to launch a broader effort.

If approved, the state could begin clearing debt for thousands of residents, potentially reducing financial strain and improving access to care.

However, the $2.5 million amount is modest relative to the scale of need, suggesting the program may serve as a test for larger future funding.

Critics may question whether the funding will reach enough people to make a measurable difference.

What to watch next: The bill will undergo committee hearings in the coming weeks, with a floor vote expected later this spring; its fate will determine whether California expands the model statewide.