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A $1.1 million investment of St. Paul's federal pandemic aid could wipe away as much as $110 million in medical debts for city residents, Mayor Melvin Carter announced in his annual budget address Thursday.

Thousands of city residents could have their debts canceled under Carter's proposal, which would pursue a contract with nonprofit RIP Medical Debt to obtain and then pay off overdue medical bills.

RIP Medical Debt was founded in 2014 by two former debt collectors. The nonprofit acquires debt from hospital systems for pennies on the dollar. But instead of calling to collect on that debt, they forgive it.

Patients are notified by letter or email that their debts have been canceled as a tax-free gift. According to RIP Medical Debt's website, the group has canceled $9.8 billion in medical debt for more than 6 million people. Last month, the Fergus Falls-based CA Foundation announced a donation to RIP Medical Debt that will wipe away the debt burden for an estimated 3,700 Minnesotans.

"We understand today in a way that we didn't three or four years ago … that anything that stands in between St. Paul residents and their medical care creates a health crisis for us," Carter said in an interview.

There would not be an application process. Instead, RIP Medical Debt looks for accounts that meet one of their two eligibility criteria: Recipients must have a household income at or under 400% of the federal poverty line, which is $120,000 for a family of four, or their debt must equal at least 5% of their income.

The city's money will only go toward accounts with addresses in St. Paul, though patients living elsewhere could still be covered by RIP Medical Debts' philanthropic funds. Carter said all of St. Paul's major hospital systems have agreed to participate in the program.

"RIP is consistent with our commitment to eliminating barriers for our patients to access health care services," Allina Health said in a statement. "We look forward to working with Mayor Carter and RIP Medical Debt to implement this resource as part of our extensive array of financial assistance programs."

Representatives from Children's Minnesota, Fairview Health Services and HealthPartners also attended the mayor's address.

Other localities, such as Cleveland and Cook County, Ill., have already used their federal American Rescue Plan dollars to partner with the nonprofit.

The mayor compared the proposal to the city's decision to stop charging late return fees for library books in 2019. After going fine-free, St. Paul saw thousands more people using its libraries.

"Medical debt works the same as library debt — it keeps people away from the doctor," Carter said.

The spending will require City Council approval.

Staff writer Jeremy Olson contributed to this report.