This story was produced as part of a joint Equitable Cities Reporting Fellowship for Rural-Urban Issues between CivicLex and Next City. When Lucy Becker got a letter addressed from LFUCG, she had a hunch about what was inside. Just a couple of weeks prior, she had read an article in CivicLex abou t her local government’s new initiative to erase $90 million in medical debt for residents. “My mom always keeps a little stack of my mail. The first one on top said [Lexington]-Fayette Urban County Government, and I was like, no way,” says Becker, a 28-year-old musician who has racked up thousands in medical debt due to injuries and severe allergies – debt she thought there would be no escape from.  “When you’re trying to stay afloat with the current bills that you have … I just can’t even imagine how I’d begin to save or pay for [major debt like] that.” Last year, the Lexington-Fayette Urban County Government entered into a $1 million, three-year contract with the New York-based nonprofit Undue Medical Debt to purchase and forgive $90 million in medical debt for income-qualified Fayette County residents. Becker, a native of Lexington, was one of about 6,000 residents who saw some amount of medical debt forgiven in the first wave of the program. Last week, the municipal government announced a second wave of about 3,200 residents. Allison Sesso, president of Undue Medical Debt, says this relief comes at a pivotal time with the expiration of Affordable Care Act subsidies, among a host of federal changes. “That means that our work is not going to be obsolete, but actually more necessary, as we continue to go down a road where people don’t have proper insurance and we’ve made it harder for people to get on Medicaid,” Sesso says. “We want to see better solutions.” Originally called RIP Medical Debt, the charity was founded by a pair of former debt collection agents more than a decade ago with the aim of using the traditional collection process for good.  Undue Medical Debt purchases unpaid patient debt portfolios from debt collectors and healthcare providers for pennies on the dollar. Unlike debt collectors, Undue erases the debt with no strings attached, so people no longer need to pay that chunk of their balance owed.  In Lexington’s first wave, which was completed last November, $90,000 of the contract was used to forgive more than $12 million in debt from an anonymous hospital system.  Undue Medical Debt began working with city, county and even state governments during the height of the Covid-19 pandemic — starting with Cook County, Ill. — spurred by local and state agencies’ need to use up federal American Rescue Plan Act funds.  But in Lexington and beyond, even as these large-scale governmental partnerships have wiped out millions in resident debt at a relatively low cost, they have also drawn criticism over their unorthodox use of government funds. They’ve also required months, if not years, of behind-the-scenes coordination and political buy-in. So even as Lexington forges ahead, mailing out thousands more debt relief notices, other communities in Kentucky are taking a grassroots approach to make a small dent in residents’ debt.  Lexington-based musician Lucy Becker is one of thousands of residents who received a letter from Undue Medical Debt stating that the city had paid to wipe out part of their medical debt. (Photo courtesy Becker) Cutting through red tape in Paducah Even with its headline-grabbing governmental contracts, most of Undue Medical Debt’s campaigns are still crowdfunding campaigns by grassroots organizations, nonprofits and individuals.  Those donations have helped fund efforts like last year’s direct purchase of $30 billion in debt from trading company ​​Pendrick Capital Partners, which led to the agency shutting down, and one North Carolina church’s successful “debt jubilee,” which raised $5,000 through small donations and paid off some $500,000 in local residents’ debt. In Western Kentucky, in Paducah and McCracken County, two local organizers reached out to their municipal government about taking action on community debt relief.  Paducah Action co-founders Parker Jaco and Eli Sicken hosted the new group’s meeting last March to gauge and ramp up interest in local politics. After months of making allies with city commission members and encouraging more people to get involved in local politics, observers asked Jaco and Sicken what other actionable steps they were taking. The conversations with local officials did not seem promising, Jaco says, so the group decided to take the more straightforward crowdfunding approach for the sake of efficiency. “We would have had to convince basically the whole city commission to be on board with this,” says Jaco, who hadn’t heard of Lexington’s program until contacted by this reporter.  “I feel that would have been red tape that we would have had to cut through,” he explains. “It, to me, felt as if it would have been better for the community to say that we came together and did this, instead of relying on city government to take action on it.” So near the end of December 2025, Jaco and Sicken launched a crowdfunding campaign on Undue Medical Debt’s platform, hoping to raise $36,000 by May 1, 2026. So far, it’s raised $5,500. Jaco says it’s only possible because of the support of community members, who have recognized change can start on the individual level.  “People see Paducah as … being a more rural place. I think people misinterpret and don’t really take a second to really think how in touch people in this community can be with each other, and how just extraordinarily helpful they are.” The fundraiser must raise $10,000 by May 1st for the funds to specifically pay off McCracken County residents’ medical debt. If they fall short of the $10,000 threshold, the money will instead go toward Undue Medical Debt’s national debt relief campaign. Neither Jaco nor Sicken believe that this is a perfect answer to Kentucky’s medical debt crisis, but they hope the campaign can at least boost awareness and decrease stigma. “People just are almost embarrassed to talk about it. I think a campaign like this will help release some of that hostility towards that way of thinking,” Jaco says. “You don’t choose to break your arm, you don’t choose to have kidney failure, you don’t choose to have cancer.” Eli Sicken is a co-founder of Paducah Action, a group crowdfunding to erase medical debt in their rural Kentucky town. (Photo courtesy Paducah Action) For Undue Medical Debt itself, these various types of partnerships go hand-in-hand. Sesso, the nonprofit’s president, says its municipal agreements, crowdfunding campaigns and its own work to directly purchase debt portfolios from hospitals are all connected. “The funds that come from private donors, it’s almost like it’s a great public-private partnership that’s happening,” Sesso says. “And regardless of whether or not we’re purchasing it from a hospital or the secondary market, we can apply the funds flexibly and make sure that the people who are giving the funds — be it a government or a private donor — can control to a degree who their dollars apply to based on where they live.” The long road to municipal debt relief in Lexington Years after state and local governments’ deadline to obligate pandemic-era American Rescue Plan Act dollars passed, Lexington’s government is still moving forward with municipal debt relief. Like any other Undue campaign, beneficiaries must either: Have a household income below 400% of the Federal Poverty Level (for a single person-household in Kentucky, that’s $62,600 or below), and/or Have medical debt totalling at least 5% of their total household income (for a single person-household making $100,000, the debt must exceed $5,000).  Instead of directly using federal economic stimulus funds, the Lexington-Fayette Urban County Government pitched in a million dollars of interest on those stimulus dollars, part of the city’s general fund balance. Because the contract uses city dollars, the debt wiped through this particular partnership will only go to Fayette County residents. There’s also no way to apply for debt relief, because these debts are bought in lump sums. Dan Wu, vice mayor and councilmember at-large with the Lexington-Fayette Urban County Government, first heard about Undue Medical Debt’s model from a friend in 2023. He knew then it was an initiative he wanted to bring to Lexington, but a partnership of this scale takes years to establish and carry out. (Editor’s note: Wu is an alumnus of Next City’s Vanguard 2024 program in Lexington.) “It wasn’t until about 2022 that [Undue] started working with local state and county governments to do this,” Wu says. “I’d been looking into it for the last two years.” Establishing the partnership took some time; council members first heard the proposal in August 2024, and then agreed to allocate those funds from the city’s fund balance that October. The contract was eventually signed last summer, though it wasn’t unanimously embraced.  Of the government’s $1 million contract with Undue Medical Debt, about 34% went toward the nonprofit for administrative costs. This allocation has spurred controversy within the community and heavy back-and-forth in the city council: Opponents have argued the steep overhead was an indication that the program’s costs would outweigh its benefits.  The million-dollar budget was broken down in a May council work session, where some council members raised these concerns. Of the contract:  $663,606 directly purchases unpaid patient debt $182,457 covers programmatic personnel costs, including debt operations, analytics and government relations $23,412 covers contractual services: software, databases and travel $130,435 covers other “indirect costs”: rent and utilities, administrative personnel salaries, auditing, general legal services and more. This breakdown almost exactly matches a template supplied to CivicLex/Next City by Undue Medical Debt, which shows how their contracts with municipalities are typically budgeted. The total “indirect costs” rate, about 13%, also falls within the bounds of the federal Office of Management and Budget’s 15% cap for indirect costs, called the de minimis rate.  Undue refers to the other 21% as direct costs, which the organization argues is essential for the medical debt relief to work.  The Lexington-Fayette Urban County Government, meanwhile, qualified any cost outside of the initial 66% as administrative. “[That is] the way we calculate it,” a city employee working on the partnership explained during the May meeting. Undue retains ‘perfect’ and ‘platinum’ ratings on Charity Navigator and Candid’s Guidestar respectively, the two most widely-used grading platforms for charities.  “Our administrative rates are very much in line with a typical nonprofit,” said Sesso, Undue Medical Debt’s president. Ultimately, Lexington Mayor Linda Gorton decided to withhold her support from the deal, explaining in a letter: “… given the significant amount of the monies that will not be used for the relief of the medical debt (specifically, that one-third or more of the $1 million expenditure will fund indirect administrative costs rather than provide direct relief, a ratio that far exceeds other non-profit organizations operating in our community).” The measure was approved by the rest of council and automatically passed without the Mayor’s signature. The mayor’s office did not respond to a request for comment.  One of the measure’s leading critics was Dave Sevigny, the council member for District 10. His concerns during that May meeting were about the percentage of the contract going toward administrative costs, as well as sole-source bidding. Now, after the dust has settled, Sevigny tells Civic Lex/Next City that city governments should be “somewhat cautious” when approaching large, third-party contracts like this. But ultimately, Sevigny says, he doesn’t think the contract with Undue Medical Debt was the wrong move. “It’s not a bad direction,” Sevigny says. “There are multiple problems that we address both with public dollars and local government dollars [as well as charitable organizations] to address an actual issue that’s taking place on the streets in our own community.” He points to local efforts to combat homelessness in Lexington as another example of how different funding sources can co-exist: “We have our own [public] money that we put towards the homelessness situation. We have a winter shelter – that’s federal money that’s coming in. Yet we have groups like Room in The Inn; we have groups like Catholic Action … 
They all have their own donor bases, [and] they’re trying to help solve the same problem.” “I was very much focused on two numbers,” Wu explained after the second wipe was announced. “The million dollars, which is what we put to it, how we funded it; and then the $90 to $100 million return on our investment. To me, as long as those two numbers didn’t change, I was very happy with the kind of return that we’re getting on this.”  An estimated 9% of U.S. adults have more than $250 in medical debt. According to Kentucky Voices of Health, Kentucky ranks 10th in the nation for residents with medical debt.  For Becker, the Lexington musician, the funds have put a small dent in her growing medical debt. The letter she received wiped away $800 she owed for a medical event in 2017.  She knows this is only a portion of her debt. But “for someone like me who recently graduated college, even beginning to think about paying off any medical debt is just not on my radar,” she says. “I definitely have my share of food allergies. I’ve had several bones I’ve broken, torn ligaments in my arm,” she says. “I don’t even have a frame of reference for how much that stuff would even cost.”  But she could name the hospital visits: surgery for torn ligaments, fainting episodes, and kidney stone removals, among others. And the cost of medical care, and the possibility of racking up more debt, has stopped her from seeking care she needs. “We’re always told, ‘better safe than sorry, get a mammogram early, get all this stuff early.’ Well, how are we gonna pay for that? I’m only going to go if there’s an emergency,” Becker says.  When she was sick recently, she opted not to get tested and treated.  “I could get tested for something I already know I have, which is probably like a strep or upper respiratory thing. But that’s probably gonna cost, with the exam, even at a UTC, probably close to $200 after a prescription … it probably lasted two or three times as long as it probably should have, but it seemed like a financially smart thing to do at the time.” Research published by the PNAS indicates that chronic debt is a burden on people with low income, and reducing this debt can improve decision making and improve emotional well-being.  As a full-time musician, Becker — who made her Grand Ole Opry debut in 2025 and is a multi-year nominee for the Lexington Music Awards — doesn’t have health insurance, like more than one-fifth of self-employed Americans. With federal fights over healthcare costs, premiums are only expected to rise, compounding the confusion and intimidation Becker feels around the process of getting insurance. “For those of us that are self-employed … People are like, ‘why don’t you have health insurance? Just get health insurance,’” Becker says. “It’s just a lot harder than it seems.” Wu, who championed the debt relief initiative, says he hopes to also bring these sorts of financial literacy training and resources as the municipal partnership continues.  “What I would love to do is help corral and collect all those different kinds of resources for people, so that they can have access to free or reduced medical care; so that they can get help signing for Medicaid [or] Medicare,” Wu says.  For Wu, these debt erasure letters are just one step toward helping debt-burdened residents. “It’s not a cure-all. We understand that a lot of folks who are in these situations will very likely get back into this situation because we’re not necessarily … able to impact the underlying socioeconomic and health disparities,” Wu says.  “My intention was never to do medical debt relief, cut some checks and walk away. We need to do everything that we can to keep people out of those cycles.” The post Lexington, Paducah follow different approaches on erasing medical debt appeared first on The Lexington Times. ...read more read less