The Treasurer of California yesterday announced she was sponsoring legislation in the state that would establish a program to purchase and forgive unpaid medical debts for consumers in The Golden State.
California State Treasurer Fiona Ma unveiled Assembly Bill 2123, the Medical Debt Relief Act of 2026, positioning it as the next step in the state’s ongoing effort to reduce the impact of medical debt on consumers. The bill would create a state-run framework to acquire medical debt from providers and debt buyers and cancel it outright, using public funds to do so.
At the center of the proposal is the creation of a Medical Debt Relief Program Account, which would be administered by the California Health Facilities Financing Authority in coordination with the Department of Health Care Access and Information. The program would allow the state to contract with third parties to purchase qualifying medical debt at a discount and then eliminate the obligation for consumers.
“This initiative is about making a full recovery, restoring your health and retaining financial stability,” Ma said yesterday at a press conference announcing her sponsorship of the bill. “Through this initiative, California can leverage its financial tools to relieve billions in burdensome debt for residents who did everything right but still fell behind due to healthcare costs.”
Eligibility would be targeted. Households earning up to 400% of the federal poverty level or those whose medical debt exceeds 5% of their income would qualify. The bill also contemplates prioritization criteria and the formation of a stakeholder advisory group to guide implementation, signaling that program design is still evolving.
From an operational standpoint, the legislation explicitly allows the state to acquire debt from both healthcare providers and debt buyers. That detail matters. It reinforces that secondary market participants could be directly impacted if portfolios become eligible for purchase and cancellation under state programs.
The proposal follows a growing trend. Several states and local governments have already experimented with similar models, purchasing debt for pennies on the dollar and eliminating large balances. In California, Los Angeles County reported that a $5 million investment resulted in the cancellation of hundreds of millions in medical debt, illustrating the leverage these programs can create.
This bill also builds on recent regulatory moves in California, including restrictions on reporting medical debt to credit bureaus that took effect in 2025. The trajectory is clear. The state is moving beyond limiting downstream consequences of medical debt and toward intervening directly in the lifecycle of the receivable itself.
One key unknown remains funding. Earlier versions of the bill referenced a $2.5 million appropriation, but that figure is still being evaluated as policymakers assess the scope of eligible debt and potential demand.
