Back in 2016 on Last Week Tonight With John Oliver” they did a piece on forgiving medical debt. John Oliver started a debt buying company, bought roughly $15 million of debt for $60,000 and then gave it to a non profit that specializes in forgiving medical debt. RIP Medical Debt was started in 2014 by former debt collector executives and so far has forgiven over $715 Million in medical debt.
The Medical Debt Problem:
Medical debt hurts the lowest income people in our society the hardest. Those who are uninsured are the most vulnerable. Insurance companies negotiate substantial discounts for hospital services, but those without insurance pay a massive premium, the full ticket price, which is the vast majority of the time unknown until the bill arrives in the mail.
For people unable to pay these medical debts they end up with fairly severe consequences. Unpaid medical debts have a lasting impact on credit scores, which makes getting credit, utilities, and even apartments either very difficult or impossible. Medical debt is the #1 cause of bankruptcy in our country. People with unpaid medical debts are also less likely to seek medical attention when they have an in jury or illness that most people would seek medical care for, in order to not add to their debt.
The Cycle Of Debt:
Typically non payed debts are sold from the original debt owner to a debt collector for anywhere from 10 cents to 25 cents on the dollar after a period of time of non payment, this could be 60 days, 90 days, or even a year; it will vary based on the company that owned the original debt. The debt collector will then try for some time to collect the debt, after a period of time passes, maybe 6 months or a year, they will sell it to another debt collector who specializes in old debt, usually for between 1 cent and 10 cents. As time goes on the debt gets cheaper and cheaper. The problem is that for the consumer who owes the debt, that debt holds the same negative whether it was written off by the original debt owner or sold for any amount to different debt buyers.
What RIP Medical Debt Does:
Typically if debt is forgiven the person who receives the forgiveness still has to pay taxes on that amount, so lets say Bob originally owed $10,000 of debt to Lakeland Hospital. He wasn’t able to pay them and the debt was sold to a debt collector for $1,000. They called Bob repeatedly and if unable to get him to pay they sell it again to another debt buyer for $200, who will then call him repeatedly to collect. he ultimately agreed to pay them $3,000 to settle the debt. Bob then owes taxes on $7,000 of income based on the forgiveness of that $7,000.
With RIP Medical Debt because they are a non profit charity they are gifting the amount of the debt, so there are no taxes owed by the original consumer. I really like this method of giving because it uses leverage to a massive degree. The average debt buy they do is at 1 cent on the dollar, so a donation of $100 can eliminate $10,000 of medical debt. Sometimes the debt can be purchase even cheaper, such as the purchase John Oliver made. His $15 million of debt was bought for less than half a cent on the dollar. Following the example above, RIP Medical debt would buy $15,000 of debt at once (the typical minimum amount to get the great discount they receive), and would pay just $100 to buy Bob’s medical debt.
RIP Medical Debt buys thousands of debts at once. They buy bundled debts of people who earn under 200% of the federal poverty level, have debts that are 5% or more of annual income, or are facing insolvency.
Starting A Local Campaign:
I visited the RIP Medical Debt website and received a mix of emotions. At first I was ecstatic to read about everyday people making major differences in the lives of others through their donations, but then I found out the full scope of the problem. There is currently $75 BILLION of medical debt on credit reports, and RIP Medical Debt estimates that this is actually less than 10% of the total medical debt owed. In Michigan alone there is $1.9 Billion of medical debt outstanding on credit reports. (RIP Medical Debt has it broken down by state). Since RIP medical debt has “only” erased $715 Million in medical debt in 5 years, there is a long way to go to put a substantial debt in this big problem. I then started thinking about what it would take to address this at the local level.
Michigan has 10,000,000 people and $1.9 Billion in medical debt. At 1 cent per dollar it would take $19,000,000 to erase all of Michigan’s medical debt. Berrien County Michigan has 150,000 people or 1.5 percent of Michigan’s population; so if everything is proportional it’s total medical debt would be $28,500,000, which at 1 cent per dollar would take $285,000 to erase.
Taking it a step further to Benton Harbor, MI, the city has a population of 10,000 and the surrounding Benton Township has a population of 15,000. 25,000 people would then have approx. $4,750,000 in medical debt that would take $47,500 to erase. I decided that this was an achievable goal for our community and that I would contact RIP Medical Debt to start a local funding campaign. I contacted RIP Medical Debt and found that the total debt available to buy for Berrien County Michigan was only $1.2 Million of debt. This was not enough for a full campaign, however adding in neighboring Van Buren county which has $1.6 Million available and Cass county which had $300,000 available was enough for a campaign.
I was ready to get started with running a campaign when RIP was contacted by a group of churches in our area that already had a large sum of money pledged to start a campaign. RIP decided it made sense to start their campaign rather than mine (which I 110% agreed with). I was thrilled to hear that local organizations were stepping up to make this happen and that I personally wouldn’t need to be the driver of this campaign.
The important thing here is that RIP is willing to work with anyone to start a local campaign. You don’t need to backing of a corporation, a church, or $15,000 of personal funds to make a campaign. RIP Medical debt is eager to work with anyone to start a campaign to pay off medical debt.
Setting Up The Site:
RIP Medical Debt sets up a web page that people can donate to local campaigns through, similar to a Go Fund Me page but with no fees. The current webpage for the campaign here in Southwest Michigan is here. Although there are currently not a lot of donations through this site, one of the church’s involved has another site that is fundraising online and all 3 are fundraising directly. It’s really cool that RIP Medical Debt provides this service for fundraisers who don’t have an alternate online fundraising source.
What I Love About Paying Medical Debt In Collections Through RIP Medical Debt:
- The leverage is insane: 100:1 leverage at a minimum. In some instances it is closer to 200:1 leverage. A $20 donation can pay off $2,000 to $4,000 of medical debt in collections.
- Leverage may be doubled through employer matching programs. I’m not sure the nuts and bolts of how this works because my employers don’t participate in charitable matching programs, but this could double the effectiveness, now a $20 donation could pay off $4,000 to $8,000.
- Donations can be local or national: You can donate at any time on their website to the national campaign, you can contribute to an existing local campaign, or start your own campaign.
- RIP Medical debt will work with anyone to start a local campaign, this high school student started a campaign and paid off over $6 million of medical debt in her community.
- There are no tax consequences for the debt forgiveness.
- There is a big impact on the individuals who have the debt, this can stop a bankruptcy and reduce a lot of stress.
To learn more on the debt buying process and the solutions to change it, check out the book the founders of RIP Medical Debt wrote End Medical Debt: Curing America’s $1 Trillion Unpayable Healthcare Debt. 100% of their income from this book goes towards forgiving medical debt.
Please consider donating to the national campaign or starting a local campaign either by yourself or through your church. What do you think of the RIP Medical Debt mission?