Nearly 80 million Americans carry medical debt, which contributes to 50% of American bankruptcies — or worse. Recently, an elderly man in Washington state killed himself and his wife because they didn’t have enough money to pay their medical debt, according to the Whatcom County sheriff’s office.
Almost half — 42% — of the nine and a half million people diagnosed with cancer between 2000 and 2012 depleted their assets within two years.
Sites like GoFundMe have given new promise to people dealing with medical debt. Medical expenses make up a third of the financial aid crowdsourced by the site, according to a recent New Yorker article.
But crowdsourcing can be hit or miss. Two former collection industry executives think they have an alternative solution to help people carrying medical debt.
Craig Antico and Jerry Ashton, founders of RIP Medical Debt, decided to use their expertise to forgive medical debt instead of collecting it. So far, their company has abolished hundreds of millions of dollars in debt. They want to reach a billion by 2020.
This all started when Antico and Ashton were contacted by Occupy Wall Street, which was trying to raise $50,000 to buy people’s debt. When their website stopped accepting donations, Antico says they had a lightbulb moment.
“We said, ‘Wow, it looked like they were doing a tremendous job. Looked like they abolished over $30 million of debt, whether it was medical and student loans,’ ” he says. “But that left us saying, ‘Hey, we’re the only ones that really could decide to go and abolish medical debt. Why don’t we go do it? We can’t let this just die.’ ”
Medical debt is debt that is moved to creditors and sold to collection agencies, which try to turn a profit through collecting that debt. Ashton says rather than collect that debt, their company wants to cancel it.
“Our only goal is to see that that debt is taken off the backs of our fellow Americans,” he says. “Our only goal is to see that if there’s a credit mark against them for that medical debt, that that is taken off their credit report. Our only goal is to see that that debt disappears.”
On the lifecycle of a medical bill and where RIP Medical Debt comes in
Jerry Ashton: “If you’re unfortunate enough to get sick or hurt and you go to a hospital, automatically you start creating a bill. If you don’t respond to that for whatever reason, then the hospital is forced to consider using collection agencies. Now collection agencies work on a contingency. That means that they are assigned the accounts, and they are guaranteed a percentage if their able to recover it. Well that can go on for two or three agencies for many hospitals until at some point in time, the agencies will come back and say, ‘These people are not responding.’ That’s when the idea of debt purchasing comes into that world.”
Craig Antico: “There is only about one collector for every 8,000 accounts in a hospital. There’s $75 billion of medical debt that’s in collection and on people’s credit reports. So think of a hospital: They have $100 million of debt that they can’t collect. They’ve gone through their three to six collection agencies over, say, two years, and a company comes to them and says, ‘I’m willing to pay you 5%.’ And you’ve got to say, ‘Well, what are the chances of me collecting on that?’ It’s an amazing windfall for them to get cash on accounts that have already been through four, five, six collection agencies. That’s where the debt buyer comes in and why they’re so valuable.
“Initially what we did was we went to those debt buyers, and we said to them, ‘Instead of collecting on these accounts that are two years, three years old when you get them, and you might have to collect on them for five, six, seven years to make your return on your money, why don’t we pay you for them?’ And we’re only paying for the accounts that really are the ones that are in hardship. You know, are they spending more than 5% of their gross income? We’ll abolish it, or if they’re making less than two times the federal poverty level, they’ll qualify. Amongst also being technically insolvent, which means that they have more debt than they have assets. Those are the three main criteria that we use to abolish the debt.”
On how they choose which accounts to forgive
Antico: “We choose by adding data. TransUnion Healthcare systems and the main TransUnion have supported us because they want to use information for good, so we’re like a predatory giver. And what they’re doing is they’re letting us know what’s the simulated income of this family? How many people are in the family? What federal poverty level percentage are they at? Because we want to make sure that we’re abolishing debt for people that are actually deserving. And people don’t know that when you go to a hospital, usually there is a financial assistance policy that actually will give the cost of that care for free if you make less than two times the poverty level, which actually is about 33% of this whole population.”
Ashton: “This is the challenge that Americans face is that either they don’t understand how the hospital system works — and very few people do, not even people in the hospital as far as we can tell in some cases. The education is insufficient to the challenges that are there. And frankly, you could walk in having a great job, perfect credit, lovely home and eight months later, you could qualify for charity.”
On the downside of crowdsourcing to erase medical debt
Ashton: “There are fingers pointed everywhere. Hospitals will point to insurance companies who will point to the providers who will point to the pharmacies. Everyone wants to see that somebody else pays the bill. So we’re just sweeping up after the parade. We know that. We know that our work is very very important, but it takes care of the people that are wounded and on the battlefield. We really do need to stop the wars, but at this moment, that’s not where we’re positioned.”
On what it means to forgive someone’s medical debt
Ashton: “So when we do the work that we do, and we know that that yellow envelope will arrive by surprise at somebody’s home, we don’t expect to hear from them. Many times we know that when we do hear from them that tears came about, incredulity came about. People would call their neighbors. They would call the Better Business Bureau to find out if indeed, we were real. So we know we’re affecting people, and we’re happy about doing that. And we’re grateful to our donors because that makes that happen. But there’s one thing that I like to have Craig address and that is the fact that we’re studying this problem very very carefully and there’s a team of four universities that are working together with us to do an economic impact study of what it means to take medical debt off of someone’s back.”
Antico: “The preliminary results are encouraging and this is only the first step. They just got an $1 million grant to actually survey the people that have had their debt abolished and the control group. Right now that’s an economic impact study. This is going to talk more about the mental and spiritual and emotional side of this horrible destructive thing called medical debt.”
This article was originally published on WBUR.org.