The nonprofit organization, Undue Medical Debt’s mission is purchasing medical debt and retiring it for the benefit of millions of Americans saddled with medical debt. The firm partners with hospitals, local governments, debt collectors and donors to buy medical debt for pennies on the dollar. In its latest endeavor, the organization has arranged with a large debt trader to buy $30 billion worth of debt for 20 million Americans. About half of the patients getting debt relief (10 million) live in Texas and Florida. KFF Heath News implies it is due to both states refusing to expand Medicaid.
The deal will prevent the debt being sold and protect millions of people from being targeted by collectors. But even proponents of retiring patient debt acknowledge that these deals cannot solve a crisis that now touches around 100 million people in the U.S.
In the past year alone, Americans borrowed an estimated $74 billion to pay for health care, a nationwide West Health-Gallup survey found. And even those who benefit from Undue’s debt relief may have other medical debt that won’t be relieved.
This large purchase also highlights the challenges that debt collectors, hospitals, and other health care providers face as patients rack up big bills that aren’t covered by their health insurance.
It is tempting to look at the charitable purchase and retirement of billions in medical debt as a win for everyone involved but it is also indicative our dysfunctional health care system.
The approach has been controversial. And Undue Medical Debt’s record-setting purchase — financed by a mix of philanthropy and taxpayer dollars — is likely to stoke more debate over the value of paying collectors for medical debts.
“The approach is just treating the symptoms and not the disease,” said Elisabeth Benjamin, a vice president at the Community Service Society of New York, a nonprofit that has led efforts to restrict aggressive hospital collections. Benjamin and other advocates say systemic changes such as ensuring hospitals offer sufficient financial aid to patients and reining in high medical prices would be more valuable in preventing people from sinking into debt.
But many government officials see retiring people’s unpaid medical bills as part of a larger strategy to make it easier for patients to avoid debt in the first place.
Undue Medical Debt is retiring the debt of 20 million patients, an average of $1,100 per person at a cost of $36 million. Sounds like a bargain and at just over one penny for every $10 worth of debt it is a bargain. What could be wrong with this picture? Plenty! This debt was traded, sold and resold to collection agencies who buy it on speculation. They pay a penny or less per dollar of debt hoping to earn a profit by harassing enough people into paying something. The debt is old, some debts aged up to seven years. It is worthless, or it would not sell so cheaply. Retiring medical debt is a kind gesture for those whose debts are erased. Yet, buying old debts also represents a reward for debt traders who are able profit from otherwise worthless debts.
It would be better if hospitals offered patients themselves a significant discount to resolve their outstanding bills. Most patients would willingly pay a far higher percentage of their outstanding debt than Undue Medical Debt can afford. For instance, instead of $0.0012 per dollar of debt, patients may have been willing and able to pay the hospital 100 times that amount if they were offered the opportunity. Many patients do not pay because they perceive prices as unfair. Or they cannot pay because prices are too high. Furthermore, the debts discharged may reflect unrealistic list prices in many cases.
Our health care system is predicated on price discrimination. Some patients pay nothing, and their medical services become bad debts. Other patient services are reimbursed at low rates by Medicaid or slightly higher by Medicare. Hospitals, doctors and clinics earn most of their profit from employer sponsored health plans. An unlucky few uninsured patients are charged sky-high list prices. Price transparency is nonexistent in any useful form. In addition, services in a hospital cost five, sometimes even 10 times the fees charged on free-standing clinics. A health care system predicated on overcharging some patients in order to provide cheap or free care to others is neither efficient nor fair.
Read more at KFF Health News: Blockbuster Deal Will Wipe Out $30 Billion in Medical Debt. Even Backers Say It’s Not Enough
Devon, it’s alarming to consider that approximately 180 million Americans rely on employer-sponsored health insurance, a safety net they tragically lose when faced with a cancer diagnosis that renders them unable to work. This harrowing reality devastates countless families, yet, for some inexplicable reason, you and Dr. John Goodman have consistently overlooked this critical issue for the past 35 years. Despite Dr. Goodman’s numerous appearances on FOX News—over 100 times—there’s still not a single instance where he has acknowledged or addressed this uncomfortable truth.
Every year, approximately 900,000 individuals lose their lives to cancer. One pressing question remains: how many of these people had employer-sponsored health insurance? It’s striking that I have yet to come across an article from you or Goodman addressing this critical issue. It feels as if there’s an unspoken agreement to ignore this deadly problem. Running a healthcare blog comes with a responsibility to highlight such important topics. Since World War II, millions have succumbed to illness, and countless others have faced financial ruin—many due to the limitations of employer-sponsored insurance. This issue deserves urgent attention and discussion.
“Certainly, it’s not just a mere issue for Blue Cross; rather, it feels like a divine blessing that has fallen from the heavens!”
I know you should write about this now, Devon, but it seems unlikely. You must be receiving substantial payments to avoid discussing this topic. How do you look at yourself in the mirror knowing that so many people have died or gone bankrupt because of the lack of attention to this issue? It’s absolutely appalling.