Medical Debt Forgiveness is Beautiful – But Not a Cure-All 

RIP Medical Debt has become prominent in the fight against health care debt burdens.

• Fifteen state or local governments have used RIP Medical Debt to acquire  $8 billion worth of medical debts that either had been — or were about to be — sent to bill collectors.

• Five other  states are considering programs that would raise that total to nearly $13 billion.

•  Private donors are also starting to finance the purchase of outstanding medical debts worth  billions of dollars.  

Once the funders purchase these debts, their next step is always to cancel them.

This should be a blessed event for the families who are currently in debt.

However —   are these efforts delivering on their promise?

Not completely, according to the largest study to date of medical debt relief programs.  

Neale Mahoney at Stanford could find no evidence that buying and then forgiving medical debts improved the average beneficiaries’ finances, access to credit, or their physical or mental health. 

The beneficiaries were even less likely to pay new medical bills after their debt was eliminated.

“We are not saying with this study that medical debt relief doesn’t help people,” says Mahoney.

“What we found is that reducing their medical debt when it’s either in collections or headed there may be happening too late to make a major difference. “ 

Here is what I think is going on…..

Most of the people whose medical debt goes to collections have one common financial ailment  – they’re broke! 

And that’s with or without medical bills.

Sometimes they cannot afford their rent, their car payment, maybe even groceries.

Being told that an old medical bill is now being forgiven is nice to hear — but it does not change their lives in a significant way. 

Having an old medical bill forgiven does not create any new resources to pay current bills – medical or otherwise.

Most people in the study hadn’t been paying anything on their old medical bills for years – so forgiveness of those bills did not help their cash flow at all!

Their next month’s round of expenses (including new medical bills) was just as hard to deal with.

A New Approach

Mahoney and his collaborators at RIP are now changing their approach — including buying up debts before they reach collections, when the hoped-for benefits are more likely to be felt by debtors.

Incidentally:  In Canada the bankruptcy rate is high and has nothing to do with health care.

Currently Canadians are the number-one group for personal financial indebtedness at $1.67 for every dollar in their pockets. They are the worst in the G20 and the IMF, World Bank, 

 The Bank of Canada and our Federal Gov. have been warning about it for years but still the Canadians charge and spend.

 I only bring this up to illustrate that debt is not a simple ailment!