Underscoring the huge scale of America’s medical debt downside, a New York-based nonprofit has struck a deal to repay outdated medical payments for an estimated 20 million individuals.
Undue Medical Debt, which buys affected person debt, is retiring $30 billion price of unpaid payments in a single transaction with Pendrick Capital Companions, a Virginia-based debt buying and selling firm. The typical affected person debt being retired is $1,100, in accordance with the nonprofit, with some reaching the a whole bunch of hundreds of {dollars}.
The deal will forestall the debt being bought and defend tens of millions of individuals from being focused by collectors. However even proponents of retiring affected person debt acknowledge that these offers can not remedy a disaster that now touches round 100 million individuals within the U.S.
“We don’t assume that the best way we finance well being care is sustainable,” Undue Medical Debt chief government Allison Sesso mentioned in an interview with KFF Well being Information. “Medical debt has unreasonable expectations,” she mentioned. “The individuals who owe the money owed can’t pay.”
Previously yr alone, People borrowed an estimated $74 billion to pay for well being care, a nationwide West Well being-Gallup survey discovered. And even those that profit from Undue’s debt reduction might produce other medical debt that received’t be relieved.
This huge buy additionally highlights the challenges that debt collectors, hospitals, and different well being care suppliers face as sufferers rack up large payments that aren’t lined by their medical health insurance.
Pendrick’s chief government, Chris Eastman, declined a number of requests to be interviewed in regards to the debt sale, which has not been beforehand reported. However Eastman acknowledged in a 2024 podcast episode that amassing medical money owed has grown more difficult as regulators have restricted how collectors can pursue sufferers.
Pendrick has now shuttered, which Sesso mentioned supplied sturdy motivation for this deal. “This was a extremely nice alternative to get a debt purchaser out of the market,” she mentioned.
Undue Medical Debt pioneered its debt reduction technique a decade in the past, leveraging charitable donations to purchase medical debt from debt buying and selling corporations at steeply discounted costs after which liberating sufferers from the duty to pay.
The nonprofit now buys money owed immediately from hospitals, as nicely. And it’s working with about two dozen state and native governments to leverage public cash to alleviate medical debt in communities from Los Angeles County to Cleveland to the state of Connecticut.
The strategy has been controversial. And Undue Medical Debt’s record-setting buy — financed by a mixture of philanthropy and taxpayer {dollars} — is more likely to stoke extra debate over the worth of paying collectors for medical money owed.
“The strategy is simply treating the signs and never the illness,” mentioned Elisabeth Benjamin, a vp on the Neighborhood Service Society of New York, a nonprofit that has led efforts to limit aggressive hospital collections. Benjamin and different advocates say systemic modifications equivalent to making certain hospitals provide ample monetary support to sufferers and reining in excessive medical costs could be extra priceless in stopping individuals from sinking into debt.
However many authorities officers see retiring individuals’s unpaid medical payments as half of a bigger technique to make it simpler for sufferers to keep away from debt within the first place.
“Turning off the faucet is what’s actually necessary in the long term,” mentioned Naman Shah, a doctor who directs medical affairs on the Los Angeles County Division of Public Well being. The county is working to enhance native hospital monetary support applications for sufferers. However Shah mentioned debt reduction is vital, as nicely.
“It’s simple to criticize band-aids whenever you’re not the one who’s minimize,” he mentioned. “As a doctor, I maintain individuals who have cuts, and I do know the significance of sewing them again up.”
Undue Medical Debt’s newest deal, which it’s spending $36 million to shut, will assist sufferers nationwide, in accordance with the nonprofit. However about half the estimated 20 million individuals whose money owed Pendrick owned reside in simply two states: Texas or Florida.
Neither has expanded Medicaid protection by the 2010 Reasonably priced Care Act, a key device that researchers have discovered bolsters sufferers’ monetary safety by defending them from large medical payments and debt.
The sufferers eligible for debt reduction have incomes at or beneath 4 occasions the federal poverty stage, about $63,000 for a single particular person, or money owed that exceed 5% of their incomes.
About half the money owed are additionally greater than seven years outdated. These have been donated to Undue Medical Debt by Pendrick, the group reported.
The nonprofit plans to pay for the remainder of the money owed over the subsequent yr and a half, although all collections have stopped towards sufferers. It additionally plans to spend a further $40 million — or $2 an individual — to course of the money owed, discover sufferers, and inform them that their money owed have been relieved.
Sesso, Undue’s chief government, mentioned she hopes the debt buy will maintain policymakers targeted on enacting longer-term options to the nation’s medical debt disaster.
She applauded state leaders for taking steps to bar medical money owed from their residents’ credit score scores. However she mentioned motion can also be wanted in Washington, D.C. Nevertheless, the Trump administration has suspended rules enacted below former President Joe Biden that might have barred credit score reporting of medical debt nationally, and congressional Republicans at the moment are transferring to revoke the brand new guidelines.
“There’s a restrict to what state and native governments can do to unravel this downside,” Sesso mentioned. “It’s actually a nationwide downside that must be solved on the nationwide stage.”
