Underscoring the huge scale of America’s medical debt downside, a New York-based nonprofit has struck a deal to repay previous medical payments for an estimated 20 million individuals.
Undue Medical Debt, which buys affected person debt, is retiring $30 billion value 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 lots of of 1000’s of {dollars}.
The deal will stop the debt being bought and shield thousands and thousands of individuals from being focused by collectors. However even proponents of retiring affected person debt acknowledge that these offers can’t resolve a disaster that now touches round 100 million people within the U.S.
“We don’t assume that the way in which we finance well being care is sustainable,” Undue Medical Debt chief govt Allison Sesso stated in an interview with KFF Well being Information. “Medical debt has unreasonable expectations,” she stated. “The individuals who owe the money owed can’t pay.”
Previously yr alone, Individuals borrowed an estimated $74 billion to pay for well being care, a nationwide West Health-Gallup survey discovered. And even those that profit from Undue’s debt reduction might produce other medical debt that received’t be relieved.
This massive buy additionally highlights the challenges that debt collectors, hospitals, and different well being care suppliers face as sufferers rack up massive payments that aren’t coated by their medical insurance.
Pendrick’s chief govt, Chris Eastman, declined a number of requests to be interviewed concerning the debt sale, which has not been beforehand reported. However Eastman acknowledged in a 2024 podcast episode that accumulating medical money owed has grown more difficult as regulators have restricted how collectors can pursue sufferers.
Pendrick has now shuttered, which Sesso stated supplied sturdy motivation for this deal. “This was a very nice alternative to get a debt purchaser out of the market,” she stated.
Undue Medical Debt pioneered its debt relief strategy 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 effectively. 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,” stated Elisabeth Benjamin, a vice chairman on the Group Service Society of New York, a nonprofit that has led efforts to limit aggressive hospital collections. Benjamin and different advocates say systemic modifications akin to guaranteeing hospitals provide enough monetary help to sufferers and reining in excessive medical costs could be extra beneficial 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 essential in the long term,” stated Naman Shah, a doctor who directs medical affairs on the Los Angeles County Division of Public Well being. The county is working to improve native hospital monetary help applications for sufferers. However Shah stated debt reduction is essential, as effectively.
“It’s straightforward to criticize band-aids once you’re not the one who’s reduce,” he stated. “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 dwell in simply two states: Texas or Florida.
Neither has expanded Medicaid protection by way of the 2010 Inexpensive Care Act, a key device that researchers have found bolsters sufferers’ monetary safety by defending them from massive medical payments and debt.
The sufferers eligible for debt reduction have incomes at or under 4 instances the federal poverty degree, 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 previous. 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 in opposition to 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 govt, stated she hopes the debt buy will hold policymakers centered 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 stated motion can be wanted in Washington, D.C. Nevertheless, the Trump administration has suspended rules enacted under former President Joe Biden that might have barred credit score reporting of medical debt nationally, and congressional Republicans are actually transferring to revoke the brand new guidelines.
“There’s a restrict to what state and native governments can do to resolve this downside,” Sesso stated. “It’s actually a nationwide downside that needs to be solved on the nationwide degree.”
