Nov 24, 2022 - Economy

When medical debt is forgiven

Illustration of a medical red cross attached to a chain and anklet which has been opened by a key

Illustration: Annelise Capossela/Axios

One way that individuals and corporations are giving back this Thanksgiving is to forgive the medical debts of Americans who aren't able to pay their hospital bills.

Why it matters: Medical debt is itself a health condition — anxiety about its burden can result in emotional and even physical harm to the very patients that hospitals are trying to heal.

How it works: RIP Medical Debt buys up people's medical debts, then immediately forgives that debt.

  • If a patient owes $10,000 but can't pay that bill, often the hospital will be willing to sell that debt for just $100 — one cent on the dollar.
  • RIP Medical Debt says it's on track to buy and relieve $10 billion of debt by the end of this year.
  • It only buys debt owed by people who earn less than four times poverty-level income, or who owe more than 5% of their annual income.

"Most hospitals see this as mission aligned," said Allison Sesso, RIP's president. "They are grateful not only to get additional funds, but also to be able to relieve the debts of people who were patients of theirs."

Driving the news: A recent $30 million gift to RIP from MacKenzie Scott is being used to create a 1-for-1 match for corporations that would like to align themselves with the mission.

  • A corporate gift of, say, $250,000 would be matched by Scott's funds and then used to buy up and forgive $50 million of medical debt.
  • Debtors would receive a letter saying their debt had been forgiven thanks to a donation from the company that made the $250,000 gift.

By the numbers: Medical debt is endemic among large parts of the population — 27% of Black households hold medical debt, as do 17% of non-Black households.

The bottom line: Giving people money directly is always welcome. But forgiving their debts can multiply the effects of your gift a hundredfold, or more.

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