There’s a dirty secret about medical debt held by debt collectors: they don’t want it.
In a health care market that requires much from payers receiving medical services, medical debt is built into the structure of the market. The market for medical debt in the United States is nearly $200 billion in a 2022 estimate.
Much of that debt is not going to be repaid. And the holders of that debt know that. They will do what they can to get those debts paid off, but many people holding these debts do not have the means to pay them back.
Debt collection executives Craig Antico and Jerry Ashton saw this and had an idea. What if holders of debt were given an option to cut their losses and get paid to let go of that bad debt? How much would these collectors be willing to accept to let go of that debt?
The answer is very little. Antico and Ashton started a company called RIP Medical Debt that used advanced analytics to identify where some of this debt existed. They raised money from donors, partnering with nonprofits and community organizations to buy debt at a penny on the dollar.
Then they forgave that debt in full.
More recently, governments have been getting into the debt forgiveness game. Last year, Chicago’s Cook County, Illinois allocated $12 million of American Rescue Plan dollars to erase $1 billion in medical debt across the county.
Toledo, Ohio has become the first city in Ohio to start forgiving medical debt. The city allocated $800,000 in ARPA funds and got a match from Lucas County. This could lead to nearly a quarter billion dollars in medical debt forgiveness in the county.
Then-Toledo City Councilmember and Now-State Representative Michele Grim sponsored the program and is now looking to expand it statewide.
Other cities across the state have had legislation introduced to allocate funds to buying and forgiving medical debt. Last night, city leaders in Columbus announced $335 million in medical debt forgiveness achieved through a partnership with the Central Ohio Hospital Council. Councilmembers on the Cleveland City Council have introduced legislation to allocate $1.9 million to forgive $190 million in medical debt.
These publicly-funded allocations are cropping up outside of Ohio, too. Less than a year ago, Pittsburgh, Pennsylvania earmarked $1 million in city funds to forgive $115 million in medical debts across the city.
Cancellation of medical debt can be a lifesaver for a family struggling with paying off debt. Mounting medical debt can keep someone away from preventative care and can help families that are putting off refill of prescriptions to get access to care they need. It also has the potential to remove a barrier to access to credit for families, which can be important for families working to buy a house or get a car payment.
Medical debt forgiveness will not end poverty or solve all problems, but it is one tool in the arsenal of local governments looking to provide relief for residents. And for some people, this sort of intervention could mean the world.