Predatory Givers

August 22, 2022 2:13 AM

RIP buys the debts just like any other collection company would — except instead of trying to profit, they send out notices to consumers saying that their debt has been cleared. To date, RIP has purchased $6.7 billion in unpaid debt and relieved 3.6 million people of debt. The group says retiring $100 in debt costs an average of $1. from This group's wiped out $6.7 billion in medical debt, and it's just getting started [NPR]
posted by chavenet (47 comments total)

Brilliant. Already donated. Thanks chavenet.
posted by superelastic at 5:09 AM on August 22, 2022 [4 favorites]

Nicely done.
posted by Harald74 at 5:58 AM on August 22, 2022 [1 favorite]

I must be missing something. What makes them predatory?
posted by I-Write-Essays at 6:00 AM on August 22, 2022 [2 favorites]

I think it is great that they are doing this, but it is a sad commentary on our health care system that groups like this are needed.
posted by TedW at 6:04 AM on August 22, 2022 [17 favorites]

Presumably they hunt for the cheapest debts to forgive, no?
posted by pompomtom at 6:05 AM on August 22, 2022 [1 favorite]

I must be missing something. What makes them predatory?
posted by I-Write-Essays

There could have been lovely profits to be made gouging the people who owe the money, but they swoop in and leave the poor companies that were supposed to profit having to buy other debt bundles that costs much more and have lower profit margins. If this keeps up and expands it could squeeze some of those debt collection companies out of business!
posted by Jane the Brown at 6:06 AM on August 22, 2022 [52 favorites]

I don't think we should be using "Predatory" ironically. It will confuse things when we are talking about actual predators.
posted by I-Write-Essays at 6:14 AM on August 22, 2022 [9 favorites]

It's the words used by the founder of RIP Debt, however, I-Write-Essays
posted by scolbath at 6:20 AM on August 22, 2022 [7 favorites]

RIP really hits the spot for me. As soon as I learned about them I set up a recurring donation despite my usual tendency to waffle. RIP has a clear mission that I feel strongly about and it’s a model that directly benefits from having more money. And they have a nearly perfect score on Charity Navigator. No one should have medical debt and although RIP won’t change the system they are dealing with the issue now in a way they can. I wish them all the best.
posted by sebweyn at 6:29 AM on August 22, 2022 [25 favorites]

The group says retiring $100 in debt costs an average of $1.

Emphasis mine.

If there is a clearer tell for the completely bullshit nature of medical pricing in the US than the willingness of those owed money for medical services to accept an average of 1% of that debt's alleged value in satisfaction, I don't know what it could possibly be.

Nobody could claim with both a straight face and any conceivable credibility that a market whose price signals are as distorted as that is actually operating as a market. It's a straight-up extortion racket.
posted by flabdablet at 6:46 AM on August 22, 2022 [95 favorites]

At $1 to $100 cost, maybe they should send letters to some debt holders and offer to cancel the debt for that figure. That could expand those they can help.
posted by dances_with_sneetches at 6:50 AM on August 22, 2022 [11 favorites]

US medical insurers ought to be prosecuted under RICO law. Flip one and the others will soon fall.
posted by flabdablet at 6:53 AM on August 22, 2022 [31 favorites]

Could people buy their own debt and forgive it?
posted by vorpal bunny at 6:54 AM on August 22, 2022 [8 favorites]

Could people buy their own debt and forgive it?

I think technically 'maybe yes under some circumstances', but practically 'no'.

Bad debts are sold as a bundle to a collection agency. An individual debtor would have no way of knowing what bundle, or the details of the sale - that's just an arrangement between the creditor and the collection agency. Debts may even be on-sold at a greater discount if the first collector thinks that's more profitable than continuing a chase. There's no reason to inform a debtor of any of these arrangements until contact is made.
posted by pompomtom at 7:04 AM on August 22, 2022 [7 favorites]

If a debtor contacted a creditor to say "hey, you're about to sell my account to x for .05/$1, I could give you that .05/$1", the creditor would be like "thank you for your contact details, the Sheriff will be around shortly to seize way more of your assets than .05/$1".
posted by pompomtom at 7:08 AM on August 22, 2022 [26 favorites]

I don't know about the practicality of it, but in theory wouldn't it be better to buy the debt and not forgive it (but still intend to not collect)? Forgiven debt is considered taxable, right?

Just kind of seal it away in a vault with no intention of collecting, but also no risk of triggering a tax problem for the debtors.
posted by explosion at 7:53 AM on August 22, 2022 [2 favorites]

This is from their FAQ:

Do recipients of debt relief have any adverse consequences?

No. With your help, we abolish medical debt permanently. Recipients have no adverse tax consequences, obligations, or strings attached.

For those whose medical debts are relieved, the relief is a gift from a detached and disinterested third party (RIP) as an act of generosity, so relief of the debt does not count as income to the debtor. We will not file a Form 1099-C with the IRS.
posted by amarynth at 7:58 AM on August 22, 2022 [37 favorites]

Could people buy their own debt and forgive it?

That's effectively what we do in Australia. The method involves banding together as a society, negotiating with the medical industry as a single powerful bloc to reduce amounts owed as much as we can while keeping that industry viable and functional, and then sorting out who forgives whose debt and by how much via existing progressive taxation arrangements rather than further involving the industry. It works well. I recommend it.
posted by flabdablet at 8:01 AM on August 22, 2022 [90 favorites]

I work for a healthcare-space startup that has a small philanthropical part. We looked at contributing to either this company or another one that does something similar, and ended up choosing not to because the positive impact to patients is not what you would hope.

The problem is that the really cheap debt that can be bought for a few cents on the dollar has already been written off. It's been handed over (sold) from the health care provider to a collection agency, they tried to collect on it for a while, didn't get anything, and now it is in the "almost certainly will not be collected" bucket. It's already had a negative impact on the patient's credit score which won't be reversed by discharging it.

What you really want to do is discharge debt that is still being collected on actively, which is still counting as being later and later, but this "fresh" debt is much more expensive than the numbers that are reported in this story.
posted by bgribble at 8:01 AM on August 22, 2022 [16 favorites]

That's effectively what we do in Australia.

...except if such medical debt involves your teeth or your mind.
posted by pompomtom at 8:10 AM on August 22, 2022 [5 favorites]

No you cannot buy your own debt (as it says in the article, RIP doesn't even pick which debt to buy) at the reduced rate in the US. Sometimes, you can get a friend's debt company (not close relative) to buy your debt at the reduced rate - I have seen this done with morgages and credit cards.

And while this RIP action is amazing and every bit does count - what this article is not saying is that often medical debt is in multiple places (to the doctor, to hospital, to the lab, to another doctor, etc). So, these folks are still in medical debt but less so.
posted by mutt.cyberspace at 8:23 AM on August 22, 2022 [2 favorites]

Sesso emphasizes that RIP's growing business is nothing to celebrate. It means that millions of people have fallen victim to a U.S. insurance and health care system that's simply too expensive and too complex for most people to navigate.

Quoted for truth. So RIP is not a complete solution. It is an incomplete solution which is a genuine help to at least some of the folks who have their medical debt retired. Please read the full article, if you haven't. It discusses ways that RIP is attempting to help prevent debt as well. I am here to cheer on victories, and this sounds like a victory to me. Perfect? Nope. Better than nothing? Absolutely. Thanks for this post, chavenet!
posted by Bella Donna at 8:39 AM on August 22, 2022 [13 favorites]

If there is a clearer tell for the completely bullshit nature of medical pricing in the US than the willingness of those owed money for medical services to accept an average of 1% of that debt's alleged value in satisfaction, I don't know what it could possibly be.

This could use a little refinement. At the time the debt is sold, the original entity basically regards it as uncollectible (i.e., worth zero). This has basically nothing to do with the original value of the services, and everything to do with the likelihood of recovery of the money. Even one cent is better than nothing, and on a large enough scale the purchase price will exceed the transaction costs of the sale. Credit card companies do the same thing, and while to some extent that debt is "imaginary" (insofar as it's been inflated by fees, etc.), no one would challenge the idea that the prices for the original goods are usually set by the market.
posted by praemunire at 8:50 AM on August 22, 2022 [6 favorites]

And the original entity doesn't only get 1% of that debt's value! They also get an industry with a terrible reputation for nigh-universal criminal disregard of the laws governing that industry to harass the debtor and disrupt their life.
posted by Pope Guilty at 8:55 AM on August 22, 2022 [8 favorites]

pompomtom:
If a debtor contacted a creditor to say "hey, you're about to sell my account to x for .05/$1, I could give you that .05/$1", the creditor would be like "thank you for your contact details, the Sheriff will be around shortly to seize way more of your assets than .05/$1".
Why would they break the terms of the existing repayment plans with bully tactics when there's a good-faith offer of restitution? I know this debt is bottom-of-barrel and may have lost track of ever getting repaid, but even with a judgement of default, this punishes someone trying to play within the system. It's like you're unaware of the many millionnaire-rich households who defaulted on home loans and declared bankruptcy in 2008 to rejoin the home purchasing setup for bottom-of-market prices because they could negotiate good credit. There's always a deal to be done.

If this is live collected accounts and people living in stress and fear can sleep more easily, that's great. If this is just feeding the insatiable maw of the gap between rich and poor, stop with it already.
posted by k3ninho at 9:16 AM on August 22, 2022 [1 favorite]

Wouldn't it make more sense to endow an institution that would develop a streamlined capacity to challenge the validity of the debts, especially with regard to the statutes of limitation in the various states, and possibly sue bad actor debt collectors? I assume that by the time the debt is at pennies per dollar it has been sold on multiple times and, to the last bottom feeders, getting paid is a win that enables them to stay in business and in the end just supports this stupid system.

Another idea would be some sort of equivalent to things like NPR's bill of the month where essentially the weight of a media organization is enough to just completely crack open the ridiculousness of somebodies medical bill.
posted by Pembquist at 9:45 AM on August 22, 2022 [1 favorite]

except if such medical debt involves your teeth or your mind

Yeah, mental and dental are still excremental. I have never understood why.

Then again, I'm the kind of fairies-at-the-bottom-of-the-garden inner-city latte-sipping socialist goon who has been voting Green since that's been an option, so you wouldn't expect me to.
posted by flabdablet at 9:56 AM on August 22, 2022 [4 favorites]

This has basically nothing to do with the original value of the services, and everything to do with the likelihood of recovery of the money.

But isn't it safe to presume that the original lender is operating on a large enough margin that they can absorb these losses? They clearly don't need the recovered 1% to survive. That is to say, they still suck.

What I worry about is, these companies know that fear is what motivates their "clients" to pay, and if debt forgiveness becomes a thing that fear might subside. They'll have their lobbyists working to close this door in no time.
posted by klanawa at 10:30 AM on August 22, 2022 [2 favorites]

Did a thing for my 50th birthday that if people donated $5k to RIP Medical Debt, I would release a new short story. We ended up at over $18k (including the $1k Krissy and I donated to match give at the outset, and another $1k at $10k). So more than $1.8M in debt discharged. My best birthday present to me ever.
posted by jscalzi at 11:44 AM on August 22, 2022 [80 favorites]

But isn't it safe to presume that the original lender is operating on a large enough margin that they can absorb these losses? They clearly don't need the recovered 1% to survive. That is to say, they still suck.

One problem with the claim is that this tells you nothing about the profit margins. If you imagine a non-profit hospital is running at exactly the break even point, giving up a couple percent in revenues from debt collectors means they would be unsustainable and go under.

I'm not saying people don't suck--medical billing is arbitrary and weird in addition to everything else. But all this one number actually tells you is that, if no one defaulted, a provider could lower prices for the people who were paying on time.

But another point: The "average 1%" recovered, in addition to not going to the original medical provider, is the worst of the worst debt. It's the stuff the collection agencies have given up on after they've collected from everyone who could pay more. It makes perfect sense for RIP to focus on this--it's the biggest bang for the donor buck *and* will generally help the people who need help the most. But it's not a metric for anything global. It'd be like calculating test scores only for failing students and trying to deduce something about the school system.

(I will say the scale of the problem is a different matter. That millions of people with zero chance of paying owed so much debt does tell you something, but IMO more about the lack of a safety net in the US rather than about individual medical providers.)
posted by mark k at 12:02 PM on August 22, 2022 [3 favorites]

One problem with the claim is that this tells you nothing about the profit margins. If you imagine a non-profit hospital is running at exactly the break even point, giving up a couple percent in revenues from debt collectors means they would be unsustainable and go under.

That, of course, is by no means a universal situation for "non-profit" hospitals.
posted by Pope Guilty at 12:07 PM on August 22, 2022 [2 favorites]

That, of course, is by no means a universal situation for "non-profit" hospitals.

No, of course not. It was a thought experiment ("imagine") to try and show explain why people are misunderstanding the 1% number when they drew conclusions about overbilling from it.

There certainly are a lot of greedy people who insert themselves into the medical billing cycle (and hospital operations), but we know that from other reporting. RIP's data is orthogonal to that.
posted by mark k at 12:15 PM on August 22, 2022 [1 favorite]

I'm sure there is a Laffer-type curve somewhere out there that plots the expected default rate against the markup on medical services to find the point at which profit is maximized.

If there are no defaults then they're not charging enough. It's a system that intentionally bankrupts people.
posted by logicpunk at 12:20 PM on August 22, 2022 [2 favorites]

Interesting. Buying already written off debt and retiring it for the publicity value.

You can effectively buy your own debt. I did it for a relative a few times or rather a few lenders. One was medical. I think they owed like $40,000. They had less than that in the bank and not great future prospects for income. I called the hospital, got through to the finance department, explained the situation and told them they could have $4,000 (10%) now in settlement of the whole debt or spend years in court trying to chase them down or sell it to someone for probably something like 10% but a few years down the road. They hemmed and hawed for about 22 seconds and said, done. My relative got a letter from the hospital saying that had satisfied their debt when the $4,000 check cleared.

I made a very similar deal with their credit card company. The only difference was they were already not performing on the cc debt. Catch them during the period when they are considering selling the debt and writing it off. I think they even agreed to give them a $1,000 credit line on a new card.
posted by JohnnyGunn at 12:46 PM on August 22, 2022 [9 favorites]

"...the group swoops in after what can be years of financial stress and wrecked credit scores that have damaged patients' chances of renting apartments or securing car loans."

Presumably that's exactly why the debt is so cheap; if they haven't been able to collect after years of trying, they know they are unlikely to get much. If they wanted to repay the debt right after the bill was issued, they'd have to pay much more.
posted by Mr.Know-it-some at 12:57 PM on August 22, 2022 [4 favorites]

I forget which ones, but I've donated to a couple of these debt-clearing charities and it definitely feels good to do. It's atrocious that this is the situation in the US, but I'm glad to share my good fortunate for the more-general welfare.
posted by rmd1023 at 1:18 PM on August 22, 2022 [1 favorite]

mental and dental are still excremental

As in, shitty? Or was this an autocorrect error?
posted by eviemath at 1:43 PM on August 22, 2022 [1 favorite]

eviemath, Australia sadly does not provide government-funded mental health and dental apart from

- a few dental programs for kids/teens

- some state funded dental programs for low income earners with VERY LONG waiting lists

- 10 subsidised sessions a year with a psychologist - you need a Dr's referral and there's still a massive out of pocket gap per session

- inpatient psychiatric care at public hospitals (not enough beds)
posted by carriage pulled by cassowaries at 5:39 PM on August 22, 2022 [1 favorite]

Could people buy their own debt and forgive it?

Pretty sure I learned from MeFI about a dude managed to buy his own real estate debt but it took a lot of shell companies and other forms of deception. But the specifics have been lost to the sands of time...

It's a fascinating idea, and is basically equivalent to when you settle a debt for less than owed, with extra steps. You'd have to owe millions in order to make that level of effort worth it. And to owe millions you usually have to have millions in the first place, so you'd need to also design your portfolio to be judgement proof.
posted by pwnguin at 6:31 PM on August 22, 2022 [1 favorite]

See also John Oliver forgiving $15 million dollars in medical debt.
posted by bendy at 6:45 PM on August 22, 2022 [5 favorites]

I feel like these efforts only reward the debt collectors, because they end up with some money, rather than the no money they would otherwise end up with. It's cheap because it's not going to be paid back.

I'm just not sure how the debtors actually benefit from this. Sure, if it's their one and only debt, which is bringing their credit score down, eliminating it might have a significant effect on their credit score. But that's not the debt that's going to be sold for pennies. Rather, it's the debt that's one of twenty, which is about to age off the credit report, which is obviously never going to be repaid and has no significant impact on credit.

This feels a lot like capitalism monetizing anti-capitalist sentiment.

I feel like it would be better to teach people how to recognize when your credit is at the point where it's better to wait it out than to fix it, and how to live a cash-based life in the meantime. And knowing exactly what to say to debt collectors and how to minimize the amount they annoy you.
posted by alexei at 11:08 PM on August 22, 2022 [4 favorites]

The method involves banding together as a society

The USA has left the chat
posted by gelfin at 9:45 AM on August 23, 2022 [11 favorites]

I'm pretty sure debt ages down to pennies on the dollar well before things are likely to age off the credit report, so having a debt paid down can make a difference in the ability to, say, get an apartment, buy a car, get access to credit, etc, for years for people who are probably already in crisis from debt.
posted by rmd1023 at 11:52 AM on August 23, 2022 [3 favorites]

By the time debt is worth 1% of original value, it's gone to the absolute bottom-feeder collectors who hope I die with some assets they can seize for shit I just fucking refuse to pay for. Those bottom feeders are so lucky to get paid at all. This is fantastic work and those who are doing it should have blessings rained upon them.
posted by theora55 at 9:49 AM on August 24, 2022 [1 favorite]

The USA has left the chat

I think there's some hope.
posted by aniola at 12:04 AM on August 25, 2022 [3 favorites]

Short term "stop the aortic hemorrhage" now, worry about the systemic solution later. Sounds good to me, because the systemic solution is far more complex than simply passing a couple of laws.

Folks who are nitpicking this initiative: how much medical debt do you or a loved one owe?
posted by Sheydem-tants at 12:14 AM on August 25, 2022 [2 favorites]

having a debt paid down can make a difference in the ability to, say, get an apartment, buy a car, get access to credit, etc

I suppose that the vast majority of people with such a debt probably have a dozen others in various stages, so that paying off one is unlikely to make a huge difference in their credit. I could be wrong, though.
posted by alexei at 9:06 AM on August 25, 2022 [1 favorite]