Improving Health Outcomes by Reducing Medical Debt

Medical debt is more than a financial problem. Research is beginning to show that, for millions of Americans, medical debt leads to poor health outcomes.

A recent JAMA study linked medical debt to a higher risk of experiencing housing and food insecurity, which are key social determinants associated with poor health outcomes. According to researchers, “unaffordable medical bills may constitute an SDOH in their own right and contribute to a downward spiral of ill-health and financial precarity.”

RIP Medical Debt is working to change that. The nonprofit organization uses data analytics to identify the debt of those most in need. It buys the debt in bundles, millions of dollars at a time for pennies on the dollar, and then abolishes the debt with no tax consequences or penalties. So far, RIP Medical Debt has relieved more than $8.5 billion—with a “b”—in medical debt for nearly 5.5 million families.

On a recent episode of the Healthcare Rethink podcast, Priscilla Keith and Eva Stahl from RIP Medical Debt explained why reducing medical debt can improve outcomes not only for individuals but for our entire economy.

The dangers of medical debt

“There’s a lot of finger-pointing about who is to blame for [medical debt],” says Eva Stahl, Vice President of Public Policy for RIP Medical Debt. “But the reality is, it’s stressful for individuals, it hampers our growth as a nation, and it really demands solutions.”

Medical debt is insidious, dragging down individuals and communities in a number of ways:

Sicker patients

Individuals with medical debt are less likely to seek care for several reasons, according to Priscilla Keith, Vice President of Program Management for RIP Medical Debt. They often fear incurring additional debt, and they may worry they’ll be turned away because of the debt they’ve already incurred.

“[Additionally,] there is a stigma or shame to having medical debt, more so than regular consumer debt,” Keith says. “The impact is that the patient is sicker, and it costs more to heal them.”

Emotional strain

From a mental health perspective, Keith says individuals with medical debt are more than three times more likely to suffer from mental health issues. The stress of looming debt, coupled with anxiety over accessing the healthcare system, results in measurable impact on mental health.

Downward economic status

Keith says medical debt is now being talked about as akin to student loan debt because of its impact on financial stability. A negative credit rating resulting from medical debt can impact employment status, which can prevent an individual from buying a house or renting an apartment. Two-thirds of bankruptcies cite medical debt as a leading cause.

“Those are sometimes unseen impacts that are associated with medical debt,” Keith says.

Weakening economy

As individual financial stability declines, so too does our local and national economy. As Keith noted, it costs the healthcare system more to treat sicker patients who delayed treatment. And, as medical debt grows, our economy has fewer productive contributors who are able to buy homes, and purchase goods and services.

Making a difference

While medical debt is everyone’s issue, Stahl notes that at the same time it disproportionately harms some more than others. RIP Medical Debt prioritizes efforts to focus solutions where they’ll have the most impact. Assistance follows two main criteria: Households that earn less than 4x the federal poverty level or whose debts are 5% or more of their annual income.

“The goal of this is to capture people that are really feeling the stress and strain of medical debt,” Stahl says.

The solution is data-centric. The RIP team leverages robust databases, from sources including FinThrive, and runs proprietary analytics to identify debt to abolish. The data is protected and stored responsibly, Keith emphasizes.

Then the letters go out informing people their medical debt has been wiped away. On a daily basis, RIP Medical Debt hears stories about what that really means for individuals and families.

“They felt as though the health system had abandoned them,” Keith says. “Just abolishing that one medical bill helps them in terms of mental health stress. They’re able to navigate the system a little bit better, and they just feel better about themselves [without] the shame associated with medical debt.”

RIP Medical Debt is not only changing lives; the organization is also influencing public policy. In April 2022, leadership from RIP Medical Debt attended a White House briefing with Vice President Kamala Harris. Their efforts contributed to policy changes from the Biden Administration that limit the impact medical debt can have on a person’s credit rating and hold creditors responsible for harmful collection practices.

FinThrive’s Jonathan Wiik was at the White House briefing, too, in recognition of FinThrive’s role in providing the data that fuels RIP Medical Debt’s work.

“FinThrive was honored to be in attendance during Vice President Harris’ briefing on tackling medical debt,” says Wiik, MHA, MBA, CHFP, VP Health Insights for FinThrive. “Is it imperative to continue to support our customers’ efforts in the area of medical debt, especially our partner RIP Medical Debt. Americans must navigate a complex, unaffordable labyrinth that is the U.S. healthcare system, and partnerships like this highlight where we are doing good through data.”

Others who want to join RIP Medical Debt’s mission can donate. Every $100 donated alleviates $10,000 of medical debt.

They can also fight medical debt at its source by supporting Medicaid expansion.

“It’s very, very clear that the research points to Medicaid expansion as a key policy change that will really lift people up and is really about racial and health equity,” Stahl says.

Watch the full discussion with RIP Medical Debt on the Healthcare Rethink podcast below.