Over the last decade, RIP Medical Debt has grown from a small nonprofit group that received less than $3,000 in donations to a multimillion-dollar healthcare philanthropy organization.
They did this with a unique and simple strategy for dealing with the enormous amounts that Americans owe to hospitals: They bought up old bills that would otherwise be sold to collection agencies and paid off the debt.
RIP Medical Debt estimates that the company has eliminated more than $11 billion in debt since 2014 with the help of large donations from philanthropists and even city governments. In January, New York City Mayor Eric Adams announced plans to donate $18 million to the organization.
But a study released Monday by a group of economists questions the high-profile charity’s premise. After observing 213,000 people in debt and randomly selecting some to work with the nonprofit group, the researchers found that, on average, debt relief did not improve debtors’ mental health or credit scores. And those whose bills had been paid were just as likely to forgo medical care as those whose bills were unpaid.
“We were disappointed,” said Ray Kluender, an assistant professor at Harvard Business School and co-author of the study. “We don’t want to sugarcoat it.”
Allison Sesso, executive director of RIP Medical Debt, said the study contradicts what the group has regularly heard from those it has helped. “We’re hearing feedback from people who are excited,” she said.
In a survey the group conducted last year, 60 percent of people with medical bills said the debt had negatively impacted their mental health and 42 percent said it had delayed medical care.
Studies had shown significant improvements in mental health and finances with other forms of debt relief, such as student loan or mortgage repayment. But these debts are more pressing: Homeowners who don’t pay their mortgages could quickly lose their home, while a hospital bill can sit for years without much consequence.
New federal regulations introduced last year that removed medical debts of less than $500 from credit reports have further mitigated the impact of unpaid hospital bills.
The study, published as a National Bureau of Economic Research working paper, is one of the first to look at the impact of medical debt forgiveness on individuals. “It’s a big policy area right now, so it’s important to accurately represent the results,” said Amy Finkelstein, a health economist at the Massachusetts Institute of Technology, whose research has shown significant positive effects of purchasing health insurance.
Ms. Finkelstein is also co-director of J-PAL North America, a nonprofit group that conducts random experiments on social programs and provides some funding for this project.
“The idea that we could maybe get rid of the medical debt and it wouldn’t cost as much money but make a big difference was appealing,” Ms. Finkelstein said. “Unfortunately, what we’ve learned is that it doesn’t look like it’s having much of an impact.”
The idea for the study came to Mr. Kluender and one of his co-authors in 2016 when they saw RIP Medical Debt on a popular segment of John Oliver’s television show. She and two other economists teamed up with the nonprofit group to run the experiment, which paid off $169 million in debts to 83,000 debtors between 2018 and 2020.
These patients, like others RIP Medical Debt typically helps, failed to make payments on bills that were at least a year old. The economists monitored patients’ credit scores and sent them surveys with questions about their mental health and the barriers they faced in seeking medical care.
They compared these results to a control group of 130,000 people whose debts had not been forgiven and found few differences. The two groups reported similar financial barriers to seeking medical care and similar access to credit. The patients whose medical debts were paid off were also likely to have difficulty paying other bills a year later.
“Many of these people have a lot of other financial problems,” said Neale Mahoney, an economist at Stanford University and co-author of the study. “Removing a red flag just doesn’t make them suddenly a good risk from a lending perspective.”
For some participants in the study who had no other debts in collection, the deleted medical bills led to an average improvement in their credit score of 3.6 points.
Researchers were stunned to find that for some people, particularly those already experiencing high levels of financial stress, debt relief made their depression worse. It’s possible, the researchers speculated, that the sudden repayment notice inadvertently reminded debtors of their other unpaid bills.
RIP’s medical debt has “evolved” since the experiment ended in 2020, Ms. Sesso said. Major donations now allow the group to buy up billions of dollars in debt in a single city, which they say could have a bigger impact on beneficiaries’ finances.
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2024-04-08 12:00:06
www.nytimes.com
