How Forgiving Medical Debt Works

Better,  through a partnership with RIP Medical Debt, announced it has purchased and forgiven $1 million dollars of medical debt from California.

“Often these medical bills — ranging from hundreds of dollars to hundreds of thousands of dollars — are unpayable. Even a few hundred dollars is beyond many American families. 44 percent of adult Americans do not have $400 for an emergency without turning to credit cards, family, friends or selling possessions. It is not surprising that unexpected medical bills go unpaid.”

They offer a pretty good explainer of how the process of forgiving medical debt works:

  1. When bills go unpaid, healthcare providers rarely pursue debtors beyond a few letters or phone calls. Instead, they sell the debts to collection agencies at a fraction of the amounts owed.
  2. Collection agencies — in many states unlicensed and loosely regulated — aggressively pursue patients. They threaten court action and, most importantly, report medical debts to credit agencies. With time, the value of the debt drops and is resold at lower and lower rates.
  3. Better buys these debts and forgives them. This relieves American families of the worry caused by this debt, the hassle of debt collectors, and allows them to remove this debt from their credit history.
  4. RIP Medical Debt — a 501(c)(3) non-profit organization — facilitates this debt forgiveness and makes it tax-free for recipients.