News Release

Model for Local Governments to Cancel Medical Debt


In early spring, the mayor of Washington, D.C. announced a budget provision for a $900,000 grant to be awarded to a third-party organization to buy and cancel medical debt for thousands of residents. Because one penny can be spent for every $1 of debt, the city could use that money to cancel $90 million in medical debt. The budget will likely be finalized soon. 

    Lempert is the vice president of communications at RIP Medical Debt (RIP), a charity that aims to eliminate personal medical debt. RIP works to produce a high volume of debt relief and to help healthcare providers strengthen communities. 

RIP Medical Debt has signed contracts with municipalities—including Cook County, Illinois; Toledo, Ohio; and New Orleans—to help buy and cancel medical debt. The organization may be awarded the potential D.C. grant, though the deal hasn’t been finalized. 

Lempert told the Institute for Public Accuracy: “We’re the only organization that has gotten federal approval from the Department of Health and Human Services Office of Inspector General to purchase medical debt or have it donated directly from providers, like hospitals and physician groups. RIP acquires qualifying debt in the region of interest and can relieve it.” Medical debt qualifies for RIP’s criteria if it belongs to an individual who is at four times or below the federal poverty level or if the debt makes up 5 percent or more of a person’s annual income. 

“Typically, after a hospital or healthcare provider has spent six to 12 months trying to collect on a debt, they will consider it ‘bad debt.’ Those are the files that we look at,” said Lempert. “Often, more than 50 percent of a [provider’s] ‘bad debt’ file qualifies for RIP.” Just as for-profit debt collectors do, RIP pays a penny or less on the dollar, since debt gets less expensive as it gets older. RIP sources debt from providers as well as from the secondary debt market. 

Lempert emphasized that RIP provides an “end-of-the-cycle intervention.” Debt relief, or what RIP also refers to as debt abolition, is not the “be-all, end-all solution.”