Economics for Church Leaders: How to Think About Medical Debt Relief (2023)

The Concept

Medical debt relief is often seen as an act of social justice.

What It Means

Medical debt refers to the monetary obligation resulting from unpaid medical expenses that weren’t covered by insurance. After providing medical services, a health care provider will usually bill the patient directly or hire an outside agency to collect what’s owed. If the patient will not or cannot pay the medical bill, the health care provider will usually write off the debt as a business loss and sell the remaining debt to a third-party buyer.

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As a recent article in Religion News Service (RNS) points out, buying the medical debt of the poor and “erasing” their obligation to pay it has become a popular means of helping the economically disadvantaged. More than 800 U.S. congregations have partnered with a nonprofit called RIP Medical Debt to erase medical debt.

According to RIP Medical Debt, the organization uses donations to buy debt in bundles, millions of dollars at a time at a fraction of the original cost, which they say “means your donation relieves about 100x its value in medical debt.”

What You Should Know

The limitations of time and attention make it impossible for us to fully consider the problems and opportunities with any particular type of giving. We can also become paralyzed by the decision-making process to the point we never use our funds in a way that would honor God.

Yet as medical debt erasure becomes more popular, church leaders should have a basic awareness of what it does and the possible drawbacks. Here are five things you should know and do.

1. Understand why the debt is so deeply discounted.

Almost every news article about churches involved in paying off medical debt includes claims that sound almost too good to be true. They always highlight how churches are able to donate money that’s leveraged to have a thousand-fold effect.

For instance, the RNS article references one church in North Carolina that says it was “able to raise almost $26,000 and pay off $5 million in medical debt.” That means they bought one dollar of debt for 0.0052 cents—which would indeed be an extraordinary deal.

Yet the question rarely asked or answered is “Why would someone sell something worth $5 million for $26,000?” The answer is they wouldn’t and don’t. The debt isn’t worth $5 million; it’s worth what buyers will pay—about $26,000. It’s deeply discounted because it’s considered almost completely uncollectable.

If $5 million worth of debt was considered mostly collectible, it might still be sold at a discount such as $3–4 million. But buyers know they’re likely to collect less than 1 or 2 cents per dollar owed, which is why the debt is sold for a fraction of a cent (e.g., 0.0052 cents).

So the typical framing—“Wipe out $5 million in debt for $26,000!”—can mislead church members. The debt is so deeply discounted because attempts to collect on the debt have failed. And by the time the debt has become uncollectible, the damage to the individual debtor has likely already been done.

2. Recognize most of the damage of the debt has already been done.

By the time RIP Medical Debt intervenes, the individual has most likely already suffered the consequences of defaulting on his debt. For instance, the debt will likely have been reported to the credit bureaus and will remain on a consumer’s credit report for up to seven years.

Medical debt is also time-barred, meaning there’s a statute of limitations and beyond that point the creditor cannot sue to collect the debt. The time limit varies by state, but it’s often between 2 and 10 years. If debt collectors plan to file a lawsuit to collect, they’ll do it sooner rather than later.

So by the time RIP Medical Debt gets involved, an individual has most likely already been hounded by bill collectors and had her credit rating affected. As the organization notes, “Prior to RIP’s purchase, many of these bills passed through months or years of collection.”

Given this, churches may find their funds are better used to help debtors directly. For instance, they can identify people in need who haven’t yet defaulted and pay the money owed directly to the healthcare provider. Churches can also intervene by helping the patient to negotiate with a health care provider to pay a lower amount, such as what would be paid by an insurance company or Medicare.

Another way congregations can help is to educate those in poverty about how they can deal with debt collectors. Most people are unaware you can simply mail a letter to the collection company and tell them to stop contacting you. Reducing the stress from being hounded by debt collectors can be more valuable to a debtor than getting a letter saying his debt is “erased” years after the collectors have stopped calling.

3. Understand debt relief isn’t just going to the ‘poor.’

Proverbs 22:7 says, “The rich rules over the poor, and the borrower is the slave of the lender.” One of the primary reasons churches want to alleviate medical debt is that they believe it’s a way to help those in poverty be released from financial slavery.

But the debt relief provided by RIP Medical Debt doesn’t just go to those who are below the poverty line. The organization purchases a portfolio of medical debt based on two financial criteria: the individual debtor must earn less than four times the federal poverty level (varies by state and family size) or have debts equalling 5 percent or more of his or her annual income.

Within the 48 contiguous states, a rate of four times the poverty level is $54,360 for an individual and $111,000 for a family with four people in the household. In comparison, the median individual income is $54,132 and the median household income is $70,784. Using the 5 percent standard, an individual who earns an annual income of $200,000 may qualify if he has medical debt in excess of $10,000.

While there’s nothing wrong with church members donating to pay off debts for people with higher incomes—or even for those who earn more money than their own families—that factor should be made clear.

4. Consider the possible violations of conscience.

Because of Health Insurance Portability and Accountability Act (HIPAA) regulations, debt buyers don’t know what medical procedures resulted in the unpaid debt—nor do they care. But a church could unknowingly be donating to pay the debt on medical services they find morally objectionable, such as elective abortions or gender transition therapies and surgeries.

There are solid reasons, of course, to believe a Christian has done nothing wrong by attempting to perform a noble action (providing financial relief) when it could have the remote and unintended effect of supporting an evil action (such as abortion). However, some Christians might earnestly believe they’re indirectly morally complicit in providing financial assistance for an evil act even though it wasn’t their intention. Church leaders may need to consider such objections when encouraging their congregations to participate in medical debt erasure.

5. Help your congregation make a fully informed decision.

Even after considering these issues, a church congregation may determine this is the proper way to use their benevolence funds. There’s nothing inherently wrong with that, and RIP Medical Debt does seem to be a reputable organization. But by helping your congregation think through the process, you can ensure they’re doing it for the right reasons and not simply because some eye-popping numbers gave them the impression they can fix complex debt problems with a small amount of church funds.

FAQs

Is rip medical debt legit? ›

This charity's score is 100%, earning it a Four-Star rating.

What does the Gospel Coalition believe? ›

We believe that a zeal for personal and public obedience flows from this free justification. THE POWER OF THE HOLY SPIRIT We believe that this salvation, attested in all Scripture and secured by Je- sus Christ, is applied to his people by the Holy Spirit.

Are they wiping out medical debt? ›

Paid medical debts were removed from credit reports in July 2022. Previously, medical bills that went to collections could blemish credit reports even after the debt was paid off.

Who owns RIP Medical Debt? ›

Founded in 2014 by former debt collection executives Jerry Ashton and Craig Antico, the charity purchases medical debt on the debt collection market, and then forgives the debt.

Is the Gospel Coalition Calvinist? ›

The Gospel Coalition, or TGC, is a union of evangelical and Reformed churches.
...
The Gospel Coalition
ClassificationEvangelical Christianity
TheologyReformed New Calvinism
FoundersD. A. Carson and Tim Keller
PresidentJulius Kim
3 more rows

What does the Calvary Fellowship believe? ›

We believe there is one living and true God, eternally existing in three persons; the Father, the Son, and the Holy Spirit, equal in power and glory; that this triune God created all, upholds all, and governs all.

What are the 4 points of evangelical? ›

Bebbington notes four distinctive aspects of evangelical faith: conversionism, biblicism, crucicentrism, and activism, noting, "Together they form a quadrilateral of priorities that is the basis of Evangelicalism."

When in 2023 will medical debt be removed? ›

This last step went into effect on April 11, 2023, and with this change, it's estimated that roughly half of those with medical debt on their reports will have it removed from their credit history.

What is the 7 year credit rule? ›

Late payments remain on a credit report for up to seven years from the original delinquency date -- the date of the missed payment. The late payment remains on your Equifax credit report even if you pay the past-due balance.

What are 609 letters? ›

A 609 letter is a credit repair method that requests credit bureaus to remove erroneous negative entries from your credit report. It's named after section 609 of the Fair Credit Reporting Act (FCRA), a federal law that protects consumers from unfair credit and collection practices.

Can you inherit medical debt in the US? ›

Medical debt for the deceased is paid by a person's estate — if the estate has enough assets. An estate with enough assets to pay any or all debts is considered “solvent.” If an estate does not have enough assets to pay debts, it is considered “insolvent.” Survivors are not responsible for medical debt, in most cases.

How do I write a forgiveness letter for medical bills? ›

Please require that the hospital reduce or forgive my bill according to their policy [and/or] reimburse me with interest the amounts I already paid in excess. Please let me know when you will respond to this complaint and how it is ultimately resolved. Thank you for your time.

Will medical debt under $500 be excluded from credit report? ›

On April 11, 2023, Equifax, Experian and TransUnion announced that any medical collection debt below $500 will no longer be included on credit reports, regardless of whether the debt has been paid. Most medical collection debt on credit reports is under $500, according to the CFPB (PDF).

Are Baptists Calvinists? ›

Regular Baptists adhere to a Reformed soteriology. Those who are Old Regular Baptists largely hold to the tenets of Calvinism, "but maintain that God never predestined anyone to hell and that only those who do not heed the Word of God will be lost."

What churches use Calvinist beliefs? ›

Contents
  • 4.1 Continental Reformed churches.
  • 4.2 Congregational churches.
  • 4.3 Presbyterian churches.
  • 4.4 Evangelical Anglicanism.
  • 4.5 Reformed Baptist churches.

What is the new Calvinist movement? ›

New Calvinism, also known as the Young, Restless, and Reformed Movement, is a movement within conservative Evangelicalism that reinterprets 16th-century Calvinism under contemporary values and ideologies.

Does calvary church believe in predestination? ›

Regarding unconditional election, Calvary Chapel affirms that God, "based on his foreknowledge, has predestined the believer," and that "God clearly does choose, but man must also accept God's invitation to salvation."

What do salvation Army churches believe? ›

The Salvation Army, an international movement, is an evangelical part of the universal Christian Church. Its message is based on the Bible. Its ministry is motivated by the love of God. Its mission is to preach the gospel of Jesus Christ and to meet human needs in His name without discrimination.

What does Cornerstone Chapel believe? ›

Cornerstone Chapel is a community of believers in Jesus Christ that exists to glorify God through the teaching and application of God's Word and through personal and corporate worship, with an emphasis on equipping believers for service within the church to strengthen the body of Christ, and for service outside the ...

What states are most evangelical? ›

The evangelical influence is strongest in northern Georgia, Tennessee, Alabama, Mississippi, North Carolina, southern and western Virginia, West Virginia, the Upstate region of South Carolina, and East Texas. The earliest known usage of the term "Bible Belt" was by American journalist and social commentator H. L.

What is the difference between Pentecostals and evangelicals? ›

Pentecostalism refers to Christian denominations who prioritize the spirit and whose worship services may include speaking in tongues, faith healings, and other charismatic expressions. Evangelicalism today is a protean movement that includes Christians on both the left and right of the political spectrum.

What are the signs of an evangelist? ›

Seven Characteristics
  • They are people of prayer. ...
  • They have a theology that compels them to evangelize. ...
  • They are people who spend time in the Word. ...
  • They are compassionate people. ...
  • They love the communities where God has placed them. ...
  • They are intentional about evangelism.
Jul 2, 2014

What is RIP Medical Debt? ›

RIP Medical Debt is a 501(C)(3) nonprofit whose sole purpose is to locate, purchase and then abolish unpaid and un-payable medical debt as a benefit to society as well as the recipient.

Can medical debt ruin your credit? ›

It's always best to pay off legitimate medical debt—and when it comes to your credit scores, it can make a big difference. Unpaid medical collection accounts over $500 can appear on your credit reports and affect your credit scores for up to seven years.

Does medical collections affect your credit score? ›

Most healthcare providers do not report to the three nationwide credit bureaus (Equifax, Experian and TransUnion), which means most medical debt billed directly by physicians, hospitals or other healthcare providers is not typically included on credit reports and does not generally factor into credit scores.

Who is the CEO of RIP Medical Debt? ›

RIP Medical Debt named Allison Sesso CEO shortly before the pandemic hit in 2020. She wants to continue expanding the amount of debt her organization buys, especially from hospitals.

How is RIP Medical Debt funded? ›

We buy debt in bundles, millions of dollars at a time at a fraction of the original cost. This means your donation relieves about 100x its value in medical debt.

Is Forgiven medical debt taxable? ›

In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs.

Is it true that all medical collections are $500 will automatically be removed from my credit report? ›

On Tuesday, the three major credit bureaus — Equifax, Experian, and TransUnion — announced that medical collections with balances of $500 or less would no longer appear on consumer credit reports.

Is medical debt vanishing from credit reports? ›

Effective July 1, 2022, all medical collection debt paid in full will no longer be included on U.S. consumer credit reports.

Is it a HIPAA violation to send medical bills to collections? ›

Thus, health care providers and their agents are able to report medical debts to CRAs without violating HIPAA regulations.

Will medical debt be removed from credit report in 2023? ›

This last step went into effect on April 11, 2023, and with this change, it's estimated that roughly half of those with medical debt on their reports will have it removed from their credit history.

Does medical debt count towards debt to income ratio? ›

Your debt-to-income ratio does not factor in your monthly rent payments, any medical debt that you might owe, your cable bill, your cell phone bill, utilities, car insurance or health insurance.

Why did my credit score drop when I paid off collections? ›

This is because your total available credit is lowered when you close a line of credit, which could result in a higher credit utilization ratio. Additionally, if the account you closed was your oldest line of credit, it could negatively impact the length of your credit history and cause a drop in your scores.

What is a goodwill deletion? ›

Use a Goodwill Letter to Remove Late Payments From Your Credit Reports. A goodwill letter explains why you had a late payment and asks the creditor to take it off your credit reports. By NerdWallet.

Can I get a mortgage with medical collections? ›

Now, mortgage lenders ignore medical collections as part of a buyer's mortgage application because medical debt doesn't predict future mortgage performance as other debt does. Home buyers with medical debt aren't less creditworthy.

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