RIP Medical Debt- A SCANDAL or A Social Help Campaign? Time to Find Out!!!

Americans are now more immersed in medical debts than ever. The average debt of 11 million Americans exceeds $2000 each. 20 million more has an average debt of $1000. So, any project or waiver scheme that may relieve people from the pain is welcome. Many people thought the same after the introduction of RIP Medical Debt. What is rip medical debt?  It is a non-profit scheme. A nonprofit group of the same name launched it.  

In an upfront venture, the scheme relieved Americans’ medical debts of $11 billion. People who don’t have any life insurance in USA are more eligible for the scheme. People called rip medical debt a bliss for those reeling under medical expenses. But was it so? 

If it were really the way it was meant to be, we might not be discussing it now. A NYTimes study confirms that the scheme neither improved recipients’ mental health nor credit scores.  

I knew the news was not wrong when I checked the rip medical debt reviews. Rip medical debt enjoyed a fluffed-up weightage and stature followed by this stunt.  

RIP medical debt- A relief scheme or a commercial stunt in disguise

At FinanceTeam, we will not overlook the burden of bills the scheme has levitated. However, we will also explore if it leverages the fiscal health of individuals.  

For one, we know that people’s credit scores were not improved after the waiver. There were lots of rip medical debt complaints that cited the same issue.  

As most debts were already in the COLLECTION Phase, the retribution of the FICO score was very difficult. At the same time, the issuing companies had probably got their insurance claims against NPA filing.  

I may presume the whole $11 billion was not recovered. But people paid many penalties and bounced fees over their failed payments.  

It was NOT a WIN-WIN Deal

Once your FICO is permanently damaged, you can’t avail yourself of further loans. In the case of medical loans, a collateral loan may work. But most people reeling under existing loans had already tried that option out.  

A survey by The Street in 2022 showed that 51% of American household expenses run on credit. Amidst this situation, imagine what would happen if your credits (ongoing balances included) were frozen overnight. Managing Existing Credit poorly leads to it.  

On top of that, there are medical bills due, too. And there is no credit balance to clear off the bills. So, how would the families keep up the supply of life-saving drugs for chronic patients or critical admits?  

The bottom line is that the simple waiver did not significantly benefit the people. But what was in it for the non-profit company? 

How RIP Medical Debt Profited?

RIP medical debt controversy sprouts from this incident. Once, they were just a small nonprofit agency. They seldom received more than $3000 as donations. However, their medical waiver scheme changed everything overnight.  

After the event, they received millions of dollars from state agencies and international groups. When you see the rip medical debt CEO salary, you can understand that the claim is accurate. She earns $291,865 as compensation only.  

I admit Americans owe an enormous amount to the hospitals. In fact, 18% of medical debts are in collections as I write the article now. What did RIP Medical DEBT do, standing in this situation…… 

…….They bought old medical bills (mostly insurance claimed). Most of the bills were to be sold to collection agencies. Therefore, the debt was wiped off the book.  

Understand ECONOMICS Here!

The NPA bills were valued less than their actual collection values. When an insurer declares a credit fund as NPA, it is considered that the money is beyond recovery. Hence, third-party collection agencies are charged to recover as much as possible from the recipients.  

After recovery, the agency keeps a cut from the recovered amount. Let’s take an example to understand better.  

Imagine I have a medical debt of $2000. When Medicare declares insolvency and then NPA, there’s no hope I can repay the amount.  

Still, a collection agency is given the right to press the cause and collect as much as possible. However, Medicare would barely expect that 40 to 50% of the amount would be recovered at the most.  

At that moment, RIP Medical Debt will come in. They pay the negotiated amount to Medicare or the concerned medical credit issuer (hospitals). So, they are not paying the full $2000. However, the waived-off amount remains $2000 by the book.  

Some may call it a rip medical debt scandal. But the real problem penetrates way deep.  

REAL Impact of RIP Medical Debt Scheme on People’s Finances

In 2014, RIP Medical Debt started waiving off the medical debts of distressed people. However, it was not a solo move. Loads of donations started flowing in from businesspeople, philanthropists, and even state government agencies. 

Eric Adams, mayor of New York City, donated $18 million to RIP to aid their cause.  

The high-profile charity went well until the National Bureau of Economic Research observed something extraordinary! The credit scores of the recipients remained the same even after the write-off. Most people whose bills were paid were ready to forego medical care.  

The bottom line is that there was no creditable improvement in the life or sustainability of the people in debt. On the other hand, it is undeniable that RIP Medical Debt made tons of profits through funds flowing in.  

Why are MEDICAL BILLS a FINANCIAL PERIL???

After understanding the finances behind the situation, we can understand the gravity of the situation revolving around unpaid medical bills in the US. We already know that Medicare requires monthly fees (Premiums).  

On top of that, we need to pay upfront charges (deductibles) to activate the treatment insurance. This charge covers miscellaneous areas like missed premiums, late fees, or portions of the bill for which the scheme does not count.  

The charge may easily climb as high as $1700. Shocked? I believe every 2 out of my 5 readers will relate to the issue. Often, insurance denies our claims. Sometimes, we need to pay small upfront payments at regular intervals.  

We may also book doctors or services our health insurance does not cover. The providers charge us for all this. And don’t forget we are already paying monthly premiums, too.  

What happens when we are unable to pay all the charges?

I will accrue debts when I cannot pay all the fees together. Eventually, the provider will appoint collectors to retrieve the payables. That’s how medical debt becomes the most detrimental debt among loan debts in the US. Today, medical debts represent 58% of all debts that we may see in our credit reports.  

That’s why schemes like RIP or American general life insurance exist.  

Our finances are linked directly to our HEALTH. How………

……When you miss payments, you will avoid routine check-ups and delay going to the doctor. The fact is that medical bills have become unpredictable due to the complex Medicare billing process.  

The Healthcare Costs in Retirement are another challenge we must deal with. Despite the piling up of medical debts, we can’t ignore old-age health care. After retirement, people try to cut down on food and clothes to pay medical bills.  

BUT don’t avoid Medicare

Amy Finkelstein from the Economic dept of M.I.T did a study on the effect of Medicare on people’s finances. It exposes that your out-of-pocket expenses will be lower if you have Medicare.  

The fact holds for people of any financial strata. Finkelstein says that medical insurance is a misnomer. It not only protects your health. According to her- “It’s actually to protect you economically in the event of poor health.” 

But where do things go astray??

People have less understanding of Medicare schemes. That’s why they often forget or misjudge premiums. They think it’s too costly. I admit that people usually cannot pay the out-of-pocket costs they must pay as part of their insurance scheme’s expenditure.  

The problem is that Medicare costs are rising sporadically. In a matter of 1 year, medicare expenses grew 3.88%. However, the average income of 2nd or 3rd-tier earners is not increasing proportionately. So, HOW can they bear such hefty expenditures? 

It is redundant to discuss if the capitalist connotation of the economy is to be blamed for the outcome. However, corporate healthcare bodies are increasing their charges, too. In the US, the cost of prescription drugs is 2.78 times higher than in many other countries, including the UK.  

How does rip medical debt work in this bigger picture? They identify people with a poor financial dashboard. Companies like them take advantage of the country’s medical debts piling up.  

Grants to help pay medical bills

While we discuss the issues surrounding rip medical debt, we must also talk about other grants and schemes that serve the same purpose. We can conclude that with RIP, it was not a good outcome. But we can’t deny that such schemes help a lot of people.  

Healthwell Foundation

Over 129 million people have at least one chronic disease in the US. This foundation cares for those with chronic diseases who are heavily underinsured as well.  

Unlike others, Healthwell does not only help people when they are vulnerable to debt. You can also get financial assistance while paying off “co-Pays”, “buying prescription drugs”, “monthly premium payments,” and so on.  

Frequently Asked Questions (FAQs)!!!

There are various opinions and ideas surrounding the rip medical debt. The following are some of the repeating concerns among Americans: 

Shall I Choose Medical Debt Waivers After This?

Debt leverage schemes like rip medical debt are necessary for people under medical debt. So, I encourage the scheme by all means. But I also urge readers to improve their understanding of how the Medicare scheme works.  

If they pay Medicare charges correctly, the out-of-pocket charges will not hurt them much. However, some people still find it challenging to pay the primary charges. I also recommend that they seek the best treatment from government healthcare institutions.  

If you have low Medicare coverage, it can be a good option for you!!

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