The Secular Society in Blacksburg finalized another purchase of medical debt this week, paying off bills for 14,434 people in Southwest Virginia.
The nonprofit embarked on a campaign in 2020 to donate $3 million over three years to RIP Medical Debt, a New York-based charity organization, to purchase and abolish debt in the region. This is the final tranche of payoffs, but Peter Trower with The Secular Society said the organization would be open to another campaign if RIP Medical Debt identifies additional opportunities in Southwest Virginia.
[Disclosure: The Secular Society is one of our donors, but donors have no say in news decisions; see our policy.]
This year, more than $12.1 million of debt was forgiven in 20 counties in Southwest Virginia, according to a news release from The Secular Society.
RIP Medical Debt takes advantage of an established paradigm in the United States where debt can be purchased for pennies on the dollar, but instead of collecting the money, the organization uses donations to forgive the balance. The nonprofit has abolished $10.4 billion of medical debt since its inception in 2014.
Since the debt is purchased for much less than its original value, a $100 donation covers about $10,000 of medical debt, said Daniel Lempert, vice president of communications at RIP Medical Debt.
A website for The Secular Society said that its funds are derived from activities on property located in Texas and does not solicit or accept funds from external organizations, governmental agencies or individuals.
The beneficiaries of the debt relief efforts have a family income of less than four times the federal poverty level or had balances that exceeded 5% or more of the individual’s gross income. The debt of uninsured or underinsured individuals is also eligible.
In 2021, an estimated 8% of Virginians between the ages of 19 and 64 were uninsured. That’s about 550,000 people, according to the most recent data from the Virginia Health Care Foundation and Urban Institute, a public-private partnership dedicated to increasing access to primary health care for uninsured Virginians.
About one-third of uninsured Virginians lived below the federal poverty level in 2021, and more than 40% of uninsured individuals between 19 and 64 years old lived with income 138% below the federal poverty level.
While uninsured individuals are at greater risk of incurring significant medical debt, high-deductible insurance plans can cause insured people to build up debt as well. About 4 in 10 adults have some form of medical debt in the U.S., according to data from the KFF, a nonprofit foundation that does research, journalism and communications programs focused on major health care issues in the U.S.
RIP Medical Debt partners with hospitals, private practice providers and debt collection agencies to identify eligible accounts, Lempert said. Debt relief, however, cannot be requested.
“We look for people who are least likely to be able to pay their debt,” Lempert said. “We’re more focused on individuals in need.”
The majority of the recipients live in the coalfields, with Wise County seeing more than 5,000 accounts closed by RIP’s purchase.
Ballad Health is the primary health care provider in the southwest corner of the state, and the organization has partnered with RIP Medical Debt in the past. However, partners sign a nondisclosure agreement with RIP that prevents the purchaser from releasing the names of their partners. It’s unclear if Ballad, Carilion Clinic or LewisGale Medical Center participated in this round of medical debt purchasing.
“For those whose medical debts have been abolished, the relief is a gift, an act of generosity from a disinterested third party,” according to the press release from The Secular Society.
The IRS tax term “disinterested third party” signifies that the payment by RIP does not count as income, meaning debtors will not be required to pay taxes on the monetary gift.
Once the debt is forgiven, the recipient’s credit will be restored.
“We understand we aren’t fixing the system,” Lempert said. “We’re really just doing triage.”
Beneficiaries will receive a letter from RIP Medical Debt over the next month explaining that their debt has been forgiven.