Friday, September 22, 2023

People in the United States should be offered a chance to buy their own medical debt back from a creditor before it goes to a collection agency.

This must be the week for questions that pop into my head to which I have no answer. So, being a Friday post, I'm going to ask all of you to educate/explain to me a "Why is this a thing?" question. This week, I was thinking about medical debt. Specifically, medical debt in the United States. Most people have health insurance that doesn't cover all of their medical costs, due to high deductibles and co-pays for certain services. Hospitals aren't allowed to turn away patients who need emergency care, even if they don't have health insurance. This means that uninsured patients who need their services will receive a bill afterward, and they may be unable to pay for it. If a person doesn't pay their outstanding medical bill, their creditor will try to set up a payment arrangement (simple enough to understand). When this doesn't get paid, and more time passes, and there is no attempt to repay the debt, then the creditor (hospital) may charge off the obligation and sell it to a collection agency. you have all that background. But there's something more to all of this. Collection agencies are allowed to buy this outstanding medical debt at a fraction of their original value, especially if the chance of collecting the entire amount is remote. Debt buyers may pay as little as $.04 to $.014 for every dollar of a consumer's outstanding debt. All of this is legal in the United States. This is how capitalism works.

And is my question: why can't the person/consumer who owes this medical debt, but it (for themselves) at the same cost.'s an example. Let's say I had $30,000 in unpaid medical debt. I can't pay it back for whatever reason, and it has lingered for years. So, the hospital approaches me (instead of a collection agency) and says, "We are selling this debt to a collection agency, but we'll give you first shot. At .04 cents on the dollar, we'll take $1200 and call this good. Whatever. How about it?" I think a lot of people would jump at that chance. But for some reason, I can't find any example of this happening. Instead, we have this predatory step where the debt is handed over to someone else at a super discounted price, and then this new company can go after the full debt with all of their resources. And it's obviously profitable enough to be a good business model for a bunch of companies that honestly are amoral and shouldn't exist. 

So please, explain to me why medical debt gets sold to collection agencies instead of to the person who owns that debt. Why do we have this system in place in this country? I'd seriously like to know the answer.


  1. I think the most likely explanation is that since most medical companies are huge conglomerates now they're not just selling one debt. Like those bad mortgages in the Big Short, they're bundling thousands of these things, which is why they can let go of them at a lower rate. It's a volume discount and an individual doesn't have the buying power for that. There's probably also a tax benefit and it makes the bottom line look a little better when they don't have tons of outstanding accounts receivable, especially when it's not likely those are going to pay right away.

    Then these big huge debt collection companies like Midland Credit Management divide up the debts and contract firms like the one I work for to actually go collect the debt starting with a default judgment in court and then if you don't pay they'll garnish your taxes, your wages, or even just take money from your bank account, which is the worst. Seriously it is just the worst. I woke up one morning a few years ago and all the money in my checking account was just gone. After calling my bank and actually going there I found out there had been a "hard pull" from some creditor. They of course don't tell you about it up front because what would you do? You'd go empty the account before they could take anything. And these banks don't leave you with anything plus they'll take $50-$100 (probably more by now) of your money as a fee.

    Anyway, so we get the money from the debtor and we keep some and give the rest back to Midland or whoever the bigger fish is. Where I work we don't do medical debt; it's mostly credit cards, but I'm pretty sure it's largely the same thing.

    It was probably in 2019 or 2020 when John Oliver did a report on medical debt and actually negotiated to buy a bunch and forgive it. You can probably find that episode on MAX.

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    2. Ugh, I should have proofread before posting.

      Just to expound on the "volume discount" thing, a company like Midland might buy 10,000 debts--just for the sake of round numbers. Of those 10,000 maybe 7500 they'll get a decent value for. The other 2500 though might go into bankruptcy or (especially with medical debt) the debtor might die or like me they might just be broke AF and not have anything to pay. That's especially true when you have old people on a fixed income.

      So for a company like Midland, it's like one of those reality shows where they auction off a storage unit and someone buys it sight unseen. There could be something really valuable inside or it could just be a bunch of old clothes. That's a big reason they get a discount because they're taking a risk. Meanwhile for the big medical or insurance company they get it off their books and get a little revenue so at least they got something for it. Everyone (except the debtor) wins. Capitalism!

  2. What PT said. The thing is, we shouldn't have for profits in the medical industry, I don't think. If all hospitals and such weren't allowed to make a profit, a lot of these issues might go away. (Okay, capitalism, so not likely, but it might make a small difference.) That might stifle innovation in curing diseases, of course, but when curing a disease impacts the bottom line... This is too much for my brain for a Friday. It sucks. The system needs to be trashed and we need to start over.