RIP Medical Debt can take on and forgive patients' medical debt directly from providers, a decision that experts welcomed as more Americans are saddled with debt amid the COVID-19 pandemic.
HHS' Office of Inspector General recently said it will not penalize health systems and large physician groups that donate or sell unpaid bills to the national not-for-profit RIP Medical Debt instead of following the traditional debt collection agency referral process. The OIG ruled that the arrangement would not violate federal anti-kickback laws that prohibit providers from unlawfully drawing patients to their organization.
The decision is timely as millions of Americans lose their employer-sponsored insurance along with their jobs, and those that still have insurance are making less money, RIP's Executive Director Allison Sesso said.
"At a time when the pressure on the healthcare system is so extreme, we will see a significant increase in medical debt because of the amount of care needed as a result of COVID-19 as well as patients' increasing inability to pay," she said. "We really need to be able to get hospitals to work with us—this could be a real economic stimulus for people who need the burden lifted."
RIP, which proposed the arrangement to HHS OIG about a year ago, forgives loans for individuals with incomes at or below two times the federal poverty level, whose medical debts are 5% or more of their gross annual incomes or who are insolvent. Until now, RIP has acquired delinquent accounts only when those debts have been available on the secondary debt market.
Working directly with the provider will allow RIP to ease patients' financial burdens sooner, said Sesso, noting that only around 40% of hospitals sell their debt to collection agencies. It will also increase RIP's reach; it has forgiven more than $2.5 billion in medical debt since 2014.
"We know that debt itself is a social determinant of health, so if a hospital's goal is to reduce peoples' stress and improve their health outcomes, this is one way to address that," said Sesso, adding that this could also address health disparities, particularly among people of color who are disproportionally impacted.
HHS OIG ruled that providers will not be able to publicize their partnership with RIP, which would alleviate anti-kickback concerns that patients would be drawn to a particular provider if they could have their debt forgiven. Also, RIP would only step in after the accounts are deemed "uncollectable," which "does not carry the same risks as agreeing to subsidize an ongoing payment obligation or waiving a payment obligation in advance," regulators said.
It was important that hospitals and physician groups do not publicize that it is donating or selling debt to RIP, which would be exactly the inducement regulators worry about, said Michele Masucci, a partner at the law firm Nixon Peabody and RIP board member.
"We had people say to us, 'Well if a hospital can't publicize it, then why would they do it?' There are plenty of reasons," she said. "It's the right thing to do for patients. The other thing is that hospitals have an opportunity to participate with us as we do more research about population health management."
RIP relies on donations from individuals, philanthropists, foundations, faith-based organizations and corporations to forgive medical debt. But donors would have limited control over how their donations are used in the direct RIP-provider model. Although donors could earmark the donation for certain broad categories of patients, donors would not be permitted to restrict donations for certain types of treatments or otherwise target particular patients, treatment types or patients covered by a particular type of insurance, the OIG noted.
"This is a good decision both from the perspective that RIP appears to be doing good work to try to relieve medical debt as well as from a legal standpoint where it seems to present very little risk regarding anti-kickback laws," said Gary Young, director of Northeastern University's Center for Health Policy and Healthcare Research, noting that these transactions occur after services are provided and collection notices are sent. "It is also timely because medical debt is expected to grow significantly during the pandemic."
Many Americans have high-deductible health plans. That, combined with the growing unemployment rate and other financial struggles, will weigh on consumers and providers over the next several years, Young said.
Yet, if providers have RIP to fall back on, they may not be as motivated to provide charity care or debt cancellation to financially disadvantaged patients, said Ge Bai, an associate professor of health policy at Johns Hopkins University.
"The last thing donors ould want to see is that their well-intentioned money simply saved hospitals their charity care and bad debt expenditure," she said, adding though, that the OIG opinion is welcome news to financially disadvantage patients and offers an exciting remedy for the medical debt issue.
Medical debt has been burdening patients well prior to the pandemic. The average annual family premium rose to a record-high $20,576 in 2019, far outpacing growth in wages and inflation, according to the Kaiser Family Foundation's annual report on employer coverage. Employees are picking up more than a quarter of the cost, largely through high-deductible health plans.
When patients can't pay after multiple attempts to collect, debt collection agencies typically buy patients' debt from hospitals for pennies on the dollar. Calls and letters from those agencies weigh on patients' minds as well as their credit scores, producing a cascading financial impact.
As a result, many Americans are forced to file for bankruptcy protection to wipe their outstanding medical bills.
"We had no idea when we put this deal in motion that the pandemic would be upon us," Sesso said, adding that RIP is scaling up to meet the new demand. "Now we're facing an even worse situation—a solution like this couldn't come sooner."
Aside from the pandemic, many hospitals continue to sue patients as they see their bad debt levels rise. Even if the hospitals are less aggressive, they are often slow or reluctant to inform patients about any financial-assistance policies.
Given the complexity and depth of the problem, it is unclear how much the RIP arrangement will have an impact over the long term, Young said. RIP will have to compete with debt collectors and raise providers' awareness that another option exists, he said.
"It depends on the extent that RIP can actually scale up and how much hospitals are going to be able to cut their medical debt by transferring ownership to RIP," Young said. "While there are some unknowns about the impact, it seems like the right way to go."