Over the past decade, R.I.P. Medical Debt has grown from a tiny nonprofit group that received lower than $3,000 in donations to a multimillion-dollar force in health care philanthropy.
It has done so with a novel and easy technique to tackling the large amounts that Americans owe hospitals: buying up old bills that might otherwise be sold to collection agencies and wiping out the debt.
Since 2014, R.I.P. Medical Debt estimates that it has eliminated greater than $11 billion of debt with the assistance of major donations from philanthropists and even city governments. In January, New York City’s mayor, Eric Adams, announced plans to offer the organization $18 million.
But a study published by a bunch of economists on Monday calls into query the premise of the high-profile charity. After following 213,000 individuals who were in debt and randomly choosing some to work with the nonprofit group, the researchers found that debt relief didn’t improve the mental health or the credit scores of debtors, on average. And those whose bills had been paid were just as more likely to forgo medical care as those whose bills were left unpaid.
“We were upset,” said Ray Kluender, an assistant professor at Harvard Business School and a co-author of the study. “We don’t need to sugarcoat it.”
Allison Sesso, R.I.P. Medical Debt’s executive director, said the study was at odds with what the group had frequently heard from those it had helped. “We’re hearing back from people who find themselves thrilled,” she said.
In a survey the group conducted last yr, 60 percent of individuals with medical bills said the debt had negatively affected their mental health, and 42 percent said they’d delayed medical care.
Studies had shown significant mental health and financial improvements for other forms of debt relief, akin to paying off student loans or mortgages. But those debts have more urgency: Homeowners who don’t pay their mortgages could quickly lose their homes, whereas a hospital bill can languish for years with little consequence.
Major credit reporting agencies removed debts smaller than $500 from credit reports last yr, further lessening the impact of outstanding debt. And the federal government is pursuing rules that might remove medical bills entirely from credit reports.
The study, published as a National Bureau of Economic Research working paper, is one in every of the primary to take a look at the impact of medical debt relief on individuals. “It’s a giant policy area immediately, so its necessary to point out rigorously what the outcomes are,” said Amy Finkelstein, a health economist on the Massachusetts Institute of Technology whose research has shown significant positive effects of gaining medical health insurance.
Ms. Finkelstein can also be a co-director of J-PAL North America, a nonprofit group that runs randomized experiments on social programs and provided some funding for this project.
“The idea that perhaps we could do away with medical debt, and it wouldn’t cost that much money but it surely would make a giant difference, was appealing,” Ms. Finkelstein said. “What we learned, unfortunately, is that it doesn’t seem like it has much of an impact.”
Mr. Kluender and one in every of his co-authors got here up with the concept for the study in 2016 once they saw R.I.P. Medical Debt featured in a popular segment from John Oliver’s television show. They and two other economists teamed up with the nonprofit group to run the experiment, which worn out $169 million in debt from 83,000 debtors between 2018 and 2020.
Those patients, like others R.I.P. Medical Debt typically helps, weren’t making payments on those bills, which were not less than a yr old. The economists monitored the patients’ credit scores and sent them surveys asking questions on their mental health and the barriers they’d faced in getting medical care.
They compared those results to a control group of 130,000 individuals who had not had their debts relieved, they usually found few differences. The two groups reported similar financial barriers to searching for medical care and similar access to credit. The patients whose medical debts had been paid off were just as more likely to have trouble paying other bills a yr later.
“Many of those people have a number of other financial issues,” said Neale Mahoney, an economist at Stanford and a co-author of the study. “Removing one red flag just doesn’t make them suddenly turn into risk, from a lending perspective.”
For some within the study with no other debt in collections, the erased medical bills did result in a 3.6-point bump of their credit rating, on average.
The researchers were startled to search out that for some people, particularly those that already had high levels of economic stress, debt relief worsened their depression. It’s possible, the researchers speculated, that being told in regards to the sudden payoff had inadvertently reminded debtors of their other unpaid bills.
R.I.P. Medical Debt has “evolved” since 2020, when the experiment concluded, Ms. Sesso said. Major donations now allow the group to purchase up billions in debt in a single city, which she said could have a bigger impact on beneficiaries’ funds.
