HOUSTON, Texas – An estimated 20 million people will have their medical debt paid off after a nonprofit cut a deal to pay off outstanding medical balances.
Undue Medical Debt, a national nonprofit organization that pays off personal medical debt, is paying off $30 billion in outstanding medical debt through a partnership with Virginia-based debt trading company Pendrick Capital Partners.
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The deal is set to help an estimated 20 million people throughout the United States living at or below 400% of the federal poverty level or whose medical debt constitutes 5% or more of their annual income.
Without this intervention, these debts would have been sold to for-profit collection agencies. The partnership allows Pendrick to exit the medical debt collection space, alleviating a burden from families nationwide.
Key Takeaways:
- All payment plans with Pendrick have ended, and unpaid balances for those at 400% or below the federal poverty level are now erased.
- Sixty percent of this medical debt relief is in non-Medicaid expansion states.
- All analyses are estimates as Undue must assess the accounts of 20 million people while maintaining its normal operations.
- The average amount erased is estimated at $1,100 per patient, with the highest debt relieved exceeding $350,000.
- The top states with the highest amount of debt in this portfolio are Texas, Florida, California, Georgia, and Oklahoma.
- While this acquisition significantly supports Undue’s mission, such large-scale purchases are not the norm due to the associated capital and administrative complexities. Undue will continue its vital work, powered by the generosity of private and grassroots supporters.
Currently, in the U.S., there’s an estimated $220 billion in medical debt, according to KFF. With the purchase of this debt, the outstanding medical debt total is set to decrease drastically.
In the past year, according to a West Health-Gallup survey, Americans borrowed an estimated $74 billion to pay for health care.
Since its founding in 2014, Undue has successfully erased $15 billion in medical debt.
Undue leveraged the scale of this acquisition to negotiate the deal, purchasing the debts at a substantial discount—less than a penny on the dollar.
The debts acquired include those over seven years old, which Pendrick has donated to Undue. Funding for this historic purchase comes from various sources, including government partners. Undue is collaborating with over 20 cities, counties, and states—as well as existing donors like philanthropist MacKenzie Scott. Additional fundraising efforts are planned to support the quarterly payments to Pendrick over the next 18 months.
“This deal underscores that the way we finance healthcare in the U.S. is fundamentally broken,” said Allison Sesso, president and CEO of Undue Medical Debt. “Patients are increasingly left on the hook for balances they cannot afford just because they got sick, were in an accident, or were born with a chronic condition. Undue’s intervention is not a silver bullet, and much work remains to create an equitable and comprehensive healthcare financing ecosystem, but through this effort with Pendrick, we are stopping collections on a monumental number of medical debts and helping tens of millions of families breathe a little easier.”
Undue anticipates that it will take up to 1.5 to 2 years to inform all 20 million patients about their debt relief.
In the meantime, any acquired medical debts reported to credit bureaus have been removed, and all collection actions have ceased. Patients can confirm their debt has been erased by receiving an Undue-branded envelope in the mail.
Those with outstanding balances owned by Pendrick who meet the eligibility criteria can rest assured that their debt is now erased.
Last year, the Consumer Financial Protection Bureau (CFPB) proposed a rule to remove all medical debts from credit reports. Additionally, the three major credit institutions decided to independently remove medical debts under $500 from credit reports and provide patients with more time to pay off past-due medical debts.
However, the future of the CFPB remains uncertain, and potential federal cuts to Medicaid and ACA plan subsidies could lead to an increase in medical debt.