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People don’t usually talk about medical debt, but Daren Hashimoto knows it’s out there.
Hashimoto is starting Hawaii’s first online campaign to forgive medical debt using a crowdfunding platform operated by New York-based nonprofit RIP Medical Debt.
The goal is to forgive and erase the medical debt held by an estimated one in 10 Hawaii residents. RIP Medical Debt estimates that Hawaii holds about $108 million in medical debt on credit reports.
Hashimoto saw a chance to help strangers.
“I figured I have nothing to lose, why not?” he said. “It’s the idea of changing someone’s life for the positive because of the weight it can lift off of someone’s shoulders to have that debt paid off.”
RIP Medical Debt is a federally-recognized 501c3 organization founded by two former debt collectors. It works with secondary debt collection agencies to purchase portfolios of old medical debt.
Once it purchases the debt at a discount, RIP abolishes it then sends yellow forgiveness envelopes in the mail to notify the qualifying debtors.
Last holiday season, two New Yorkers raised thousands of dollars to forgive medical debt for 1,300 strangers using the platform.
Because medical debt can take years, even decades, to collect, hospitals often sell the debt to third-party collection agencies at steeply discounted prices.
“They’ve often passed through many hands: from doctor or hospital to the secondary debt market and most have been floating around for many years,” said Daniel Lempert, RIP Medical Debt communications director.
“Since our criteria for aid is those most in need, they’re also the least likely to be able to pay these debts. So the medical debt simply languishes on the market, impacting credit scores and emotionally burdening struggling Americans.”
Hospitals are usually more than willing to sell the debt to the charitable organization, since it would likely be sold off anyhow.
“We kind of act as a debt collector but we don’t actually collect on the debt,” said Darby Drukker, RIP Medical Debt development coordinator. “We use contributions to relieve it entirely.”
Through its partnerships, the nonprofit currently has access to purchase approximately $257,000 in medical debt from 350 accounts held by 230 Hawaii residents. It may only represent a fraction of the total medical debt in Hawaii, but it’s all RIP Medical Debt can access in the state.
“It comes down to what our contacts in debt collection have access to, and where they’re doing business,” Drukker said. “Oftentimes in a rural area we don’t have a lot of access to medical debt.”
To qualify Hawaii for a RIP Medical Debt relief campaign, which purchases bulk portfolios for a minimum of $15,000, Hashimoto combined his fundraiser to include debt relief for Texas and Florida.
If Hashimoto is able to raise the $15,000, about $2,570 of it will be prioritized to abolish all of the medical debt RIP currently has access to in Hawaii. Because of how the debt is purchased, the organization can clear $257,000 in debt for about a penny on the dollar. If the funding goal is not reached, all donations will be directed to a general national debt relief fund.
Beneficiaries must fall into at least one of three categories: individuals who earn less than two times the federal poverty level, those in financial hardship and those whose debts exceed their assets.
Honolulu bankruptcy attorney Edward Magauran says it’s common for medical debt to be the trigger for many to consider declaring personal bankruptcy. The cases he’s assisted vary from emergency situations such as people dealing with medical expenses after car accidents, work accidents, or broken bones. Other times, it’s diseases like cancer that lead them into financial instability.
“It’s a pretty consistent thing that medical debt gets people in trouble,” he said. “When there’s serious medical debt, they’re often unable to able to work for extended periods of time and that kind of compounds it.”
Magauran, who has helped clients file for Chapter 7 and Chapter 13 bankruptcy, has also witnessed how the Hawaii state law regarding spousal liabilities can affect clients.
“There’s cases where let’s say a husband has a massive heart attack and lives for a couple of weeks, then he dies,” he said. “The bills are unbelievable and by law, the spouse owes them. It’s not uncommon to see people owe what’s not even their debt. It’s an awful insult to a lot of people to lose a spouse and then get hit with a bill.”
Drukker says the actual amount of medical debt in the U.S. is much greater than the $75 billion reported on credit reports, since only a fraction of medical debt is reported to credit agencies.
A study published by Health Affairs found that one in six Americans had past-due health care bills on their credit report — a collective debt totaling $81 billion turned over to third-party agencies for collection, based upon 2016 credit records for more than 4 million Americans.
Those without health insurance are more likely to have outstanding medical bills. But younger people are more likely to have medical debt than older people, and “medical collections could still occur under typical insurance plans” since more than half of debts held were under $600, the study found.
Hawaii may have less medical debt compared to other states, but Hashimoto says he was inspired to start a Hawaii campaign after seeing the reactions people had to the debt forgiveness envelopes, captured by videos circulating on social media.
The 40-year-old has worked in the retail, banking and nonprofit sectors. Most recently, he worked for Make-A-Wish Hawaii, a nonprofit that grants wishes to children with critical illnesses. During times of crisis, outstanding medical expenses are rarely spoken of, he said. The focus is ensuring the child gets the needed care.
Hashimoto says he has been lucky to not have any medical debt.
“Even having insurance, you still get the bill,” he said. “I’ve been fortunate to have the funds to pay off that bill.”
According to the May 2019 Economic Wellbeing report published by the U.S. Federal Reserve, about 20% of U.S. adults had “major, unexpected medical bills to pay in the prior year,” and a quarter of U.S. adults “skipped necessary medical care in 2018 because they were unable to afford the cost.”
RIP Medical Debt estimates Americans owe about $1 trillion, which has accumulated within the past decade.
“Sometimes people will say in buying debt from collectors you just perpetuate the cycle, but if we weren’t buying this debt, someone else would be collecting it,” Drukker said. “We’re trying to lift the burden, whereas other people would just perpetuate it.”
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