More than 10,000 residents of primarily rural counties in Central Appalachia will receive letters in the next month telling them they no longer owe a combined $10 million in medical debt.
The debt forgiveness means the individuals will receive no more bills, dunning letters, or telephone calls seeking payment for the medical services they received months or years ago.
“Over the next two to four weeks, letters will go out to each of the gift recipients telling them that their debt has been abolished as a gift — a no-strings-attached gift from a donor,” said Craig Antico, a founder of RIP Medical Debt, the nonprofit organization that is forgiving the debt after purchasing it on the debt market.
The debt forgiveness was paid with donations from two families with ties to Central Appalachia: Jim and Sharen Branscome and Bill Bishop and Julie Ardery. (Disclosure: Both families have made donations to the Daily Yonder. Bishop and Ardery are the founding editors of the Daily Yonder and ran the publication from 2007 to 2012.)
Jim Branscome is a native of Southwest Virginia. He and Sharen Branscome met when they both worked for the Appalachian Regional Commission in Washington, D.C. Bishop and Ardery are from Kentucky. Early in their careers, both Jim Branscome and Bishop worked for the Whitesburg Mountain Eagle, a renowned weekly newspaper in the Kentucky coalfields.
Jim Branscome said he hopes the debt reduction will help relieve economic distress and increase the likelihood that Appalachian residents will get adequate medical care.
“Health statistics in Appalachia are among the worst in the country, and medical debt prevents people from getting the care they need to improve their lives,” Jim Branscome said in a press release. “For just a penny on the dollar, RIP Medical Debt can wipe out debts and clear the credit history for thousands with our donation.”
The donations (a total of $100,000) focus on erasing debt in the central portion of Appalachia, a multi-state region that runs from Mississippi to New York, according to the federal definition. The donations will wipe out most of the currently reported medical debt in counties in Eastern Kentucky, Southwest Virginia, and portions of West Virginia, the press release said. Those regions are among the most economically distressed in the region.
The Branscomes, who donated $80,000 to the effort, said they hope their gift will spur others to contribute to eradicate medical debt in Appalachia. Bishop and Ardery responded to the challenge with a $20,000 contribution.
RIP Medical Debt has launched a campaign to raise funds to forgive medical debt across Appalachia. The region’s residents have a combined $240 million in medical debt on the debt market.
RIP Medical Debt was incorporated in 2014 by veterans of the debt collection industry.
The nonprofit can eliminate medical debt for pennies on the dollar because it purchases debt bundles on the debt market. Medical providers and others sell their debts at deep discounts on the market with the hope of recouping a portion of what they are owed. When RIP Medical Debt purchases the debt, instead of attempting to make collections, they forgive it. The organization sends notifications to the affected individuals and reports the erasure to credit bureaus, which improves credit scores, Antico said.
A primary source of revenue for the debt purchases are donors who want to forgive medical debt for a specific geographic area. The donations for Appalachia are the first they’ve received for a multi-state region, Antico said. Other donors have focused on eliminating debt in multiple counties or an entire state.
Since it purchases debt in bundles on the market, it cannot purchase the debt of specific individuals. Individuals do not have to pay income taxes on the value of the debt relief, Antico said.
The organization has forgiven the debt of approximately 300,000 individuals with a combined debt of $800 million, Antico said. The average recipient has $2,600 of debt forgiven, he said.
Antico said the forgiveness can have special benefits for rural consumers, where there are fewer medical-care choices and those with insurance may be more likely to face out-of-network expenses. Uninsured patients are another major source of medical debt. Medical debt contributes to 60% of all individual bankruptcies and can reduce access to healthcare, he said.
“Imagine you’re in a rural place. It’s the only hospital, and you owe them $20,000,” he said. “You’re going to feel like not going near that hospital. You’re afraid they’re going to ask you for the money. So what do you do? You don’t get care.”
One in five people in the United States are grappling with medical debt, according to RIP Medical Debt. More than 40% of Americans would not be able to cover an emergency expense of $400.
Antico, who has worked in the industry since the 1980s, said he much prefers forgiving debt than trying to collect payments on it. “I never liked it, but it’s what I did well,” he said. “I’m the happiest guy in the world now because I actually hated collections.”
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