Toledo wipes out medical debt for 41,000 citizens

November 11, 2022 10:55 AM

After months of discussions and public meetings, Toledo City Council passed a medical relief debt proposal by a vote of 7-5, approving $800,000 to purchase the medical debt of an estimated 41,000 Toledoans. As part of a collboration with the non-profit RIP Medical Debt, the city's plan will create up to $240 million in debt relief for its citizens. Toledo is the first city to approve a community-scale medical debt relief.

The plan was pushed forward by then-Councilman, now-State Representative Elect Michele Grim. Her Twitter has more info on the medical debt relief effort.

RIP Medical Debt, previously featured on the Blue has already wiped out in excess of $6.7 billion in medical debt.

The hope is that the RIP collaboration in Toledo/Lucas County will become a model other communities can follow.

posted by DirtyOldTown (40 comments total)

There isn't a lot to those articles, beyond the bare facts. I'm sure some clever writer will write a few thousand words on this for one of the long form sites at some point. But the news is so cut-and-dried, unambiguously good that I wanted to share it anyway.
posted by DirtyOldTown at 11:05 AM on November 11, 2022 [21 favorites]

Honestly it's a pretty incredible local investment - a million bucks to clear 240 million of debt from your citizens? You'll make it up in tax revenue of the things that people will spend on now that they don't have to worry about the debt - a few times over, I'd imagine. Win/win.

Also it's so fucking crazy that you can buy bundled debt for pennies on the dollar but you can't pay it off the same way.
posted by entropone at 11:16 AM on November 11, 2022 [51 favorites]

Their original investment proposal was $1.4 million to clear the debts of 25,000 Toledoans. The fact that the cost was able to go down while the number of people receiving assistance went up suggests maybe there was a lot of bad medical debt in the area that was ripe for the picking. That and/or the relative muscle of a city getting involved facilitated a better deal.
posted by DirtyOldTown at 11:18 AM on November 11, 2022 [12 favorites]

There is now a plan in Illinois to partner with RIP to spend $12 million to cancel $1 billion in medical debt.
posted by DirtyOldTown at 11:20 AM on November 11, 2022 [30 favorites]

Good job, Toledo! The 5 against votes should be exiled to Denton.
posted by Abehammerb Lincoln at 11:29 AM on November 11, 2022 [10 favorites]

Holy Toledo!
posted by uncleozzy at 11:32 AM on November 11, 2022 [5 favorites]

Another fine example of how voting matters. This easily would not have happened under different leadership.
posted by beaning at 11:50 AM on November 11, 2022 [11 favorites]

How does debt relief like this work politically? Did they buy out $160-240M in debut for $0.8M? Is that a one-time discount? Did they just give $0.8M to sleazy debt collectors? Is that good? What happens next year?

It's undoubtedly a good thing in this moment. I'm trying to understand if this kind of debt relief program is a long term solution to a problem.
posted by Nelson at 11:59 AM on November 11, 2022 [3 favorites]

Rock over London, Rock on Toledo!
posted by riverlife at 11:59 AM on November 11, 2022 [5 favorites]

I'm sure my city council will be interested to hear about this as an option. Yours probably would too!
posted by zeptoweasel at 12:02 PM on November 11, 2022 [3 favorites]

Did they just give $0.8M to sleazy debt collectors?

The sleazy debt collectors probably paid $0.5M for the debt in the first place, hoping to squeeze a little profit out of it while making people's lives hell until the "borrower" gives up and file bankruptcy.

"Borrower" is in quotes because it's not like you can subjectively agree to pay millions for cancer treatment because the alternative is, well, not being around to borrow money anymore. That's my "socialism" argument - if you can't reasonably decline to be part of a financial transaction, then capitalism doesn't work in that case.

However, there's probably a dark lining to this cloud, in that the IRS probably considers this 'free stuff' taxable income in some way. On further review the charity appears to have figured out how to make this work without tax ramifications.
posted by AzraelBrown at 12:22 PM on November 11, 2022 [25 favorites]

How does debt relief like this work politically? Did they buy out $160-240M in debut for $0.8M? Is that a one-time discount? Did they just give $0.8M to sleazy debt collectors? Is that good? What happens next year?

From the previously:

RIP buys the debts just like any other collection company would — except instead of trying to profit, they send out notices to consumers saying that their debt has been cleared. To date, RIP has purchased $6.7 billion in unpaid debt and relieved 3.6 million people of debt. The group says retiring $100 in debt costs an average of $1.

And from this article (this one about RIP's collaboration with John Oliver):

RIP is a Section 501(c)(3) charity whose purpose is to provide charitable aid by purchasing and forgiving the medical debt of poor people. RIP forgave the debt as a gift to the debtor out of “detached and disinterested generosity.” And that is why the debtors were not taxable. (emphasis added)

posted by DirtyOldTown at 12:29 PM on November 11, 2022 [19 favorites]

(Missing link from above comment)
posted by DirtyOldTown at 12:38 PM on November 11, 2022 [3 favorites]

So let me know if I'm thinking this through correctly... People living in Toledo had a quarter billion dollars in outstanding debt originally owed to hospitals and other healthcare organizations. The debt can be purchased from those organizations for roughly $1.6 million total, according to the article. And... there are still hospitals and healthcare organizations in Toledo, right? Still running?

Okay. So then those hospitals, etc. could have originally charged, say, $2 million for all of those services and stayed in business? Been even a little better off than the current situation? Okay, maybe some of the patients couldn't even afford their slice of that much-reduced amount, but then maybe we could just... have other folks chip in.

Sure, this must be a gross oversimplification. But I'm pretty sure this is evidence that supports the general idea: we could sustainably pay a certain amount for healthcare collectively up front — instead of having our existing system charge ridiculous, massively larger amounts and employ huge bureaucracies and predatory businesses in an attempt to bleed their patients dry... to receive the same compensation in the end.

On top of the massive issues of justice, the current system is just offensively inefficient. This is so ridiculous.

Preaching to the choir, I know. I'm grumpy.
posted by whatnotever at 12:51 PM on November 11, 2022 [63 favorites]

Totally agree. I think a huge aim of groups like RIP is likely to demonstrate that the amounts charged to be for medical bills are fundamentally artificial.
posted by DirtyOldTown at 12:53 PM on November 11, 2022 [13 favorites]

... holy shit. This is absolutely amazing. I gotta call my councilman.
posted by Etrigan at 12:56 PM on November 11, 2022 [6 favorites]

Not directly rated to this but Arizona voters just *overwhelmingly* voted to impose major curbs on medical debt and collection practices. The appetite for socializing health care is there.
posted by azpenguin at 12:57 PM on November 11, 2022 [25 favorites]

I really have to raise how strange most of this discussion sounds to non-Americans.

I am happy for everyone involved but this has the same energy as a news story about a school holding bake sales to buy body armor.
posted by ZaphodB at 1:18 PM on November 11, 2022 [21 favorites]

I think a huge aim of groups like RIP is likely to demonstrate that the amounts charged to be for medical bills are fundamentally artificial.

While absolutely true (and, honestly, I think everyone know that anyway) this is pretty much how debt is sold throughout the economy. If the debt owner has determined they stand little chance of recouping the debt in full, they can sell it off to third-party debt servicers for pennies on the dollar, making some money back and, likely, writing the balance off and taking it as a loss for tax purposes.

That new servicer can, in turn, sell the debt to yet another servicer for even fewer pennies on the dollar. Lather, rinse, repeat. Note that, at no time, is the debtor ever off the hook for payment. They just get harassed by new voices on the phone.

RIP does a huge “fuck that noise” and buys and retires the debt. Period.
posted by Thorzdad at 1:45 PM on November 11, 2022 [10 favorites]

So then those hospitals, etc. could have originally charged, say, $2 million for all of those services and stayed in business?

There's not just a quarter billion of medical debt in total -- there's probably billions of medical debt, which does get paid off by insurance premiums and long-term out-of-pocket monthly payment plans, making the quarter billion of loss less significant to the medical providers. The medical providers have already written that loss off by the time it ends up bundled up together for collection vultures to buy up.

What's happening here is when the hospital finally gives up on this debt, it doesn't become an albatross around the debtor's neck: if it goes away for the hospital, it goes away for the person too.

The bigger problem is that of the billions that did get paid off, can that be made smaller so the rest of us can save money on insurance premiums and monthly payment plans and so forth, so it's not just the worstest-off of us that benefit. I'm not saying they shouldn't have their debts written off -- I'm saying that there's probably a lot more that can be written off well before it becomes the worstest debts.
posted by AzraelBrown at 1:55 PM on November 11, 2022 [2 favorites]

Not directly rated to this but Arizona voters just *overwhelmingly* voted to impose major curbs on medical debt and collection practices.

Too many of those voters will vote against it because they're retired conservatives who already have Social Security and Medicare.
posted by snuffleupagus at 1:58 PM on November 11, 2022 [3 favorites]

(against universal healthcare, that is)
posted by snuffleupagus at 2:05 PM on November 11, 2022 [1 favorite]

Good for Toledo!

The midwest is well represented here.
posted by doctornemo at 2:26 PM on November 11, 2022 [1 favorite]

Holy Toledo!
posted by The Ardship of Cambry at 2:53 PM on November 11, 2022 [1 favorite]

I've always liked the sign. Seems like the truth...
posted by Chef Flamboyardee at 2:59 PM on November 11, 2022

this has the same energy as a news story about a school holding bake sales to buy body armor.

Before Michigan was "American", there was a war.

"This, the largest sum of medical debt forgiveness EVER, was facilitated through the nonprofit charity RIP Medical Debt."
posted by clavdivs at 3:45 PM on November 11, 2022 [3 favorites]

Did they just give $0.8M to sleazy debt collectors?

I mean you're right, we should probably just shoot the sleazy debt collectors, but this is easier
posted by Ray Walston, Luck Dragon at 3:51 PM on November 11, 2022 [5 favorites]

Reminds me of the Rolling Jubilee that had formed out of Occupy Wall Street.

Also, yay Toledo! Love being in the news for something not stupid for once.
posted by charred husk at 6:43 PM on November 11, 2022 [3 favorites]

Note that, at no time, is the debtor ever off the hook for payment. They just get harassed by new voices on the phone.

They're eventually off the hook, but exactly how long it takes before the clock runs out depends on the state. At any time before that the owner of the debt can sue, turning it into a judgement that doesn't go away. Also the clock gets reset if the debtor makes a payment or acknowledges the debt is real, even if it was once expired.

There are other pitfalls, too, but generally speaking in the US debt isn't forever, unless it's a student loan. Problem is that with the widespread use of credit checks for just about everything you do these days, you still get fucked for a good long while even if the debt expires/is forgiven. Medical debt is a special case in that once it's paid or forgiven you can get it off your credit report entirely if you're aware that it's a thing you can do.

Speaking of which, it's about time for me to send some no contact letters to some debt collectors now that all my unpaid credit card debt has become uncollectible so I can safely kick the hornet's nest. The calls automatically go to voicemail (thanks, Google!), but I'm getting tired of deleting their damned messages.
posted by wierdo at 7:39 PM on November 11, 2022 [1 favorite]

At any time before that the owner of the debt can sue, turning it into a judgement that doesn't go away.

In which case the debt is forever if the creditor is diligent in renewing their judgment—often obtained by default in a friendly jurisdiction under a contract of adhesion specifying that forum and choice of law — and they can tack on interest and costs of collection and all kinds of shit.

Not an area I focus on, but I helped an ex deal with a bad car loan that had been haunting her for years and it's pretty egregious what judgment creditors can do even in a relatively protective state. She probably paid for that car at least twice over by the end.
posted by snuffleupagus at 7:54 PM on November 11, 2022 [2 favorites]

I really have to raise how strange most of this discussion sounds to non-Americans.

I also find it strange how voters in Ontario re-elected a Conservative government that's been pushing away from public health care to more in the direction of a for-profit health system.
posted by ovvl at 8:26 PM on November 11, 2022 [2 favorites]

I had medical debt that I was slowly paying off, like $25 a month for a four figure debt. And then one day I received a refund check for my last payment and when I logged into my account, the rest of my debt was gone. I have no idea what happened, but if I ever win the lottery, I’m absolutely going to buy up random debt and forgive it.
posted by Ruki at 8:57 PM on November 11, 2022 [12 favorites]

Or pay it forward - you're saving $25 a month - donate $10 of that to RIP Medical Dept and retire $12,000 worth of other people's debt a year
posted by mbo at 10:19 PM on November 11, 2022 [7 favorites]

On top of the massive issues of justice, the current system is just offensively inefficient. This is so ridiculous.

This: it's what happens when you commercialise a social need; opportunities for efficiency that don't benefit the middle-men are actively discouraged.

A public-health, single-payer system with uniform itemised procedure codes would do away with the entire medical billing industry and the profligate costs they cause.
posted by Thella at 10:38 PM on November 11, 2022 [3 favorites]

we could sustainably pay a certain amount for healthcare collectively up front

This already exists. It's called capitation: flat upfront annual fee which covers a set panel of services. Unlike the more common fee-for-service model, capitation encourages less expensive care, with a focus on primary/preventative care. Kaiser works this way, for instance. So does traditional Medicare (not devil's spawn Medicare Advantage, which is duping seniors into paying commercial insurers even more). So does concierge care, but that's a different beast.

Downside: potentially less access to subspecialty or rare disease care (not sustainable under a capitated model). Also because the incentive is to do less, not more, practices will sometimes drop patients who are deemed too chronically ill or time-consuming, in favor of the quicker and lower acuity.

Although tbh that happens often enough in fee-for-service too that I'm not convinced that it's really any different.
posted by basalganglia at 10:50 PM on November 11, 2022 [3 favorites]

Also it's so fucking crazy that you can buy bundled debt for pennies on the dollar but you can't pay it off the same way.

"you must offer debtors the same deals on their debt that you offer debt-buyers" would be a wonderful law that would cause a lot of good will to the politicians who passed it.
posted by bracems at 8:07 AM on November 12, 2022 [8 favorites]

This Supreme Court would probably kill any state legislation like that under the Contracts Clause but it would be worth doing just to shine a spotlight on it.
posted by snuffleupagus at 8:32 AM on November 12, 2022

capitation encourages less expensive care, with a focus on primary/preventative care. Kaiser works this way, for instance

We are now on Kaiser insurance because it's the only option offered by my employer. Kaiser says my husband, who had open heart surgery last year, doesn't need to see a cardiologist. They also say he doesn't need aimovig so he's had a splitting headache for 6 weeks straight.

"encourages less expensive care" actually means "fuck you, we want you to suffer and if you're expensive hopefully just die"
posted by Jacqueline at 9:22 AM on November 12, 2022 [3 favorites]

This is wonderful news. Thank you for sharing, DirtyOldTown!
posted by rrrrrrrrrt at 7:23 PM on November 12, 2022

I am happy for everyone involved but this has the same energy as a news story about a school holding bake sales to buy body armor.
After reading the article, I was going to say something similar, but this makes the point much more eloquently. It's an absolutely 100% positive story if the beginning of the story made any sense whatsoever.
posted by dg at 2:54 PM on November 13, 2022