Dirty Little Secret – medical bills are the highest they have ever been and debtor buyers are paying pennies on the dollar to purchase the debts, but then sue the borrower for the full amount of the debt.

Article Yahoo!Finance, Adriana Belmone, June 21, 2021

“Medical debt is the no. 1 cause of bankruptcy in the United States, which is something that’s obviously a uniquely American problem,” Allison Sesso, executive director of RIP Medical Debt, said on Yahoo Finance Live. “So we’re out there trying to give people relief from this economic burden. We’ve got donors that are excited across the country to do more of this debt relief. That number — 278 million — we’re very proud of that, but we have a lot more debt relief ahead of us.”

Roughly 21 million Americans holding $46 billion of medical debt as of April 2021 face collections — meaning that a third-party debt collector is trying to obtain the money owed — according to Credit Karma data previously provided to Yahoo Finance.

How the Debt Collection Agency Business Works,

Investopedia, article by Amy Fontinelle, updated August 21, 2021.

Debt collectors often work for debt-collection agencies, though some operate independently. Some are also attorneys. Sometimes these agencies act as middlemen, collecting customers’ delinquent debts—debts that are at least 60 days past due—and remitting them to the original creditor. The creditor pays the collector a percentage, typically between 25% to 50% of the amount collected. Debt collection agencies collect delinquent debts of all types: credit cards, medical, automobile loans, personal loans, business, student loans, and even unpaid utility and cell phone bills.

Collection agencies tend to specialize in the types of debt they collect. For example, an agency might collect only delinquent debts of at least $200 less than two years old. A reputable agency will also limit its work to collecting debts within the statute of limitations, which varies by state. Being within the statute of limitations means that the debt is not too old, and the creditor can still pursue it legally.

Agencies That Buy Debt

When the original creditor determines that it is unlikely to collect, it will cut its losses by selling that debt to a debt buyer. Creditors package numerous accounts together with similar features and sell them as a group. Debt buyers can choose from packages that:

Are relatively new, with no other third-party collection activity
Very old accounts that other collectors have failed to collect on
Accounts that fall somewhere in between

Debt buyers often purchase these packages through a bidding process, paying on average 4 cents for every $1 of debt face value.1 In other words, a debt buyer might pay $40 to purchase a delinquent account that has a balance owed of $1,000. The older the debt, the less it costs since it is less likely to be collectible.

The type of debt also influences the price. For instance, mortgage debt is worth more, while utility debt is worth significantly less.2 Debt buyers keep everything they collect. Because they took the risk of purchasing the debt from the original creditor (and paying in advance to the original creditor), this debt becomes their own, and any amounts collected are theirs.

Debt collectors get paid when they recover delinquent debt. The more they recover, the more they earn. Old debt that is past the statute of limitations or is otherwise deemed uncollectable is bought for pennies on the dollar, potentially making collectors big profits.

What Debt Collectors Do

Debt collectors use letters and phone calls to contact delinquent borrowers and convince them to repay what they owe. When debt collectors can’t reach the debtor with the contact information provided by the original creditor, they look further, using computer software and private investigators. They can also conduct searches for a debtor’s assets, such as bank and brokerage accounts, to determine their ability to repay. Collectors may report delinquent debts to credit bureaus to encourage consumers to pay since delinquent debts can seriously damage a consumer’s credit score.

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MUSINGS BY DIANE:

No one wants medical debts, yet that may be the only way you can save your family member who is suffering with a disease or injury. From my own personal experiences I know the scams that the medical system is suffering on us all. If you need health care and have really good insurance (if that is an option) then you will not be faced with choosing between paying your mortgage or the hospital so they will operate to save your life.

Why do I know the truth? Because I have had several knee surgeries (same knee) over a 4 year period. The bill for the first surgery was about $125,000, my co-pay was about $1,000, and the insurance company was billed about $29,000. That means the hospital/doctors over-charged by $95,000. When I asked a hospital administrator about the extra $95,000, I was told that is the amount they would have billed anyone who did not have good insurance (they were talking about my clients who can barely afford to feed their families). My husband went to the emergency room for fractured ribs. We were there for 8 hours, he had a cat scan. The final bill was $12,689, our co-pay was $231, and our insurance was billed $300.

This is wrong. No one should have to delay necessary medical treatment because they cannot afford it. No, I am not a socialist, but I am a pragmatist. Greed should not be part of our medical system.