Americans Owe $140 Billion in Medical Debt. The People Who Collect It Say It’s Not Their Fault.

Jeffrey Billman
August 25, 2021
Jeffrey Billman


Kevin Jones (not his real name) never aspired to be a medical debt collector, and he didn’t remain one for long.

For about $12 an hour, the father of two spent his days in a windowless Rust Belt office, making hundreds of calls to harangue people about overdue hospital and medical bills. The boiler-room pressure numbed him to their suffering, he says.

“People tell you all the time why they can’t pay, and your quotas and call time make you just think, ‘Yeah, lady, hurry up, I don’t care if this is your second round of chemo, I just want to get to the payment part,’” said Jones, who was in his mid-30s at the time.

Jones—who asked No Patient Left Behind to use a pseudonym and few personal details because he signed a nondisclosure agreement—landed a job in a family-owned firm through a temp agency in late September 2019. In March 2020, the office closed as the pandemic hit and hospitals called off collections. 

He says he found his inside look at America’s medical debt crisis depressing. 

Nearly one in five Americans has medical debt in collections, totaling at least $140 billion, according to a recent study in the Journal of the American Medical Association (JAMA). That doesn’t include the untold—and uncalculated—billions paid by credit cards, put on installment plans, settled by court order or discharged in bankruptcy. Indeed, medical debt accounts for about 60 percent of U.S. bankruptcies.

But debt collectors say media stories profiling unfortunate people overwhelmed by medical debt often make them scapegoats for systemic problems in American healthcare. 

“You know the debt collector really gets a bad rap, right?” said Jan Stieger, director of the Receivables Management Association International (RMAI), a trade group representing companies that purchase and collect debt. “In my mind, the negative press blames a segment that has nothing to do with what’s causing the problem.”

‘They Wanted Suits’

Jones’ boss had a sign in his office that read, “The beatings will continue until morale improves.”

That set the workplace tone, he says. There was constant turnover. His team of eight collectors usually had five. (His longest-tenured coworker was a pastor, which Jones found ironic.) That’s normal: Large collection firms report annual turnover of 75 to 100 percent, according to the Consumer Finance Protection Bureau (CFPB).

During his weeklong training, Jones was told that everyone he called would lie. Some did. A few cussed him out. Most sent his calls to voicemail. But the people he did speak with—many insured but crushed by copays and high deductibles or facing bills from out-of-network providers—were usually willing to work with him, he says.

“People take pride in taking care of themselves and honoring debts,” Jones said. “Even if they can’t pay it all, they’ll pay something.”

“In the training, they are not training empathetic people. They are training people not to care about the story and to go after the money.”

After debts had been in collections for the legally required 180 days, his company reported them to the credit agencies. Then, if the debts were large enough—more than $800, he says—one of the law firms the company partnered with got involved.

Three or four times a day, Jones says, he asked the office’s legal adviser to initiate a legal claim. For medical collections agencies—most work on commission—lawsuits and property liens are close to guaranteed money. Judgments can lead to wage garnishment, while liens secure an eventual payday.

“They wanted suits every time we could,” Jones said. “I mean, they wanted payment. But if you couldn’t get payment, which was often the case, that was the next best thing.”

That, too, is normal in the world of medical debt. 

Between January 2018 and July 2020, the 100 largest hospitals in the United States—two-thirds of which are nonprofit—filed nearly 39,000 lawsuits and other legal actions against their patients, seeking about $72 million in unpaid bills, according to research from Johns Hopkins University.  

Jones says he still thinks about the calls with people so overwhelmed by debt that they told him they were contemplating suicide. He had one almost every month.

The first time, Jones recalls, he asked his boss what to do: Should he refer the man to a suicide prevention hotline?

No, he was told: “Don’t say anything, because then we are liable.”

(What to do if a medical debt collector comes calling.)

Cheap Debt

Jerry Ashton became a debt collector in 1978, a year after Congress passed the Fair Debt Collection Practices Act (FDCPA). Among other things, the law barred debt collectors from then-ubiquitous practices such as calling late at night, lying about how much someone owed, pretending to be from the government, and claiming the debtor would be arrested.

RIP Medical Debt co-founder Jerry Ashton. Photo credit Kevin Sturman.

“It was the Wild West,” said Ashton, 83. “The typical picture of the bill collector with a fifth of scotch in his lower right-hand drawer and a cigar and a bunch of collection cards to chase debtors—they’re smiling and dialing.”

Thirty years later, he left the industry as the head of a collections consulting firm, convinced the healthcare system works exactly as designed: to separate patients from their money.

When Occupy Wall Street emerged in Lower Manhattan’s Zuccotti Park in 2011, Ashton’s office was three subway stops away. He was drawn to a group that wanted to abolish medical debt. That project became the germ for RIP Medical Debt, a nonprofit he helped launch in 2014 to buy and forgive medical debt. 

By the time Ashton stepped down as a director in October 2020, the national charity had abolished more than $4 billion in debt. Within a year, it had eliminated almost $5 billion.

(Resources to help with medical bills before falling into debt.)

RIP Medical Debt works because bad debt is cheap. 

When patients don’t pay bills, some healthcare providers contract with collections agencies to recoup it. If they fail, providers either eat the debt, hire another collections firm or sell the account to a debt buyer, which then tries to collect the debt itself.

Most opt for one of the first two choices. But the older a debt gets, the less recoverable it is, and the less valuable it becomes. Eventually, a state’s statute of limitations expires, usually after three to six years, and the debt’s owner loses the right to sue. 

That can make the prospect of selling the debt for as little as 3 percent of its face value more appealing. 

But industry sources say medical debt is rarely sold. Only a third of hospitals sell their debt, Ashton says. Physicians almost never do. And just a handful of buyers work in that niche, says the RMAI’s Stieger.

Though the pool is relatively shallow, until recently, this was where RIP Medical Debt swam. Debt buyers strike out more often than they hit. RIP Medical Debt bought their uncollected accounts for about a penny on the dollar, so long as they belonged to people with low incomes, in financial distress or whose bills made them insolvent.

But in July 2020, the pool got much bigger. The U.S. Department of Health and Human Services’ Office of Inspector General reversed regulations that prevented RIP Medical Debt from buying debt directly from hospitals.

A year later, RIP Medical Debt purchased $278 million worth of debt from Ballad Health, a hospital system dominant in Tennessee and Virginia. Ballad officials told The Wall Street Journal that RIP Medical Debt forgave the debts—some a decade old—of 82,000 low-income people who probably qualified for Ballad’s financial assistance program but didn’t apply.

Generosity aside, that raised questions. 

As a nonprofit, Ballad is legally required to “notify and inform” visitors about its aid policy, but more than 80,000 patients didn’t know they were eligible for free or sharply discounted care. So for years before RIP Medical Debt intervened, its beneficiaries were likely hounded by debt collectors and burdened by ruined credit. 

To some in the debt-collection industry, that illustrated a larger point: How debts are resolved matters less than the policies that create them.

If hospitals had fewer barriers to financial assistance—such as a requirement to screen patients for aid programs rather than making them fill out applications, as the National Consumer Law Center recommends—fewer low-income people would wind up with bills they can’t afford.    

Likewise, increasing access to affordable health insurance would lead to fewer interactions with debt collectors. According to the JAMA study, the medical debt crisis disproportionately affects those in low-income zip codes, especially in states that haven’t expanded Medicaid.

Nearly one in five Americans has medical debt in collections, totaling at least $140 billion. . .Indeed, medical debt accounts for about 60 percent of U.S. bankruptcies.

‘Go After the Money’

In 2019, nearly 8,000 U.S. debt-collection companies employed more than 115,000 people and generated $11.5 billion in revenue, according to an analysis by the research firm IBISWorld. 

But as household debt skyrockets, IBISWorld researchers predict the industry will shrink by 2.2 percent due to regulations that “curtail collectors’ aggressive tactics.”

Lawmakers have become increasingly sensitive to concerns about medical debt. In December 2020, Congress banned surprise out-of-network billing, a key driver of medical bankruptcies that affects 18 percent and 16 percent of claims for emergency visits and inpatient hospital stays, respectively. It takes effect Jan. 1, 2022.

In May, the U.S. House followed up with a collections reform bill that, among other things, would block debt related to “medically necessary procedures” from appearing on credit reports. (It’s currently before a Senate committee.)

Public sentiment toward debt collectors isn’t hard to gauge. Since 2017, the CFPB has published more than 35,000 complaints accusing them—sometimes in vitriolic language—of a host of offenses, including demanding the wrong amount, not verifying debts, and pursuing the wrong person.

Rebecca Pineda

Some of that anger might be misdirected. Debt collectors work with the information they’re provided, and hospitals are notoriously error-prone, as Rebecca Pineda recently learned.

In 2018, Pineda, now 30, donated a kidney to her mother. The transplant took place in Austin, Tex., where she lives, but she had pre-op bloodwork done at a Dallas hospital. As a donor, Pineda isn’t responsible for costs associated with the procedure. But in May, a debt collector told her she owed the Dallas hospital $2,600.

“We can’t take anything back,” the collector said when Pineda protested. She called the hospital’s billing department, which said it couldn’t help because the bill had gone to collections.

“I just get the runaround anytime I try to call, and they seem to keep passing the buck back and forth between the hospital and the collections agency on who needs to fix it,” she said.

The Dallas hospital did not respond to a request for comment. 

It’s unclear how many debt collectors collect medical debts. (Ashton estimates half.) But the industry’s employees aren’t getting rich. According to the Bureau of Labor Statistics, their median salary is $38,100.  

“[Medical debt collectors] are one illness away from being collected on, the same as most people,” Ashton said. “It’s a hard job. They’re paying their bills, they’re feeding their kids. I’ve got great compassion for that.”

Robin Coleman, 31, says she tried feeding her four kids by working for a medical debt collection company in Beloit, Wisc., two years ago. During her job interview, the company said it wanted empathetic people. But that wasn’t true, she says.

“In the training, they are not training empathetic people,” Coleman said. “They are training people not to care about the story and to go after the money.”

Coleman—who says she was drawn to the job because it paid $14.50 an hour and allowed her to sit all day, which was easier on her fibromyalgia—lasted seven months.

Like Kevin Jones, Coleman remembers the conversations with suicidal debtors. (Unlike Jones, she says her employer sent someone to check on them.) But it was the people who had insurance and still accrued massive debts who stuck with her. A woman who owed $50,000 following her husband’s life-saving surgery. A veteran drowning in debt from cancer treatment at a Veterans Affairs hospital. 

“I remember him telling me how he wished he just wouldn’t have made it back,” Coleman said. “I left the job because I couldn’t bear to hear those stories anymore. Many times, on my break, I would sit outside and cry.” 

Jeffrey Billman is an award-winning investigative journalist based in North Carolina.  

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