TV station buys $1 million in medical debt forgiveness for viewers
KIRO-TV, the CBS-affiliated Cox-owned TV station in Seattle, spent $12,000 to buy $1 million worth of debt that people in the TV station's coverage area owe to medical providers. Then, the station said it was sending notices to the debtors telling them the medical debt is forgiven.
KIRO reporter Jesse Jones presented a story about medical debt featuring a chronically ill woman who said she had to make a choice between getting cancer treatment she knew she could not afford but would die without.
She said she found herself in the never-ending cycle of running up medical bills she would never pay off. She said she considered not even going to a cancer screening she knew she could not afford but had small children who needed her to live.
The station explained that when providers like hospitals and doctors cannot collect payment on medical bills, they sell the debt to a collection agency for about 1 cent for each dollar owed.
It’s how medical debt is sold that doesn’t help consumers, experts say. Medical debt can be sold multiple times. A $1,000 bill could be sold to a collection agency for as little as $10. However, the amount you owe can grow at 12 percent interest. In six years, the debt almost doubles while the agency still pays $10.
“In some cases, we’ve found that interest starts accruing from the moment you walk into the hospital facility,” lawyer Lili Sotelo said.
Sotelo is a lawyer representing consumers' medical debt cases. Sotelo told us 40 percent of Americans have medical debt, and about half will end up in collections.
KIRO-TV made a decision to do what debt collectors do, spend $12,000 to purchase $1 million worth of debt for 1,000 viewers around the Seattle area. Only the TV station won't be collecting those debts. Beginning this week, those people will open envelopes telling them the TV station helped pay some of their overdue medical bills.
The station does not know the names of the debtors or the medical issues they faced. The TV station contracted with a 501c(3) charity called RIP Medical Debt in New York, which says it "locates, buys and forgives medical debt across America." The charity screens the information that it gets from the doctor's office or hospital it bought the bad debt from to find the neediest patients.
Generally, the charity is looking for debtors who have incomes of twice the national poverty rate or less or people who make more but their medical debt puts them at the twice the poverty rate. The TV station purchased the debts without ever seeing their names. The charity sent letters to those people with KIRO's name on it. The yellow envelopes told the recipients the good news and invited them to contact the station if they wanted to share their story.
In 2015, WCBS New York profiled RIP Medical Debt and explained that the founders were former debt collectors. Then, in 2016, comedian John Oliver worked with RIP Medical Debt to buy then forgive almost $15 million of medical debt. Oliver bought the debt for $60,000.
"That is where I first heard about RIP Medical Debt," Jones told Poynter. "We considered doing what Oliver did, posing as a debt collector and buying up medical debt to prove how the system works, but in Washington State it would cost maybe $7,500 just to get registered; then there is a lot more to it. So we did it this way instead."
Jones says he knows something about medical debt from his own experience. "I am a cancer survivor," he said. "I do well in my job and I have been on payment plans to pay my medical bills. When you have $200,000 in medical bills, even with insurance, you are on the hook for some of that. I started thinking about my story and the stories of the people I see at the cancer center who I talk to every day. I said 'Let's talk about the people who have issues, big issues with the bills that have forced them into bankruptcy, forcing them to make choices about whether to get treatment.'"
The ethical rub
Jones says he is aware of the many layers of ethical issues that this kind of project can involve. For starters, the TV station did not want to pry into viewers' medical history. "Of course people ask me why we can help with this cause but not some other cause," he said. "I have hundreds of emails and social media contacts from people who want to tell us about their needs. How do we choose one over another? And we have to keep asking ourselves 'Why are we doing this? Is it for the people or is it for the TV station, for us?' The moment we start showing promos with people holding their yellow envelops telling them their debt is forgiven, then it could appear we are just doing this for us."
Jones said the station also had to be careful about who it partnered with on the project.
Poynter examined RIP's I-990 tax disclosure to learn how the charity says it operates:
We raise funds to purchase in bulk (large portfolios) unpaid and unpayable medical bills, at a significant discount, from hospitals and physician practices. Our relief is a random act of kindness; not one a person or family can register for or be nominated for. We then forgive each debt as a tax free gift to that individual or family. We send a letter to the recipient giving them the news of our donor's gift and give them information on our charity.
We plan to raise $14.4 million from individuals, foundations, the government and corporations, to locate, qualify, buy and abolish $1 billion in destructive medical debt in the USA, for over 300,000 families. Our system has already abolished over $50 million for tens of thousands and our platform has over $4 billion in medical debt owed by over 3 million families, that we can buy and forgive. We place the purchased and abolished debt in a Debt Cemetery.
As I look at the charity's last I-990, which all charities that collect $25,000 a year or more must file with the IRS, RIP Medical Debt's financial disclosure shows 80 percent of the money it raises goes to "program services." That is is well above the Better Business Bureau's guidelines for charities that at least 65 percent of income goes directly to the services the charity was formed to deliver. In other words, the I-990 indicates the charity operates with low overhead and spends very little on fundraising, two areas that sink some charities.
KIRO-TV says viewers wanted to participate, so the station posted a page on the website allowing viewers to donate money to buy more medical debts that will also be forgiven.
Jones says he underestimated how much response he would get from these stories. "My email is full. We never expected to get this kind of response," he said. Now he says he is working on follow-ups including covering moves in the state legislature to limit how much interest debt collectors may charge on medical debt and restricting when the interest charges begin.
"Our stories showed that some collectors start charging as soon as they take the account, even before they send a letter to the person who owes the money or before they have a chance to challenge the charges," Jones said.
Medical expenses are the No. 1 underlying issue of bankruptcies in the United States. One study said that "bankruptcies resulting from unpaid medical bills will affect nearly 2 million people" per year, which is more than bankruptcies caused by overextended credit cards or overdue mortgages.
A report from the Kaiser Family Foundation said one in four American families (read that number again — one in four) ages 18-64, "say they or someone in their household had problems paying or an inability to pay medical bills in the past 12 months." And just as Jones told me, it is not just the uninsured having problems paying their bills. One in five insured households say they have trouble paying their medical bills.
During ratings sweeps months, lots of TV stations do special projects, sometimes silly stunts to try to score ratings. KIRO-TV has gotten a lot of good publicity and feedback from their project, but it also has tapped into a key national issue that deserves all the attention journalists can give it. And if that attention generates a couple of ratings points, that's fine too.