Paying off debt that is largely uncollectable shouldn't be expected to help much.

That does make sense in that the sale value of a debt is logically going to be pretty close to the NPV of the debt itself, and if your debt has very low NPV then getting rid of it won't make much difference to your future cash flow.

I was still surprised by the result because I thought it might have some impact on credit score but maybe it doesn't?

If you're seeing like a state and you see medical bankruptcy because it's an easy-to-measure entity, then uncollectable debt among people who haven't filed for bankruptcy yet is a win.

Yeah, the ultimate solution is to just have single payer healthcare. We need more expensive and not clever solutions to problems in general.

2.2: Our credit agencies are weird enough I wonder if they have some flag for when someone else pays off the debt so they can say "it's not really their own virtue that let them pay it off."

Or just, they tend to have enough other non-medical debts on average not paid off.

5 makes sense.

And, yes, 4 too.

2: The paper says it did have an effect on credit scores, just a small one (3 point improvement to FICO, I think?). It's good (if disappointing!) work -- RIP Medical Debt's current strategy has moved to targeting debt clusters in geographic areas, which may or may not work better to have more measurable large-scale outcomes. But yeah, this kind of makes sense in the negative; the very cheap debt RIP Medical Debt targets means that hospitals etc. are unlikely to recover the debt, which means that the people thus indebted are likely in broader financial distress. (And as the article says, there are already moves to ring-fence medical debt from broader credit score effects.)

I worry that any gains made by this method will be offset by an inadvertent increase in the price of nearly non-collectable medical debt.

If the government said "We're going to retire all the medical debt" - or half or whatever - the price would definitely rise, at all risk levels.

RIP Medical Debt's current strategy has moved to targeting debt clusters in geographic areas, which may or may not work better to have more measurable large-scale outcomes

What is the theory of change there? That you get a detectible Keynesian impact?

9: I don't want to make investing in poor debtors a good business model.

In MA medical debt is not reported to the credit agencies. I thought that a decision was made not to include it in credit scores?

According to Experian, it is typically collected without recourse to collection agencies - at least the normal ones where it affects your credit score - but if it gets sold to a collection agency, then after a special 365-day waiting period (because it can take so long to be finalized), at that point it can impact your credit score. (I've heard some things at my workplace about a "pre-collections" contractor which may be a dodge around that.)

So essentially the whole effort to buy and retire medical debt seems to have been, unintentionally, a fundraising effort aimed at raising millions of dollars to give to the sort of hideous people who invest in the medical debt of very poor people.

Well, it's nice to feel you've given something back to the community.

14: maybe the do-gooders negotiated the baddies down to their breaking point?

I don't suspect 14 is actually happening to now. I just worry that scaling up might produce that kind of situation.

There's also a question of: do we want people who are very bad at repaying debts to have good credit scores? We definitely don't want people to have unfairly bad credit scores, if you like, but it might not be great to, effectively, encourage people without much money to run up very large debts.

I think the original idea just wasn't well thought through. The whole concept hinges on getting a big multiplier from donations > writeoffs by buying cheap, and the only way an inventory of debt gets to the point where it's trading at a tenth to a hundredth of its face value is if the borrowers haven't made a payment in years and/or it's become legally uncollectable.

17 In the US, the general understanding is that medical debt is mostly "run up" involuntarily. And, one hopes, not likely to recur.

Well, I think that's what it is, and I'm probably not too far out of the conventional point of view on this.

Right and there's enough truth to 19 that the major credit reporting agencies have started treating medical debt differently from other debt.

In addition to it being usually run up for unpredictable reasons, medical billing is such a shit show that it's pretty common for medical debt to be sent to collections even when you are willing and able to pay just because the bills got screwed up somehow. It's happened to us twice. (Once due to a mixup where a doctor left the insurance network and once mostly due to my incompetence in not noticing an ebill somewhere.)

The problem here is that the cheapest debt is probably people who had terrible credit scores prior to any medical debt.

21 Right, One never pays the first bill, because they often get adjusted.

In the 90s, my then firm had health insurance that later got in trouble for denying nearly every claim, and only paying on claims where the insured appealed the denial. Highly profitable as this business model was, the regulators weren't fans. So they all sail as close as they think they can get away with to the wind on this.

In the late 90s, I had some cases where I was defending subprime lenders -- people were taking out second mortgages to pay off their credit card debt, much of which was from buying prescription drugs, and maybe also get a little cash out of the appreciation of their homes. (The second mortgage laws have limits on fees, which boiler-room guys didn't pay much attention to, and the consequence of a violation was voiding the interest. Get enough of these together, and you've got some real money.)

17: Involuntarily run up, yes. Unlikely to recur, definitely not. Medical debt in the past is a signal that the person had a major health problem and insufficient insurance. The best predictor of future major health problems is the existence of past major health problems, even if the patient theoretically recovered. The best predictor of future insufficient insurance is past insufficient insurance, mitigated but not eliminated by various goernment programs.