This interview with Craig Antico, founder of RIP Medical Debt, an organization that has abolished over $1 billion in medical debt, was conducted and condensed by franknews. 

Craig | I've been in the debt collection business for over 30 years. I started in a family business. In the early 2000s, I built a company with Jerry Ashton. We eventually parted ways, but then in 2012 he called me and told me about a nonprofit that had an idea about buying medical debt and abolishing it. We both thought it was the dumbest thing that we had ever heard. Like if we are collecting medical debt, why would you ever forgive it now? After two years of working with the nonprofit, we decided to do that sort of work full time, so we started RIP Medical Debt in 2014. 

frank | What was your mindset when you were collecting on medical debt? 

We never realized the harm that the debt itself was doing or the harm that the act of collecting it was doing. 

We thought that because we were a little bit different than the rest of the collectors -- because we had compassion, because we cared, because we wouldn't collect on debt we didn’t believe was right -- there was nothing wrong with the practice. 

When we started to abolish debt, we realized that it really didn't matter how ethical our approach was if half of the people could not afford to pay the debt without significant hardship. 

We hadn't been thinking about their hardship, we were thinking about how they were going to pay.

So if I understand correctly, you still operate as a debt buyer. You just discharge the debt instead of collecting it.

Correct. We are a debt buyer -- but a nonprofit debt buyer. We specifically buy the debt that is considered charitable and pay it off. A person qualifies as a charitable class of person, generally, if they are living at two times the poverty level or below. We also take into consideration what we call “hardship.” If the debt of a person equals five percent or more of their income, that qualifies as “hardship.” 

What does the debt buying industry look like? Who are the profiteers? 

There are hundreds of for-profit debt buyers. They are investors who buy the debt with the expectation of being able to collect two to three times the amount that they paid. And these debt collectors are backed by specialty finance companies. 

To buy debt, you go to a creditor who is owed money from consumers, a hospital, or a credit card agency, for example, and bid on a portfolio. As the debt buyer, you value the portfolio and forecast what you might be able to collect. 

You do that by asking how hard it is going to be to collect this debt. How hard is it going to be to contact these people? Did they have insurance? You look at their addresses. You look at their bankruptcies. You look at how old these bills are. From there, you get a number. For example, out of this million-dollar portfolio of some number of people, we think we're going to collect $15 million. Then you offer the hospital $5 million. 

We operate in the same way because we have to go against other for-profit debt buyers in bidding for the debt. 

How are investors able to make more money on the debt than what they pay the hospital for it?

In general, the creditor, the hospital, is selling the debts because it has come up short in collecting and doesn't have the bandwidth to collect. So it's willing to sell for a fraction of the debt's face value and then the new owner, the collection agency, will pursue the full amount to make a profit. 

Debt collectors can make high returns on buying medical debt due to their accuracy to forecast collections, and being disciplined in not paying more than the portfolio is worth. They have experience using data to segment accounts to better choose the accounts and individuals to collect from -- those with the ability and willingness to pay.

The debt buyers that collect more than 2.5 to 3 times what they paid will make over 20% or more on their investment.

Do you view debt collection as a necessity or are there other solutions? 

I think that too many poor people are placed for collection. I think too many people experiencing hardship are placed for collection. There are things that can be done to stop that from happening, but it would take a seismic shift in the willingness of a hospital to build out their own department to handle that. 

Getting these people coverage upfront is really the solution. There's research to show that about a third of all the accounts that are sold to debt collectors qualified for a hospital's charity care policy. So if these people had applied, they would have gotten charity care and they would not have this debt. I have always believed that this policy should be an opt-out policy. People should be placed in charity care automatically, instead of having to fill out an application to opt-in. 

Why is it not the other way around?

It's a good question. I don't know why. 

I know in some places, the state does not allow them to do what they call presumptive charity care. Presumptive means you didn't have someone apply to it, but you have data that can determine if someone fits a hospital's charity care policy. 

At RIP Medical Debt we act as a second safety net. We give hospitals the ability to give us the cases that qualify for charity care so that we can donate them. 

So it really comes down to the hospitals, both public and private? 

Yes, it does come down to the hospitals. Some of the private hospitals have some of the best charity care policies, but, again, they don't do presumptive charity care. 

One telltale sign that the system is out of whack is charity care as a percentage of costs of hospitals is about 1.6% when we know that over 33% of the people qualify for charity care. We can see that they're missing people. If they were right on target, 10% of their expenses would go towards charity care. 

What sort of changes do you press for as an organization? 

As a charitable organization, we don’t advocate for a specific policy. I do think that the opt-in versus opt-out question might be one of the biggest problems. 

I've never met anybody with Medicaid that had a medical debt problem. 

There are 12 states that have not adopted Medicaid to cover people who make 138% of the federal poverty level. That's something that should be made uniform across the country. For example, at one and a half times the poverty level, everybody gets Medicaid. Then we would be taking a swath of the poorest people and children and making sure that they're always covered. Medicaid is the best insurance out there, and it comes at no cost to the people.