A Long Island City company purchased $30 billion worth of medical debt, a sizable chunk of the national total, in order to erase it.
Undue Medical Debt, a nonprofit dedicated to buying and forgiving medical debt, spent just $36 million to acquire the debt, according to spokesman Daniel Lempert. The company announced the deal with Pendrick Capital Partners, a third-party debt buyer, on Friday to purchase the sum of its medical debt portfolio for low-income residents, mostly Texas, Florida, California, Georgia and Oklahoma.
The nonprofit buys aging and difficult-to-collect debt from unpaid medical bills usually at pennies on the dollar – debt that collectors have struggled to recoup from customers and are often happy to unload. The group has contracts with the city, the state of New Jersey and other jurisdictions to forgive debt. Outside of government contracts, Undue is bankrolled in large part by billionaire philanthropist Mackenzie Scott, the ex-wife of Amazon founder Jeff Bezos.
The latest acquisition is Undue’s biggest to date. It will impact an estimated 20 million individuals living at or below 400% of the federal poverty level or who hold debt more than 5% of their annual income, would wipe out close to 14% of the $220 billion in medical debt nationally, the company said. That assessment is based on an estimate of federal census data from the health care think tank KFF.
The company used the size of the purchase to negotiate a price that was below $1 for every $100 of medical debt forgiven. About half – $15 billion – of the total buy were for debts over seven years old that were donated by Pendrick, said Undue spokesman Daniel Lempert.
In total, it will take 1.5 to 2 years and $76 million to close out the debt, he said. That includes the upfront cost of the purchase plus another $40 million to match the accounts with patients, buying data to find current addresses and mailing a letter informing them that their Pendrick debt has been forgiven. The process will cost roughly $2 per person, Lempert said.
