Medical bankruptcy is more common than you may think. In the US, medical expenses are the leading cause of personal bankruptcy. And at a time when the average American can’t afford a $500 emergency, $14,000 in out-of-pocket—a common annual maximum for medical expenses on many insurance plans—can be an unthinkable setback for many people. To make matters worse, bills for treatments, surgeries, and hospital stays are only the beginning. Lost income, rehabilitation, medications, and copays add up quickly, and can rapidly run to the tens or even hundreds of thousands of dollars.
People use YouCaring’s crowdfunding platform to raise money for a wide variety of things, but medical expenses are currently our largest category—clear testament to the frequency of the problem. And along with serving as your go-to medical crowdfunding platform, we want to answer your questions about medical bankruptcy and offer a helping hand.
Medical bankruptcy and debt: Symptoms of a broken system
According to the World Health Organization, the US healthcare system ranks 38th in the world, behind Colombia (#22) and Saudi Arabia (#26). Medical errors are the third leading cause of death in the US, behind heart disease and cancer.
While opinions over solutions vary, there’s no denying that, collectively, our medical expenses create a drag on the economy and degrade the overall quality of life in America—in forms from infant mortality to life expectancy.
When it comes to reducing the number of Americans who can’t access care, the Affordable Care Act (ACA) has stopped some of the bleeding. But there are still 27 million Americans without the insurance they need to access care in our system.
Understanding the ACA
Under the ACA, Americans must now buy private insurance policies or pay a fine—unless the cheapest policy available to us exceeds 8 percent of our income. Insurance companies price policies accordingly. A family making $100,000 per year is likely to pay about $8,000 (8 percent of their income) in premiums for a bare-bones policy—a policy under which healthcare use is discouraged through significant out-of-pocket costs.
In exchange for their insurance premiums, the family’s financial liability for copays, tests, and other out-of-pocket medical expenses in any given year is capped. A bare-bones policy might cap these at around $14,000 annually. This means that if someone in this family needs medical care, say, for a broken bone, they could easily be out the $8,000 in premiums plus $14,000 in out-of-pocket costs, for a total of $22,000. That total doesn’t include lost income. And if medical needs should extend over two calendar years or longer (or if the patient needs ongoing care), more out-of-pocket expenses will be added to that total.
Even if a family never uses the healthcare system, they would still pay at least $80,000 in premiums over a 10-year period—if their premiums remained the same for 10 years, which is an impossibility. In 2015, the Kaiser Foundation released a study showing that employees paid 83 percent more in premiums than they had a decade earlier. According to Marketplace, premiums are set to go up 50% in 2018 alone.
By allowing all Americans to buy insurance policies that cap annual expenses, the ACA has reduced the total number of personal bankruptcy filings in the US, which fell by 50% between 2010 and 2016. That’s a significant improvement, and an indicator of a slightly less dysfunctional health care system, but not necessarily a functional one—in countries where healthcare is viewed as a human right rather than as a consumer good, medical bankruptcy is unheard of.
The prospect of medical bankruptcy changes your life
The prospect of bankruptcy often emerges with a life-threatening diagnosis or unexpected accident that lands you or a loved one in the hospital. As the costs build, you may start to feel helpless. Trying to make ends meet can seem insurmountable since medical bills take over your budget.
The Kaiser Foundation released a report showing how people facing medical bankruptcy try to make ends meet. Coping mechanisms include cutting spending on food, clothing, and education; working more hours or getting a second job; drawing down on long-term savings accounts; borrowing money from friends or family; increasing credit card debt; and taking out a second mortgage.
According to a report from Urban Institute, approximately three out of four nonelderly adults with medical debt forego any further preventative or necessary healthcare.
The no-nonsense truth about medical bankruptcy
At this moment, an American is using up all her savings to pay medical bills. She may be unable to pay for basic necessities like rent, food, and heat. She may have children who have to be pulled out of any program that costs money.
On top of all this, she has to fight cancer or a major injury. To save money, she may cut corners with treatment, or take less of an expensive medication than prescribed. And if she recovers, she will likely return to work before she’s ready.
Despite her heroic efforts, in the end, she may have no other choice than to file for bankruptcy.
Tips to avoid medical bankruptcy
1. Don’t ignore the bills
You may be overwhelmed by incoming medical bills, but don’t toss them in a drawer. It’s important to notify hospitals, health providers, and insurers ASAP if you think a payment will be late, or if you want to request a payment plan. Paying a portion of your bill, even a small amount, is still better than making no payment at all—it keeps you on better terms with the recipient. If you don’t have the funds available to make a payment on time, ask about financial assistance programs that may be available to you.
2. Scrutinize the bills
Always ask for an itemized statement so you can look for billing errors. These are extremely common and could end up costing you many thousands if you don’t pay attention to every detail. Pricing for medical services isn’t like pricing at a store; it can vary greatly depending on who’s buying—that’s why it’s so easy for major mistakes to creep in. If you have questions about your bills, don’t be afraid to contact your medical provider and ask for clarification. Make sure that all payments from both you and your insurance company have been applied to your bill.
3. Negotiate a lower rate
This may seem like a daunting task, but it’s certainly worth trying. Call the billing office and ask if they’d accept a lower rate for your care. They may not return your calls right away, and you may hear “no” a few times. Be persistent. If your negotiation is successful, stick to the plan you agree to so they can’t renege on it and stick you with the full amount again. You can often get lower rates for paying cash or paying in a way they favor, or any number of other reasons, including them charging you their lowest possible rate.
4. Don’t use credit cards
Avoid using credit cards to pay for your medical expenses, as it only adds insult (compound interest) to injury. If you’re admitted to a hospital emergency room and your only form of payment is a credit card, don’t use it. The hospital cannot deny you medical treatment—it’s illegal to do so. You can later work out an alternative form of payment with the hospital or your healthcare provider, rather than maxing out your credit cards and spiral further into debt.
5. Crowdfund to pay your medical bills
Crowdfunding is a proven way to raise funds quickly from family, friends, and even strangers who want to show their support. Creating a medical fundraiser gives you an outlet to tell your story to the world, easily share your campaign via social media, raise the funds that can ease your stress, and ultimately help keep you from falling into medical debt or bankruptcy.
If you’re wondering whether YouCaring profits from medical (or any other kind of) crowdfunding, we don’t. As with any fundraiser on our site, we never take a penny of the funds you raise. Read more about our free fundraising model.
How crowdfunding can be a lifesaver
Human nature has always been collaborative, and evolution favors humans who show kindness and help each other. Crowdfunding has made it easy to express kindness collaboratively.
Through our Compassionate Crowdfunding™ platform at YouCaring, we’ve seen millions raised to pay medical expenses and pay off medical debts. Beyond raising money, we also see spirits raised every day. Our community is eight million strong and growing. Your fundraiser will provide a welcome place for friends and family to share words of encouragement and to come together to support you as you face this challenge.
Crowdfunding your medical expenses
With so many Americans facing insurmountable medical bills whether we have an insurance policy or not, crowdfunding for medical expenses has become a popular and highly successful way to avoid financial disaster. If you or a loved one is in need of help to alleviate the financial burden caused by medical bills, create a free fundraiser now and start raising money today. You can begin withdrawing funds as soon as you start receiving donations.
For more resources on dealing with medical debt, see: