Truth be told, the facts and statistics I found related to this are disheartening. It makes me think about the political climate in our country, the ridiculous medical costs, and wonder why we are falling behind other developed countries in this social policy. But, before I go down a political discussion (I do not intend to have) here are some facts I found that I’d like to share with you…
According to a study done by Harvard University, 62% of bankruptcies are due to medical bills, making this the number one reason for personal bankruptcies in America. What makes this interesting is that 78% of those individuals who filed bankruptcies had health insurance…hmmmm.
Here is another one…according to the Kaiser Family Foundation, an estimated 40% of Americans racked up debt from medical issues. 63% of these Americans claim to have used up all or most of their savings to tackle their healthcare expenses. Furthermore, 42% took an extra job to cover their costs.
So, we know this is real and it’s affecting American families every single day. What makes it more concerning is how can you possibly prevent a catastrophe from happening in your own life? Right now you may be healthy, but what about tomorrow? It’s a bit frightening to think about, but this should motivate you to prepare for these hurdles in life.
Here are some tips to create a safety net and to prevent medical bills from screwing up your finances and credit:
The emergency fund is just that, for emergencies! You need at minimum 3 months of living costs in a high yield savings account to be your safety net. If you’ve got a family, a lot of assets and high living costs, you should consider at least 9-12 months of living costs saved up. Here is one of my related articles about emergency funds.
Needless to say, keep a close eye on your medical bills. Unpaid medical bills will be sent to debt collectors and the debt collectors will report it to the credit bureaus, without hesitation. According to a survey by Credit.com, 10% of those who reviewed their credit reports found a collection account they had no idea about it. Don’t be that person!
When it comes to my health benefits, I’m practically clueless because it is so complicated to understand. But it’s important to review this with someone that understands the policies and benefits. You may think you’re covered for something that is really important for you and you come to realize you’re not. Do your due diligence and stay on top of this.
Always ask for itemized bills. Every. Single. Time. You need to know what they are billing to your insurance company and have them go over every line item in detail. If something is wrong, speak up.
If you can’t afford your medical bills be transparent with them right away and let them know you intend to pay in full but you will need to make an arrangement. If you don’t do this, it is possible they will send your debts to a debt collector and then you’ll have more problems to deal with.
If your debt has gotten to a collection agency, don’t be afraid to negotiate with them and to set arrangements. Here is a related article I wrote about dealing with debt collectors. By this point the debt has most likely been reported to the credit bureaus. Check your credit reports with Credit Karma and make sure the information is accurate.
The bottom line is to take steps in your life to prevent financial gaps and financial whirlwinds. While you can’t prevent horrible medical situations, you should adjust your spending habits, establish strong emergency funds, and have a good grasp of your medical benefits, bills, and claims. A sound financial life may prevent a ridiculous medical bill from derailing your life.