Thursday, October 28, 2010

Shit Happens - Prepare for it.

Medical Bills are the Number One Cause of Bankruptcies and Financial Distress in this Country.  And yet few are prepared for what can be a likely occurrence in their lives.

Shit happens, as they say.  And yet most of us are ill-prepared for it.  In America today, most workers mortgage their futures to the hilt - taking every penny of every paycheck and putting into payments for a house, car, jet ski, cable TV, and credit card payments.  What is left over is spent on take-out pizza, and then even more money than is earned is spent and that added to the credit card debt.

And many folks "survive" this way for days, months, years, and decades, even, until something upsets this carefully balanced apple cart, and it all goes horribly wrong.  You son calls from jail.  Your husband gets a DUI, or most likely, you end up with health problems.

Health problems are the most common cause of bankruptcy, as huge medical bills can swamp even the average household.  And yet, we should all expect health issues in our lives, as our bodies slowly fall apart over time.  Moreover, the stress of living in constant debt, plus the sedentary lifestyle of overeating and over-drinking can lead to these very health problems.

How can you avoid this mess?  And if you are in this mess, how do you get out of it?

Avoiding it is the easier of the two.  Stop spending money you don't have!  Make a plan to get out of debt and stay out of debt.  Sell the Jet Ski, the Camaro, the snowmobile, and any other "toys" that are part of your "lifestyle" - and yea, Cletus, that means your gun collection.   Cut up the credit cards, start a savings plan, contribute to your IRA and 401(k).  Get rid of cable TV and other junk you don't need in your life, that have monthly fees attached to them.

If you can cut your overall monthly cash-flow to a minimum, when the shit hits the fan, you won't need tons of money to make the monthly "nut".  And you can build up real savings, too.

Next, get health insurance.  A surprising number of Americans don't have any, not because they can't afford it, but because they'd rather spend $300 a month on a Jet Ski.  A high-deductible ($10,000) plan like from Blue Cross can be very affordable, provide you with two doctor visits a year (for a $40 copay) and provide you with a prescription plan.  Plus (and this is the big deal) you get the negotiated prices the insurance companies get, for any medical services.  That alone can save you more than 50% on your medical bills.

If you do all that - which is called being a responsible citizen - if bad things happen, chances are you will be able to survive them better.  And if bad things don't happen, well, you can look forward to a happy retirement with a fully-funded 401(k) and money in the bank today to pay cash for that next used car.

But suppose the shit has hit the fan and you are living "paycheck to paycheck" - what now?  Well, I'm sorry to hear it, to be sure.  But there are things you can do.

First, if you have a stack of medical bills and no insurance, call the hospital billing department and talk with them.  As my experience with Blue Cross has shown, medical billing is very elastic.  The difference between the "retail" cost and negotiated price for my colonoscopy, for example, was nearly a 50% discount ($2000 versus $1100).  So hospitals have a lot of "wiggle room" in terms of billing, and moreover, don't want you to default, go into bankruptcy, and end up not paying the debt at all (or paying very little of it).

You may be able to arrange payment terms over time, at no interest, as well.  We had an MRI scan two years ago, at the height of the recession, and I simply didn't have the $1250 laying around at the time.  I called the billing department and they were more than happy to accept $250 a month in payments for five months.  And all I had to do was ask them.

Of course, the next step is to get your own financial house in order.  If you have "toys" in your yard, like boats, cars, and jet skis, it is time to sell them and pay off these debts.  If you have monthly payments like cable TV bills, it is time to pull the plug on that as well.  This could be a wake-up call that you need to change your life for good.

But if the hospital bills are staggering - in the tens of thousands of dollars - or hundreds - and you can't see any way of ever paying them off, then maybe you need to talk to a Bankruptcy Attorney to see what your options are to discharge the debt.