The most important rule to staying out of debt

 

Few financial experts, if any, will include the following rule in their recommendations for staying out of debt: Make sure you have and keep health insurance. Not only do I recommend it, but I think it is most important.   

This realization came to mind yesterday as I rode in the ambulance with my younger sister, a victim of a hit and run here in Atlanta. As we headed to the hospital, the EMT asked for my sister’s health insurance information.  She gave it to him while I praised in relief, “Isn’t it a blessing to be able to say that!” The EMT agreed enthusiastically, “Yes!” As he made the final stroke on his digital tablet, he mentioned that recently he canceled his health insurance to save some money. Struck silent by the tremendous irony of an EMT canceling his health insurance, I listened intently.   He continued, saying that he luckily reinstated it two months before he came down with pneumonia.  Yes. He was lucky. My sister was lucky too: Despite the car being totaled, she only received a few minor bruises and was able to go home early in the morning. She slept well, knowing that her bills were covered.

Unfortunately, the great majority of people in my sister’s situation are not as lucky.  Medical bills are the leading cause of bankruptcy and high credit card debt in the United States.  According to a recent CNN article, “60 percent of people who go bankrupt are actually capsized by medical bills”. I must admit that I thought the majority of bankruptcies were caused by shopaholics who enjoy this country’s favorite past time: conspicuous consumption. That all changed when I started my blog a year ago. From day one, I received heartbreaking e-mails from everyday people who fell seriously ill and because of lack of health insurance had maxed out their credit cards. 

Here is a depressing excerpt from “Jessica’s” e-mail sent to me a year ago:

“… I was unemployed for a total of 15 months in Michigan (the largest unemployment rate in the country).  My income dropped from $110,000 to $40,000. I used my savings and my retirement to hold on and eventually had to succumb to the hard facts that I could not keep up. Oh yes, in the middle of all of this, I suffered a major heart attack, racking up major medical expenses… I was forced to file bankruptcy and foreclose on my house. I have been trying desperately to get back on my feet…”

So, while it may not be politically popular to advocate health care for all right now, it certainly is practical in the sense that it will prevent people from getting into so much debt that they have to file bankruptcy. In our current predicament, which brings so much anguish and pain, we all end up paying much more anyway. 

Comments

[Kevin D. Johnson]

Thanks for sharing, Carole. You’ve made Sarge’s point so much clearer. That is quite a lot to have to go through. I am glad things are looking better for you.

[Carole May]

You can rack up huge medical bills even WITH health insurance. I had health insurance through my job, but it only paid 80%.

I was 100% healthy until I went to work one day and the guy in the cubicle next to me came to work with a horrible virus. He was coughing all over everyone in the area and, not surprisingly, I came down with what he had. Only in my case, for whatever reason (even the cardiologists don't know why this happens), the virus attacked my heart. Only my MD didn't check for this. I was being treated for bronchitis for three weeks. Still not feeling well, I went to another MD, who did a blood test and chest xray, and discovered that i did not have bronchitis, I was in congestive heart failure.

I was immediately sent to a cardiologist who got me into the hospital and saved my life. However, the bills were enormous and I had to pay 20% of them, plus the cost of prescriptions, etc. There went my emergency savings very quickly and the rest had to go on credit cards.

Then, after a couple of month's recovery, my cardiologist said I could go to cardiac rehab. Once my company's disability insurance company found that out, they decided that if I could go to cardiac rehab, I could go back to work full time. Yea, like it's the same being hooked up to monitors and walking on a treadmill for 5 minutes with a technician watching you, and working an 8 hour shift. I, of course, fought their decision and with the backing of my cardiologist won my case, but in the interim, I had NO money coming in and had no choice but to use credit cards to pay for food, prescriptions, copays for doctors and tests, etc.

So even with health insurance you can end up very much in debt. I am still paying this off, and with the recent hikes in interest rates, I had no choice but to close my accounts. I also recently phoned my credit card companies, and all but HSBC agreed to lower the interest rate to 6% and put me on fixed monthly payments. Don't ever get an account with them as they are the worst! But thankfully since the others were willing to work with me, I can finally see a light at the end of the tunnel.

[Kevin D. Johnson]

Great point, Sarge.

I think the proportion of bankruptcies filed by those who don't have enough coverage by their insurance companies or were denied coverage for whatever reason would be high. We'd have to break down that figure given by CNN.

You are right. It seems as if my premium goes up every six months, and I am perfectly fine. It's not sustainable.

[Sarge]

I don't have time to find the reference but the majority of those health care related bankruptcies actually have health insurance.

The US health care system is so completely broken that I can't believe the reforms haven't passed already. The US health care system is enormously expensive; so expensive that it will eventually sink your country. For all the money that you sink into it you get worse health care than other countries.

Exactly how long do you think 6% per annum cost increases can continue before nobody can afford anything but healthcare?