The High Costs of Cancer – Study Shows Medical Crisis Drives Debt and Foreclosure

Cancer impacts your health and finances

Image Source: Flickr User Jenny Mealing

A cancer diagnosis is never a good thing, but a new study shows that a serious health crisis affects many aspects of your life well beyond your health. The study, titled Cancer Diagnoses and Household Debt Overhang, was conducted by Columbia Business School, Columbia Law School, and the Fred Hutchinson Cancer Research Center. This research showed the shocking outcomes of cancer on home foreclosure, bankruptcy, and debt accumulation. Here's a look at the findings and how you can combat the hit to your finances if you were diagnosed with a devastating illness.

No surprise, financial stability affects outcomes

The study showed that those with more equity in their homes and more savings in the bank weathered a health crisis far better than those with little savings and lower home equity. In our experience, this is true of any major life event whether it be illness, divorce or a bout of unemployment. Unfortunately, financial stability isn't always income-driven. Even those earning a good living can find themselves living paycheck to paycheck with little equity in their assets and little savings to fight off a crisis.

Health shock drives debt, reduces assets

The research showed that, in the short term, patients diagnosed with cancer had increasing health costs and drained their savings, sold assets, worked longer hours, borrowed from loved ones or turned to external debt sources. And it also found, again not surprisingly, that those with inadequate insurance, high co-pays, and high co-insurance, suffered more debilitating financial outcomes than those with more complete insurance coverage. They classify this as “household financial fragility.”

Cancer can wreck the finances of even those with insurance and savings

The study found that for many cancer patients who were not elderly, out of pocket costs to fight the disease exceeded 20% of their annual income. Imagine losing one-fifth of your income while also battling an illness that can cost you time off work, reduced income or hours beyond your available sick or vacation days. The impact could be staggering. The research considered the five years before and after a cancer diagnosis to weigh the outcome and found disheartening results for many patients.

Foreclosure risks are associated with a cancer diagnosis

Cancer is bad enough in itself, but when it increases the risk of losing your home, it's even more concerning. Among all cancer patients, the study found a 35% increase in foreclosures. Advanced cancers had an even more dire housing outcome with an increase of 89% in foreclosure risk. The risks are worse for those with lower equity and is particularly high among those who are upside down on their home (i.e. negative equity). These risks exist even for those with adequate insurance coverage.

Unemployment exacerbates financial impact of cancer

More than 40% of cancer patients are forced to stop working after their initial cancer treatment. Chemotherapy can make it impossible to work, not only because it weakens the body and causes nausea and other negative physical consequences, but also because it causes cognitive issues that can make it impossible to focus on the tasks of work. For those with short-term or long-term disability insurance, there's a safety net. But for those without, this can be the start of a downward financial spiral.

What are the chances you'll be hit by a crisis like this?

Believe it or not, you've got a 40% chance of a cancer diagnosis at some point in your life and about 20% of Americans die of cancer or cancer-related complications. Not only that, but these numbers are increasing every year. What makes this even more of a challenge financially is that the cost of treating cancer is rising, not falling, despite advances in medicine and technology. Cancer treatment cost is rising faster than the cost of medical care overall, according to this study.

How can you protect yourself financially from a cancer diagnosis?

Most cancers are unexpected so it's difficult to prepare yourself for a “what if.” However, knowing that you've got a two out of five chance of developing cancer of some sort at some point, there are some steps you can take to lessen the impact.

• First, check out the affordability of short and long-term insurance. This can put money out of your pocket if you have to stop working due to an illness.
• Second, try and build up an emergency fund. This can help you in case of an illness or other financial crisis that can crop up out of nowhere.
• Third, look at the true costs of your health insurance. Many people opt for insurance plans that offer low-cost wellness care but that carry higher co-insurance for major medical expenses. Consider flipping this and opting for a plan with higher costs for routine care but richer coverage for catastrophic illnesses.
• Fourth, slash expenses ASAP if you get a cancer diagnosis. Get frugal by ditching cable, stop eating out and look at other expenses that can add up to big debt if you can't work.

Finally, if you've racked up a pile of medical debt due to cancer or another serious illness, know that bankruptcy is always an option if you truly can't afford to pay these debts. Medical bills are classified as an unsecured debt and are 100% dischargable in bankruptcy. It's best to wait until all of your treatments are done and expenses are incurred to get the most complete debt relief. Chapter 7 bankruptcy can wipe out the bills you can't afford to pay while protecting the equity in your home, auto and retirement accounts.

Contact the law offices of John T Orcutt to speak to a North Carolina bankruptcy expert if you're saddled with medical bills you can't pay. Call +1-833-627-0115 for a free consultation at one of our offices in Raleigh, Greensboro, Fayetteville, Garner, Wilson or Durham.