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Are You One Serious Illness Away from Bankruptcy?

If you’re someone without health insurance, you could face paying $220 for a doctor’s office visit, $450 for routine blood work, $70 for a prescription drug, and $2,450 for an overnight stay in the intensive care unit at your local hospital.

Looking at these costs, it’s no wonder why having medical expenses is among the top reasons people end up in bankruptcy.

In fact, researchers of a Harvard study found that medicalproblems caused 62% of all 2007 personal bankruptcies filed in the United States. Another study cited that half of the average consumers filing for bankruptcy between 1990 and 2009 had experienced a serious health problem. While figures may be a bit dated, the problem is clear: soaring healthcare expenses are causing financial hardships that many Americans are ill-prepared to endure.

"For middle-class Americans, health insurance offers little protection,” said Dr. David Himmelstein, lead author of the Harvard study. “Most of us have policies with so many loopholes, co-payments, and deductibles that illness can put you in the poorhouse. Unless you're Warren Buffett, your family is just one serious illness away from bankruptcy."

And it’s not just the direct medical costs that can lead to bankruptcy. There are also other related issues to contend with, such as the loss of job income due to missed work or the possibility of having to resign from working altogether, depending on the situation; this leaves consumers without any income to stave off mounting medical expenses.

Maintaining Good Health, Managing Your Costs

So, what can you do to prevent this from happening to you? Listed below are some simple steps to help position you (and your family) properly so that you can avoid bankruptcy.

  • Familiarize yourself with the new healthcare reform legislation. Signed byPresident Obama in March 2010, the Patient Protection and Affordable Care Act makes health benefits more accessible to all Americans and improves the quality of the healthcare system. This is a positive change, considering the average family pays approximately $13,000 for their annual health plan. To learn more, visit the U.S. Health and Human Service’s healthcare website, which breaks down the law and provides links to information such as state-specific private insurance plans, public programs, and community services that may be available to you.
  • Obtain adequate healthcare insurance. If you suffer a sudden illness, become pregnant, or are involved in an accident, you don’t want that to be the time when you say, “Hey, I should have had better health insurance.” Instead, prepare for the unexpected by obtaining enough coverage now. Navigate the world of healthcare plans beginning here to learn which one best fits your situation.
  • Participate in a Health Spending Account (HAS) plan. An HSA allows you to set aside pre-tax dollars from your paycheck and then draw down on that amount during the year to pay for certain qualified medical expenses; if your employer offers one and it’s financially feasible for you contribute, then participate. Plans vary, so work with your human resources professionals to learn about your options.
  • Address your health risks. Talk to your family members so you clearly understand the composition of your genetic health history. Then, take that knowledge to your doctor to develop a plan of action to lower your risk of suffering a similar health problem. If you have a parent with Type-2 Diabetes, for example, you’re likely to get the disease yourself; however, you can slow the disease’s progress and its effects on your heart and circulatory systemby eating a diet low in sugar and carbohydrates, and by getting regular exercise. Also, know that genetics aren’t the only factors that contribute to these risks. For example, if you’re a smoker, make quitting a priority today.
  • Get regular checkups. Just as you perform preventative maintenance on your car, be sure to perform a little preventative maintenance on yourself. Annual physical exams that include a general assessment of your health, and laboratory and pulmonary function testing, for example, can identify risk factors that could help you avoid a major problem down the road. If you don’t have a regular doctor, ask your friends and family members for a recommendation.
  • Exercise. You don’t have to fork out a lot of money for a gym membership or work out 24/7 to receive some health benefits; a brisk walk with co-workers, gardening, and simple exercises you can do at home can produce similar benefits. Check out the Frugal Fitness Guide for tips to help you break a sweat without breaking the bank.
  • Eat a good diet. A diet that is high in saturated fat, cholesterol, sugar, and sodium is a recipe for disaster and will lead you toward becoming part of the growing number of Americans who are overweight and obese. There are large costs – monetary and health-related – associated with being heavy. Avoid them by maintaining a healthy weight.

While a lot of these ideas aren’t rocket science or revolutionary in their thinking, these basic tenets of good health and good money management can help you avoid bankruptcy should you face major medical issues down the road. Taking care of yourself is one of the best ways to take care of your wallet. 

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