Why You Are Just One Step From Financial Disaster!

Being retired gives me the time to read more than I ever did when I was working every day. Sometimes being busy with a job can be a cushion from discovering some really worrisome facts that you may just hear about, but not really see the fine details. That may be the situation you are in when it comes to thinking about healthcare costs for you and your family. Healthcare costs are a reality that just might be the reason why you are just one step from financial disaster!

Many people don't realize that they are just a step from financial disaster. Healthcare costs from an illness or injury can easily push you into bankruptcy.

The Big Fear

It’s a fear that we all have, the fear that we may have to face financial ruin someday. We may not know exactly how or why, but it is something we sometimes do think about. Most often it comes when you lose your job or if you are really unlucky you might have to face some sort of natural disaster like a flood, fire, or weather event that sets you so far into debt you can’t see ever climbing out of that hole. But the number one thing that can send you into financial hell is much more devastating and personal then suffering through a hurricane.

Number One on the List – Healthcare Costs

Medical problems contributed to 66.5% of all bankruptcies in the U.S., a figure that is virtually unchanged since before the passage of the Affordable Care Act (ACA) in 2008, according to a study published February 7, 2019 in an editorial of the American Journal of Public Health. The findings indicate that 530,000 American families suffered bankruptcies last year that were linked to an illness or outrageous medical bills. Think about that for a second. 67% of bankruptcy filers cite illness and medical bills as the number one contributor to their financial ruin. Does that scare you?

By the way, researchers found no evidence that the ACA has reduced the proportion of bankruptcies driven by medical problems, and medical insurance offers little help when a real personal health crisis hits. Even insured and financially comfortable people aren’t immune. In fact, it’s mostly people who are middle class and have insurance who are filing for bankruptcy.

Some Astonishing Facts About Medical Costs

As you may have read here in my blog, both my wife and I suffer from multiple medical problems and have been in this situation for years and years now. Amazingly, we have managed to keep up with the medical costs despite the fact that we spend an outrageous portion of our annual income on it. Typically, we spent over 30% of our income on our medical costs. Meanwhile the average expense for a “healthy” family runs about 6-8% of their income and most of that is for the health insurance premiums they pay.

Back in 2012, when I had my heart attack, had a stent placed, and was hospitalized for a few days, I was amazed when the bills started rolling in. One bill from my hospital was written up for over $100,000! When the insurance was balking at paying, I was harassed repeatedly by the hospital, and at one point they offered me a “settlement” for $18,000 if I would just pay it and close the claim. I knew that eventually the insurance would pay, so I aggravated myself and held on for months while letter after letter came in my mail.

The Average Costs

Providing health care to an average American family surpassed $25,000 for the first time in 2016 according to CNBC. The $25,826 in healthcare costs for a typical family of four covered by an employer-sponsored “preferred provider plan” is triple what it cost to provide healthcare for the same family in 2001. (This amount includes both the portion paid by the employee and the employer for healthcare costs.)

A significant cost driver is the rapid growth in what health plans and insured people are paying for prescription drugs, which now comprises almost 17% of the total spending on healthcare, or an average of $4,270 annually, four times the 2001 costs.

Seniors Feel It The Most

Being older means you need medical care more than ever, and not earning a regular income means you have to bear more of the cost burden on your own. It really is a “double whammy”. My wife and I have doctor appointments every month and between the two of us, we take over 20 prescription drugs every day. The cost of our prescriptions alone, even after insurance coverage, generics substituted when possible, and careful administration to try and improve our overall health, still comes to more than $7,000 a year! With our main source of income being Social Security, it can be a struggle.

How to Prevent Financial Ruin From the High Cost of Healthcare

On the surface, the most significant thing anyone can do to guard against financial strain from medical costs is to try and stay healthy! Let’s face it, our lifestyle here in America is almost “anti-health” in the sense of how we live, isn’t it? We eat horribly when it comes to our diets, we don’t get enough exercise, and we live in an environmental “hell” with air and water pollution all around us. And it is getting worse all the time.

One problem that I can testify to is that when you are young, you typically feel you are invincible and almost never dwell on potential health issues you might face, unless you have a family history or a childhood ailment that you deal with already.

Other than that, you—if you are like most of us—eat whatever you want, drive to the mailbox rather than walk, and think that watching sports on TV is an exercise. Those habits will not only potentially shorten your life, but put you on the edge of potential financial disaster later in life because of it. If you don’t believe me, then you aren’t paying attention to what happened to me and my 2012 heart attack and its consequences. And I am actually one of the lucky ones that survived until now and haven’t yet faced bankruptcy!

So recommendation number one: eat healthy, exercise more, and see your doctor for routine care. And if you have a family, make sure they do the same. Starting now is always better than starting tomorrow!

What About a Financial Plan?

We seem to have no problem planning to save for a fancy new car, buying a home, or saving up for a big vacation. But when it comes to planning for our medical care, after buying medical insurance we often just ignore all the rest of any safety net. Do you know anyone who has a savings account at the local bank entitled “money for my future healthcare”?

Some people do have those savings in the form of a Flexible Spending Account (FSA) or a Health Savings Account (HSA). These plans, offered through an employer, allow employees to put away pre-tax savings to cover future qualified medical expenses. There are some differences, for example an HSA is only available to employees who have a High Deductible Health Plan (HDHP), and there are different contribution limits and carryover rules. If your employer offers one of these plans, it would be wise to check it out.

One Option Might Be Investing in the Healthcare Sector

As overall healthcare spending increases, healthcare companies are likely to see their sales and profit climb, and that could mean that healthcare stocks and mutual funds are a solid bet for long-haul investment portfolios. Assuming that new laws are not going to wipe out corporate profits for healthcare companies anytime soon, investing in them makes a lot of sense. If you’re interested in owning stocks that benefit from rising healthcare spending, a good place to start may be healthcare insurers. Estimates are that health insurance premiums will climb 5.4% per year from 2019 to 2023. Thanks to a combination of higher insurance premiums and an increasingly insured population due to healthcare insurance reforms, insurers could have solid revenue tailwinds for years. If so, large insurers like UnitedHealth Group (NYSE:UNH) and Anthem (NYSE:ANTM) could be a good bet for investors.

Investors may also want to consider owning hospital stocks. Projections are that spending on hospital-based healthcare will grow by an average 6.2% per year between 2019 and 2023. That spending growth, driven by aging Baby Boomers and an increasingly insured population, should boost results for hospital operators such as HCA Holdings (NYSE:HCA) and Community Health Systems (NYSE:CYH)—two of the biggest hospital operators in the country.

Investors willing to take on a bit more risk in their portfolios might want to also consider investing in drug makers, including biotechnology stocks. Spending on prescription medicine is supposed to grow by 6% per year between 2019 and 2023. If those estimates are right, then investing in companies like Celgene Corporation (NASDAQ:CELG) could make sense. Celgene’s cancer and autoimmune drugs expect huge increases in sales and the company thinks that its sales could exceed $20 billion by 2020. In January, Celgene reached a deal to be bought by international biopharmaceutical conglomerate Bristol-Myers Squibb.

Final Thoughts

I know you have enough on your plate that you don’t need anyone to burden you with even more to worry about like healthcare costs. The problem is that it is out there and it’s pretty dangerous, so you need a plan to deal with it. Even if you’re currently spending less per year on healthcare than the average American, your spending is likely to climb significantly as you get older and new treatments become available.

Since the increase in healthcare spending poses a risk to your financial security, it may make sense to think about ways to hedge against ever-increasing healthcare costs. Taking better care of you and seeking to profit from investing in healthcare companies like insurers, hospitals, and drug makers makes a whole lot of sense.

Are you prepared to deal with financial adversity from medical costs? Do you and your family have medical problems right now and deal with them? Or are you facing huge financial problems from them? What would you do if you or a loved one becomes ill and medical bills become uncontrollable?


  1. I’m lucky that it’s just me now, so the only real costs are my prescriptions. I’m able to get those for about $60 a month, with two other prescriptions I refill quarterly for about $30-40 each. Well, and I pay $375 for my health insurance. But that’s cheap these days.

    It’s not just the medical bills, though. It’s also missed work. I’m a contractor, so if I spent two weeks in the hospital I’d be out thousands of dollars in income. It’s a scary thought!

  2. You don’t usually think about the potentially suffocating health care costs from a medical condition until it happens to you, or to someone you love.

    I have an FSA at my job, which helps me save money on health costs.

    Oh, and yes, my husband does have a bank account called “money for my future healthcare” because of his disability – he had to have a Medicare set aside account for healthcare costs related to his disability. But I realize this is not the norm.

    1. It’s certainly good that you and your husband are preparing for what could be a real financial heartache. Many people could learn a lesson from what you’ve stated and I hope they will. I also hope that you’re not going to have to draw from that fund in any dramatic way. Wishing you the best, and thanks for your comment.

  3. I have a disability and fortunately I have Medicare so if my wife retires earlier than 65 she will have to cobra which we figure is about 10k a year. I have budgeted 12k for Medical first year of retirement. Great post

  4. Fiscal Frontiers

    Great post, lots of information to chew through. Even living outside the U.S., I still often hear about the cost of hospital stays and it seems terrifying. I think if people started looking at healthy eating and exercise as investments, rather than chores and expenses, everyone would be better off. I know I’m fairly good with the healthy eating, just need to work on that exercise part. ..

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