A Tough Pill to Swallow – The Link Between Your Medical and Financial Health

In Canada, we’re fortunate to have a health care system that covers our basic medical needs. Therefore, as a Licensed Insolvency Trustee, I don’t come across a lot of situations where people are in debt due to unpaid medical bills and invoices. What I do see however, is the impact of how a medical condition or health related issue can prevent a person from continuing to pay their financial responsibilities like mortgages, vehicles payments or credit card bills. In fact, according to Grant Thornton’s 2017 numbers, 20%, of those we helped cited medical or health-related issues as a contributing factor to their debt situation. That’s one in five of all people who filed a bankruptcy or consumer proposal with us last year.

WHAT HAPPENS WHEN MEDICAL SITUATIONS ARISE?

When I listen to peoples’ stories about how their medical or health well being is linked to the state of their financial affairs, it is incredible how every situation can be so different, yet result in the same thing; that people lose the stability of an income and the ability to continue to service their debt payments.

For example:

• Workplace injuries that evolve from being short term downtime to more lengthier recovery periods and, in some cases, people finding they are unable to return to work.
• People who’ve suffered from severe depression for many years and have a pattern of being unable to sustain employment because of their condition.
• Those with an acute or short term medical condition that actually turned into a longer term/chronic condition which resulted in the inability to work can be financially devastating to households, especially when it happens to the sole income provider.

Lastly, serious & unexpected news, such as a cancer diagnosis, hits you like a brick wall and can put you and your family in a financial tailspin.  When my husband was diagnosed with stage 4 colon cancer over 10 years ago, it was very difficult to focus on anything other than fighting the disease.  So, when people come to me saying everything was a blur, I fully understand that. It wasn’t because they were being negligent, it’s just such a difficult time.

According to the (CCAN) Canadian Cancer Action Network, a family dealing with cancer goes into debt an average of $30,000 to $40,000 in the first three months from:

• lost income to not one but maybe both partners
• increased daycare costs for your children because you have to be with your partner or spouse;
• increased travel expenses for fuel, parking costs at the treatment facility and staying in a hotel (if it’s out of town)
• medical equipment and drugs that aren’t covered

So, what occurs is a reliance on credit to supplement the reduced income flowing into the household.

WHAT CAN YOU DO IF YOU’RE IN THIS SITUATION?

Check with your employer on the availability of paid sick leave and other benefits you are entitled to receive such as

• Workers Compensation;
• Short term (up to max. 17 weeks) and Long term disability insurance – so that you can get paid a % of your salary while you’re not working; If you don’t have disability insurance through employment, you can claim Canadian Employment Insurance (EI benefits) (NOTE: employers are not required to have a LTD plan for employees; it is discretionary.)
• Other health benefits through your employment

Unfortunately, if you’re self-employed or unemployed, you have to rely on savings or borrowing money if you don’t have disability insurance.

If you have additional private health insurance (ie. Alberta Blue Cross),determine what additional health benefits and coverage you may have.

• If you have it, look into your Mortgage Protection Insurance (this is NOT the same as “Mortgage Insurance”, which protects the lender if you default on the mortgage and is required if your down payment is less than 20% ). MPI is essentially a type of life insurance that pays you (MI pays the bank/lender) a lump sum to use towards paying your mortgage if you become disabled or pass away.  As with any insurance program, there is a premium you’ll pay on top of your mortgage.
• If you have it, look into your critical illness insurance on credit cards and loans.This type of insurance pays the minimum payments on your loan or credit card for a certain period of time if you fall ill or are unable to work due to an accident. Generally, it won’t pay off the entire balance owing.
• Don’t ignore your bills.To prevent delinquent accounts, you may have to dip into your savings or emergency fund to continue with the debt payments until you’re back to work. If focusing on bills is tough for you during this time, seek help from family members or friends to remind you or to help facilitate the payment of your bills.
• If you’re in a situation where the debt is overwhelming, set up a free consultation with one of our Licensed Insolvency Trustees to talk about what you can do if your medical condition is causing a temporary downtime or if the situation is more long term.

One of the benefits of a Consumer Proposal is that you can reduce your debt payments while your income is low and you will be protected from collection action while you focus on your medical situation and getting better!

Other Helpful links:

• Government of Canada’s Benefit Finder
• Canadian Cancer Action Network
• Canadian Mental Health Association