(Bloomberg) — Crowdfunding platforms such as GoFundMe and YouCaring have turned sympathy for Americans drowning in medical expenses into a cottage industry. Now Republican efforts in Congress to change the Affordable Care Act could swell the ranks of the uninsured and spur the business of helping people raise donations online to pay for health care.
But medical crowdfunding doesn't have to wait for Congress to act. Business is already booming, and its leaders expect the rapid growth to continue no matter what happens on the Hill.
"Whether it's Obamacare or Trumpcare, the weight of health care costs on consumers will only increase," said Dan Saper, chief executive officer of YouCaring. "It will drive more people to try and figure out how to pay health care needs, and crowdfunding is in its early days as a way to help those people."
At industry leader GoFundMe, medical is one of the biggest fundraising categories. CEO Rob Solomon has said it's what "helped define and put GoFundMe on the map” and has called the company, founded in 2010, "a digital safety net."
That net grew wider this year with GoFundMe's acquisition of CrowdRise, which was co-founded by the actor Edward Norton. It adds to the company's business helping people fundraise for charities and sends those who need funds for "medical bills, a friend’s tuition, a group volunteer trip, or any personal cause" to GoFundMe.
Growth has been rapid. In a September 2015 LinkedIn post, Solomon wrote that the one million campaigns set up over the previous year had raised $1 billion from nearly 12 million donors. By February 2016, the total was $2 billion. In October 2016, it was $3 billion, from 25 million donors. A NerdWallet study of medical crowdfunding said GoFundMe had indicated that $930 million of the $2 billion raised in the period the study analyzed was from medical campaigns.
YouCaring, meanwhile, acquired GiveForward this year; medical fundraisers made up 70% of GiveForward's campaigns. The combined companies have 8 million donors who have contributed $800 million to a wide range of campaigns. A big part of that total was donated to medical campaigns, according to the company. It was approaching 50% of all fundraisers at YouCaring before the acquisition, and the growth rate is set to triple this year, Saper said.
With enough volume, the business of helping people raise money for medical care has a lot of profit potential. GoFundMe takes 5% of each donation, 2.9% goes to payment processing, and there's a 30¢ transaction fee. Smaller sites, such as Fundly and FundRazr, charge much the same. YouCaring donors pay just a 2.9% processing fee plus the 30¢.
"We rely on voluntary contributions from donors [to run the business], so our big thrust now is how do we get the word out about it," said Saper. The company is scaling up its team and operations and hired the former global head of engagement and growth of EventBrite, Maly Ly, as its chief marketing officer in March.
Indiegogo, which started out funding filmmakers, created a separate platform in 2015 called Generosity. Medical is a top category, and users pay a 3% payment processing fee and the 30¢. Now Facebook has jumped into the fray. On May 24, it began allowing users to launch fundraisers for personal causes or nonprofits on their pages. Medical is one of eight available categories. For personal cause campaigns, Facebook takes 6.9% of each donation plus 30¢.
For more and more Americans, vying in a popularity contest for a limited supply of funds and sympathy may be the only way to pay the doctors and stay afloat. House Republicans passed a bill last month to replace the Affordable Care Act, or Obamacare. As is, the Congressional Budget Office estimates, it would leave 23 million more Americans uninsured in 2026 than under the Affordable Care Act. Even a law just resembling the bill is likely to raise the cost of health care for older and sicker Americans and for those with preexisting conditions, bolstering the medical crowdfunding business.
The industry still represents just a fraction of the hundreds of billions of dollars Americans pay annually out of pocket for health care, said Saper. Medical crowdfunding is "highly, highly scalable and has a ton of runway," he said. "The growth rate of the industry is showing that this can absolutely be an impactful safety net for a lot of individuals and communities to help each other."
The remarkably named Producing a Worthy Illness: Personal Crowdfunding Amidst Financial Crisis, a study published this year by the University of Washington/Bothell, offers a striking perspective on some of those communities. Personal medical campaigns on GoFundMe were likelier to come from people living in states that chose not to expand Medicaid under the Affordable Care Act, preliminary results of the study showed. Fifty-four% of 200 randomly sampled campaigns last year came from those states, though they are home to just 39% of the U.S. population. Trumpcare would sharply curtail the Affordable Care Act Medicaid expansion program.
"We had a huge number of campaigns from Texas, which is often recognized as the state where it's most difficult to qualify for Medicaid and other public insurance," Professor Nora Kenworthy, co-author of the study, said. "A lot of the campaigns are really using GoFundMe as a safety net," asking for "help with lost wages, help getting basic health care services and support."
Most medical crowdfunding campaigns are a far cry from Taylor Swift's $50,000 gift on GoFundMe to a young girl with aggressive leukemia, or $1 million in donations for a mother whose cancer returned when she was pregnant with quadruplets. "Often, funds people are raising are for a huge range of costs that go along with care, like travel to the place where you will get care, because insurance doesn't really cover that," said Indiegogo's senior director of social innovation, Breanna DiGiammarino. In the future, more fundraisers will likely seek to cover premiums and deductibles rather than the cost of care itself, she said.
"Crowdfunding is being treated a little like crowd-insurance now," said Daryl Hatton, CEO of Canada-based crowdfunding platform FundRazr.
Yet crowdfunding's business model is a poor fit for the gargantuan, mundane, never-ending health care costs of many online campaigners. Some get just 10 to 20% of what they ask for, said Jeremy Snyder, a health sciences professor at Simon Fraser University in Canada, where the need remains even with a national health care system. Snyder's research, which includes analysis of ethical issues raised by medical crowdfunding, has focused on people seeking funding for cancer treatments on Canadian crowdfunding sites.
And, of course, in the U.S. as in Canada, some campaigners get less than that, or nothing at all. Slightly more than one in 10 health-related online campaigns reached their goal in the NerdWallet report. The Bothell study found that 90% of the 200 GoFundMe campaigns didn't reach their goal, and that, on average, fundraisers got 40% of what they asked for. That doesn't sound like much of a fix to Snyder.
"Is this something that is going to be a solution to a lack of health insurance?" he said. "Absolutely not."
One reason for the discouraging statistics is that while most of the campaigns are ordinary—and no less urgent for it—it is often the extraordinary ones that do best.
“The more dramatic the need, the more successful" the fundraiser, said Adrienne Gonzalez, who follows the industry as the creator of GoFraudMe.com, a site that exposes fraudulent campaigns on GoFundMe.
Among the "most active" campaigns featured on generosity.com on May 30 were one to help pay for treatments for a man diagnosed with acute promyelocytic leukemia and one for a woman struggling to cover "co-pays, travel expenses, food, lodging, essentials" as she tends to her 19-year-old daughter, who is scheduled for a kidney transplant. A third solicited funds for a woman without insurance who had been struck by lightning.
Those appeals are very different from that of an ice hockey player who had broken her collarbone in a game and started a campaign on generosity.com. She asked for $1,500 to help cover her $1,000 deductible and other costs, including being sidelined from her landscaping job for at least six weeks. Over a month, she raised $252 from seven people, or 17% of her goal. It was something.
"‘I need help with my deductible’—they are not going to be very successful,” said Gonzalez, who believes crowdfunding has done a lot of good but presents "this whole socioeconomic problem" because "you almost have to be a marketing guru" to create a successful campaign.
The Bothell researchers noticed a bias among donors toward funding solvable problems. "Injections that cost $10,000 every six months are a more solvable problem than a campaign for a family citing a litany of challenges, like utility bills that aren't being paid because the family is paying for health care," said Professor Lauren Berliner, Kenworthy's co-author on the study. Media and digital savvy play a big part in attracting donations. The campaigns with hashtags, images, and flashy elements got the most financial support, the study found.
"Most campaigns are paid for by friends, and friends of friends," said Hatton of FundRazr. "A lot of it has to do with the strength of your social network," as people you helped now dip into a "karma bank" and help you. People with fewer financial resources may not have been able to build up that goodwill and may not have that wide and deep a social network to call on, he said.
Then there was the woman in her 30s who walked into a free clinic where Dr. Edward Weisbart, who chairs the Missouri chapter of Physicians for a National Health Program, volunteers. She was with her mother, appeared unable to speak, and had a "peculiar affect, like a crazed wild animal," he said. It turned out she had lived for years with seizures every two to three days until she found a medication that had cut the frequency to once every two months. When she visited Weisbart, she had lost her insurance and had 10 days of medication left.
"Her inarticulate state was not a consequence of the seizures," Weisbart said. "It was terror over what her life would be like if she couldn't get the medication." Once he explained that the clinic could mail her the drug and that it would cost $40 instead of $1,500, "she transformed into this normal, lucid, almost friendly person," he said. "But she could never have used crowdfunding, because she was literally beside herself."
Hatton is seeing more "fatigue" around crowdfunding efforts. Weisbart observed that "when you get your first request, you probably give a high amount. But as you get besieged and realize how common these requests are, donations will go down. We can't keep on giving to everyone who asks."
One site keeping its distance is Kickstarter, where donors fund creative projects.
"If we had personal health care campaigns, it could create a strange moral equivalency," said Justin Kazmark, the company's vice president of communications. "If you see documentary filmmakers trying to get $10,000 for a film alongside a project for someone whose dog needs dental surgery, or for disaster relief, it changes the mindset and frames the whole thing differently."
--- Read SEC’s Piwowar Warns About ‘SAFE’ Crowdfunding Instrument on ThinkAdvisor.