‘Crowdfunding’ is Popular, But Not without Pitfalls

by webadmin on July 5, 2013

CF-thumb3We know that healthcare costs in the United States are ridiculously high, and it can be a struggle for even securely employed adults to manage their medical bills. This is why many are turning to crowdfunding websites as a way to raise money for their healthcare expenses, a phenomenon that we’ve written about before.

“Medical fundraising sites are growing in number and profitability,” Caroline Mayer reports over at The Washington Post. “In the first 12 months after it launched in 2008, GiveForward raised $225,000 for 359 campaigns; this year, it has already raised more than $20 million for more than 15,000.”

In addition to GiveForward, there’s FundRazr.com, GoFundMe.com, Indiegogo.com, and YouCaring.com.

“Some medical institutions and associations are joining in,” Mayer adds. “The nonprofit Rare Genomics Institute, for example, was created two years ago to help families raise money to sequence genes of patients with rare genetic diseases, a process that generally costs about $10,000 and is rarely covered by insurance.”

As valuable as these services are, they do require effort on the part of the fundraisers. GiveForward co-founder Ethan Austin explained, “It’s not intuitive. You can’t just send out a mass e-mail and be done with it.” There has to be a “sophisticated strategy…including asking close friends and relatives to contribute first. They are more likely to make a larger donation, say $50 to $100, prompting others who follow to make similarly sized contributions.”

He calls it “the law of ‘monkey see, monkey do.’ If you stop asking, you won’t keep getting donations.”

Then there’s the issue with how each crowdfunding website functions. Some withhold any donated money until the fundraiser arrives at its end date, while some sites credit donations back to the givers if the stated goal is not reached.

And as with everything else in the Internet age, there are privacy issues to worry about, Mayer writes. “An Illinois freelance writer says she became concerned after friends created a fundraiser to help cover the costs of her chronic illness. Prospective employers, she worried, might stumble on the site while searching for her name on the Internet. She believes this is the reason she didn’t get a job she applied for.”

For those who are on relief programs like Medicaid, financial consequences could ensue, Mayer continues, affecting “a person’s eligibility for assistance, so it would be wise to check with the appropriate officials before raising money.”

If you’re a donor, it’s important to know that your contributions aren’t tax-deductible, because you’re not contributing to a nonprofit group. Then there are the issues of accountability and fraud. Basically, donors have to take the fundraisers at their word that the money is being used for the expressed purpose.

“…[B]ecause crowdfunding websites do not verify the legitimacy of every fundraiser, there is ample room for fraud,” Mayer writes. “Crowdfunding executives say that’s rare, adding that their sites are similar to eBay and Craigslist, which rely on users to police the sites and report suspicious activity. That’s why most sites caution donors to give only to people they know or to friends of friends. Even then, donors can’t be assured that the money will be used as described by the fundraisers.”

Still, in an age of spiraling medical costs, crowdfunding is proving for some that it is a worthy alternative to shouldering medical expenses alone. As healthcare executives, what do you think of this revolutionary concept? How could your organization effectively harness crowdfunding for its benefit?

-by Pete Fernbaugh

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