America’s Health Care Crisis Is a Gold Mine for Crowdfunding

"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.