Clickbait Premiums: The Hidden Costs of Crowdfunding Healthcare
“I’m overwhelmed by the generosity of people I’ve never met,” says Emily, a Kentucky mother of two who used GoFundMe to fund her breast cancer treatment last year. “But it’s scary to think that my life depends on the kindness of strangers.”
Emily’s sentiment echoes the harrowing experience of countless Americans who, faced with life-threatening illness, discover that their insurance won’t cover the necessary treatments. Confronted with mounting medical bills, they turn to online crowdfunding to fill the gap.
Online crowdfunding has roots in the earliest days of the internet. In 1997, fans of the British rock band Marillion raised $60,000 from donors online to fund the band’s US tour. ArtistShare — a commercial crowdfunding website for artistic (mostly musical) ventures — was founded in 2001, pioneering a “fan-funding” model which gives donors exclusive access to the projects they support. Kiva was founded in 2005 with a focus on “microfinance” — users could give directly to lenders operating in underserved communities and watch projects be funded. Indiegogo and Kickstarter both launched in the late 2000s and allow entrepreneurs to raise funds from future customers to build new products and launch new ventures. GoFundMe — the largest crowdfunding platform — was founded in 2010 with the goal of helping users “raise money online” for just about any cause or venture.
Fast-forward to 2024, and users on these platforms have raised a combined tens of billions of dollars. GoFundMe reported last February that users on its platform have generated $30 billion since it’s founding in 2010, the most common donation being just $50. More than 150 million people have sent or received money through GoFundMe, and the platform’s biggest years have been its most recent — in 2019, it reported $9 billion in cumulative gifts, meaning it’s raised more than $21 billion since then.
Crowdfunding has been a success story, through and through. Platforms continue to grow, and most of them have lowered their fees over the years. Currently, GoFundMe keeps just 2.9% plus $.30 per donation — down from 5% back in 2010.
And, of course, these platforms have been a literal life-saver for users. “I don’t know what I would have done without GoFundMe,” says Emily, who was declared cancer-free last March.
A dark side emerges
But a recent study by the American Cancer Society highlights the darker side of the crowdfunding phenomenon. Despite many users’ success in raising funds they desperately need, the prospect of relying on friends and family to finance rising expenses — for healthcare, especially — can leave the most vulnerable populations behind.
Of the nearly 2.3 million crowdfunding campaigns retrieved by Shaojun Yu, a Ph.D. student intern at the American Cancer Society, 21.3% were for personal medical expenses. 41% of those campaigns were cancer-related, where the average amount raised was $7,860.
Yet the vast majority — more than 84% — of these health expense-related campaigns never reached their fundraising goals.
When campaign goals are not met, it could mean that needed treatments are not acquired. That’s not a big deal when raising funds to buy a new car or launch a new business. But when a user launches a campaign to pay for an experimental cancer treatment not covered by their health insurance plan, those treatments are simply not acquired. On most platforms, users are allowed to keep the funds they raise even if they don’t hit their fundraising goal. But when goals are not met, those funds are often redirected to other needs — food, rent, and funeral expenses common among them.
Of course, failing to hit fundraising goals is not a mark against crowdfunding, itself. Where 15 years ago, these funds probably never would have been raised whatsoever, friends and family are now contributing billions of dollars to needs that matter to them.
But both consumers and health insurers know about crowdfunding. While crowdfunding is probably not part of anyone’s financial planning, the prospect of raising funds from friends and family in case of catastrophe is something most people know is possible. This disincentivizes both consumers and insurers from covering certain rare, but expensive, health care events.
“When I was diagnosed, I didn’t have health insurance,” Emily said. “I didn’t know what to do, but then my sister set up a GoFundMe and shared it with her friends.”
Questionable incentives
It’s not that Emily couldn’t afford health insurance. The Health Insurance Marketplace, created by the Affordable Care Act, would have made her insurance virtually free. She is unemployed and, at the time, qualified for a federal subsidy large enough to cover her entire monthly premium.
But Emily had heard about crowdfunding before. She’d even donated to one for a neighbor, who was raising money to fund a life-saving surgery for her dog.
“I’d seen GoFundMe on social media,” she said. “I knew people got help this way.”
Did her knowledge of GoFundMe affect Emily’s decision not to buy health insurance? She says no, but we’re not always aware of the subconscious influences that weigh on us when we make decisions like this — especially when it involves taking on risk (say, of being uninsured) in order to save money.
Insurers, too, invest considerable resources into understanding how consumers think about their health insurance coverage. Regulations govern much of what insurers can and can’t do, but the only plans they can sell are, ultimately, the ones consumers will buy. When the prospect of crowdfunding is something consumers include in their calculations about how much coverage to get, insurers have less incentive to offer coverage for catastrophic events.
“When used this way, crowdfunding can be a substitute for traditional health insurance,” says Caleb Fuller, Associate Professor of Economics at Grove City College. “Substitutes increase the elasticity of demand for rival goods. This puts downward pressure on what traditional insurers find they can charge.”
In this sense, crowdfunding can be thought of as, increasingly, a way to defray out-of-pocket healthcare costs by spreading them out over a community of people. It’s a potential source of funds to pay for experimental treatments not covered by traditional insurers. Some have even used crowdfunding campaigns to help pay their premiums and keep their health insurance when, perhaps because of illness, they are no longer able to work.
But of course, one’s pool of personal donors is finite. Starting a GoFundMe campaign might be a life-saver once, but it’s not likely to work as well the second- and third-time. Friends and family only have so much money to give, and an unsuccessful campaign is likely to deter potential donors from opening up their wallets again.
This reveals another, more sinister problem with crowdfunding that’s particularly dangerous for economically- and socially-vulnerable populations.
Favoring the privileged?
According to new research by economists Cookson, Gallagher, and Mulder, beneficiaries with income above $150,000 receive 28% more support than beneficiaries with income below $75,000. And in fact, higher-income beneficiaries are more likely to have a campaign in the first place.
The researchers attribute this to “network advantages.” Crowdfunding campaigns are typically first shared with personal friends and family members, who are likely to be in or near the same income quintile as the campaign’s originator. This means that campaigns launched by higher-income users are shared with other higher-income users with more funds to give. Campaigns launched and shared in lower-income communities struggle to raise as many funds.
These researchers also demonstrated that donors who give to multiple campaigns tend to give larger amounts to higher-income beneficiaries. This isn’t readily explained by “network advantages” and may reveal a troubling bias on the part of donors (whose gifts are often public) to share more with people who have more.
Beyond the pale of this particular study is the effect of social media algorithms on determining the success of a crowdfunding campaign. Auto-curated “newsfeeds” on social media platforms are designed to maximize engagement. They typically reward users who post with optimal frequency by showing those users’ posts more often. And the more engagement a user’s post gets, the more likely that user’s future posts will be shared with more viewers in the future.
This means that the most successful campaigns on platforms like GoFundMe are launched by users with a large social footprint — people who are already well-connected, attractive, and adept at navigating the increasingly complex world of social technology. Those with connections to local and national media, too, experience disproportionately high levels of success in hitting their fundraising goals.
Social clout is the “cost,” in other words, of a successful crowdfunding campaign. And regular, high-quality posts to social media before one needs to raise crowdfunds are the “premiums” — the better and more optimally-timed one’s posts, the higher the likelihood of one’s future crowdfunding campaign hitting it’s goal.
A less quantifiable contributor to a crowdfunding campaign’s success has to do with the pitch itself. Successful campaigns strike a nerve — the prose is sharp, the story is compelling, the photos are crisp, the videos are well-shot, and the originator shares regular, easy-to-read updates on the campaign’s page. GoFundMe reports that campaigns featuring at least five photos raise significantly more than those with just one photo, and campaigns with more than two videos raise more than those with none. “Clear, focused, and well-lit pictures help build empathy,” GoFundMe’s website says. “The more beautiful and varied your images are, the more people will want to share them on social media. This will drive more donations to your cause.”
But access to high-quality photos and video is not uniform across the population. More expensive phones almost always include higher-quality cameras. Many high-end phones today use AI to digitally-enhance images on-the-fly, making even poorly-shot photos clear, crisp, and share-worthy. And professional portraits and family photos can cost thousands of dollars and be unaffordable for many low-income families.
So while crowdfunding can be a lifeline to necessary funds during hard times, the phenomenon may also exacerbate the effect income and social inequalities on health outcomes. Higher-income recipients are more likely than lower-income recipients to get funded and, when a campaign is related to health expenses, be able finance the expensive treatments they need to thrive, or even to live. Coupled with the negative pressure that the crowdfunding “option” puts on consumers’ willingness to pay for health insurance and on insurers incentive to stretch their customers’ dollars to cover more events, this can have the effect of raising the cost of healthcare services.
Here to stay
So what can consumers do in the face of this phenomenon? Is crowdfunding destined to become a fixture in consumers’ calculus about how to think about financing healthcare costs?
It’s hard to say. For now, it’s simply important for consumers to keep their options open. For Emily, this means being good to your friends.
“Keep them updated, keep them close,” she says. She’s started posting more to social media more often, thanking everyone who donated and sharing updates about her life with her kids.
“My oldest daughter just graduated from high school. I made sure everyone knew about that!”
And all those photos you’ll take and edit and share of your Jamaica vacation this summer? Think of them as possibly the most important investment you’ll make all year. If they get enough engagement, this clickbait might one day save your life.
