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10 Money Steps to Take When Someone in the
Family is Facing a Serious Health Crisis
A June 2009 article in the American Journal of Medicine
reported that medical bills are behind more than 60 percent of
U.S. personal bankruptcies, adding that more than 75 percent of
these bankrupt families had health insurance but still were
overwhelmed by their medical debts.
The article, based on research from Harvard Law School,
Harvard Medical School and Ohio University, underscores how a
single health crisis can financially destroy both individuals
and families. It is information that underscores the need for
adequate planning ahead of any health crisis, particularly when
known risk factors exist in a family. A financial expert such as
a CERTIFIED FINANCIAL PLANNER™ professional can help
individuals determine if their insurance and savings options are
adequate to handle the possibility of any future health crisis.
If you have time to prepare, most financial planners will
advise:
- Creation of an
adequate emergency fund to cover several months (usually a
minimum of three months and, even better, up to a year) of
family expenses if a patient can't work during their
treatment;
- Purchase of
separate disability insurance to pay everyday expenses since
company-bought disability coverage will likely be limited —
the benefits on any individual policy need to be coordinated
with the group policy;
- Creation of
health care advance directives, health care powers of
attorney and financial powers of attorney, health care
proxies (each state has a "preferred" document
that is accepted; clients need to execute the form for their
state of residence) and DNR forms among the examples.
- Building lists of
critical phone numbers, major assets and where information
on each can be found on investment accounts and other key
information in case the person is incapacitated;
- Communicate
funeral plans to family members in writing so that wishes
can be implemented in the event of death. Even better,
complete a personal death awareness document that covers
both the practical aspects of death and the interior
emotional aspects of death.
But if you're suddenly faced with a frightening, expensive
and potentially life-threatening diagnosis without such
preparation, here are some basic steps to take:
Start by realizing it's not all about the money. If
you or someone you love is sick, obtain the best care possible,
not what your bank account and health insurance can buy. A CFP®
professional with experience in dealing with healthcare issues
can help you assess your financial situation against various
goals for retirement, your expenses, your children's education
and other matters.
Grill the patient's insurance agent or HR person. If
you or family members have bought health insurance through an
agent or your employer, insist that they explain exactly what
the plan covers and where your deductibles do and don't apply.
Generally, a serious illness will quickly use up the deductible
(this is where your emergency fund is important). Pay attention
to how much the insurance will pay and how much you'll pay out
of pocket once the deductible is exhausted.
Check on experimental treatment and see how it will affect
coverage. If the diagnosis is cancer or some other
potentially life-threatening illness, in addition to tried and
true treatments, research medical centers offering clinical
trials. And, keep in mind that some insurance plans might look
askance at certain treatments that could potentially lead to
other health issues. Err toward caution in these matters, but if
the insurer approves, see if such experimental treatment can get
you a break on costs.
Get those directives in order. A health care advance
directive is a formal, preferably notarized instruction sheet
for doctors to follow in case you or family members are
incapacitated. The most commonly known health care directive is
a do-not-resuscitate (DNR) order. A health care power of
attorney designates a particular individual — a spouse, a
friend, an adult child — to carry out your medical wishes if you
are incapacitated. Meanwhile, financial powers of attorney
designate an individual to handle financial affairs if the sick
or deceased are single or did not designate joint tenants for
certain assets. Again, each state follows a particular set of
documents.
If there isn't a will or a complete estate plan, make one.
A will doesn't have to be enormously detailed to relieve
problems for survivors, but it can create enormous problems if
it doesn't exist. If there is no executed will, the estate is
intestate, which means that property is distributed by state
laws. Yet it makes even more sense to review all of a patient's
assets to determine if more detailed directives are necessary
and most important, to make sure beneficiaries on insurance,
retirement accounts and other investments are up to date.
Consider whether you can make monetary support a gift.
It's good to get tax and financial advice on making a one-time
gift to support the patient. Would the potential loss of money
injure you, and worse, will it injure the relationship? If you
don't think you will be repaid would you be willing to consider
it a gift?
Ask for generics and samples. Many physicians are
willing to recommend a generic substitute or at least supply you
with a few samples of the drug they're already prescribing.
While doctors can't get away with passing sample drugs to all
their patients, always ask. As long as they are prescribing the
medication, samples with the proper dosage can provide cost
savings to patients.
Begin negotiations before there's a financial problem.
The best time to speak with hospital bean counters isn't when
you're behind on your payments. Once a diagnosis is made, either
you or someone you designate as your agent needs to contact the
hospital business office to check on payment schedules and
possible discount plans if you are uninsured or fear your
insurance may not cover a significant portion of costs. Any
creditor appreciates a customer who's willing to come to the
table first.
January 2010 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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