How to Prevent Financial Woes During a Medical Crisis - content

by Jeffrey R. Lippman, CFP, ChFC
on September 1, 2015

The impact on a household dealing with a serious long term illness, such as cancer or a stroke can be a drain of epic proportions, both financially and mentally. Although there are ways to prepare for this type of hardship, such as through comprehensive financial planning, the total impact of dealing with a medical crisis can never be fully anticipated.

Once faced with a life changing medical situation, life can spiral out of control fast. There will be a myriad of appointments and multiple treatment options from a variety of providers to consider. Bills can easily accumulate.

If you find yourself either in this situation or feel fearful that it could happen to you, the following are important areas to organize in order to minimize financial distractions and limit mistakes that otherwise could cause further stress and difficulty.  

You have insurance, but do you know what you really have?

One of your financial lifelines to a medical crisis is your insurance. If a serious situation does arise, there may be many moving parts from multiple coverages including medical insurance policies, Long Term Care Insurance  (LTC), specialty insurance (such as Cancer Insurance) and disability insurance.  It is usually only when faced with a serious medical condition when you really learn your benefits, the claims process, and limitations of coverage.

Prioritize the following:

1. If you own disability or LTC and are eligible, initiate the claim as soon as possible.   
    
2. Determine exactly what medical insurance coverage exists and try to ascertain any serious limitations with that coverage. Although options are limited after diagnosis, you may be able to obtain more insurance. For example, if you have Medicare, you can change your Medicare Part D prescription coverage each year during the open enrollment period. The prescriptions you take often affect, on any given year, the most effective plan you should buy. Then again, there may be an opportunity to upgrade or change medical insurance coverage based on the options created by the Affordable Care Act as the law provides coverage for previously uninsurable participants.  Any changes or improvements to coverage may have specific time constraints, so the sooner you identify any deficiencies and address possible solutions, the better.  
    
3. See if you have care coordination. This is a patient advocate service that can improve complex scheduling with providers and treatment centers thereby saving you valuable time.
    
4. Budget for your reality. Out-of-pocket expenses for medical treatment will be heavily determined by the depth and extent of insurance coverage.  Any gaps in insurance will be covered by the family. Such costs can be greater than originally anticipated. Expenses such as commuting costs, hotel stays, prescription co-pays, home care aides, etc. are not immediately obvious.  A family’s budget can easily be overwhelmed by a serious illness, and it is not uncommon to take from the most convenient option (i.e. credit cards, 401 (k) loans) to pay for any differences regardless of the long term consequences. Step back and consider all available options in such situations to avoid costly mistakes.  Also, keep track of receipts for potential tax deductions.

While you’re incapacitated, who minds the ship?

A retirement plan is often in the works for years with a strategic allocation of stocks and bonds that, in theory, will fund your lifestyle and financial goals throughout retirement. Unfortunately, at the onset of a chronic medical condition, this can change quickly. If there is a need to offset a cash deficit, any difference will either need to come from debt or existing assets. This begs the question of who is even watching the assets-all of them. Unfortunately, a chronic medical condition can be a distraction for either the primary caregiver or the sick person and assets can often go unmanaged with the potential for disaster.

It is therefore vital to identify a qualified, responsible, and trust-worthy back-up who can provide comprehensive advice over your investments, business interests and cash accounts. This person should be focused on understanding the total effects of one option over another and make objective recommendations free from transactional gain. It is important to designate assets that could be liquidated while at the same time considering tax ramifications (e.g. capital gains) and asset values (all else equal, what should be sold). The person should also be particularly vigilant in monitoring the viability of each security possessed in every account. In other words, someone needs to make sure a security doesn’t plummet while the family concentrates on health issues.

Are you in sync with the person who would speak on your behalf as if he/she were you?

Undergoing a serious medial circumstance is often a clarion call to get your financial affairs in order. Many legal circumstances can arise without having an updated will that includes a health care proxy, medical directive, and a power of attorney as evidenced by the infamous Terry Schiavo case.

As soon as possible, the person afflicted with a major health issue should clearly indicate his/her wishes in terms of treatment to avoid possible controversy later. Therefore, as painful as such discussions are, anyone tasked to speak on your behalf should have a clear understanding of your views towards aggressive treatments, possible side-effects, preferred end-of-life options, etc.

From a financial perspective, the person who is or in a position to have power of attorney should be well versed in knowing how to make suitable and appropriate decisions in accordance with the financial goals and objectives of the ill person.

Conclusion

Although each household’s situation is different, dealing with any medical crisis is a nightmare. Typically, there is no defined process to follow and the paths you take can feel unique and lonely. One should hope that the serious medical situation will ease and that life will soon return to normal. Hopefully, some of the items mentioned here can bring some guidance in avoiding further stress while you focus on the issue that matters most, the recovery from a serious medical illness.

Questions or comments? Email me at jlippman@capfin.net, call the office at 703-821-2000 ext. 212, or get me on my cell phone at 301-704-2696.

The information is the personal views of Jeffrey Lippman and is not necessarily indicative of those of  Capitol Financial Consultants, Inc.. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed here are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected.