Hearing a diagnosis of Alzheimer's disease or another progressive neurologic disorder can be emotionally devastating. But the financial toll can be just as severe—so much so, that people often say they wish financial advice came with the medical diagnosis.
“They wish they had known how expensive long-term care is,” says Fiona Van Dyck, JD, an estate planner with offices in New Jersey and Pennsylvania. “Or that strategies are available to help them protect their assets.” All too often people avoid or delay planning for the future, she says. “Of course, the longer you wait, the fewer options you have.”
The cost of caring for someone with advanced Parkinson's disease, multiple sclerosis, or Alzheimer's disease can run from $6,000 a month for residential care in some parts of the country to more than $20,000 in urban areas, says Bernie A. Krooks, JD, CPA, an attorney in New York who specializes in elder law and special needs. “People don't prepare for the cost, either because they don't think it's going to happen to them or they think they can rely on Medicare,” he says. “When they're confronted with these financial pressures, they're in shock.”
For those with Alzheimer's disease, the blow can be particularly acute. Health care costs for people 65 and older with Alzheimer's disease or other dementias were three times as great—$49,126 versus $15,550—as for Medicare beneficiaries in the same age group who did not have dementia, according to a 2016 special report on the personal financial impact of the disease by the Alzheimer's Association. A 2015 study by researchers at the Icahn School of Medicine at Mount Sinai in New York City that appeared in the Annals of Internal Medicine recorded similar findings, noting that many costs for people with dementia are not covered by insurance. For example, people with dementia may need caregivers who can assist with daily activities such as feeding or dressing whereas someone with a heart condition may not. Also, people are living longer so they need care for more of their lives.
What's more, the Mount Sinai study says, out-of-pocket costs are high whether people have private or government health insurance. These include paying insurance premiums, copays, deductibles, and services not covered by health insurance programs.
Using Medicare data, the Alzheimer's Association reported that the average out-of-pocket costs for a person with dementia were $10,495 a year. The highest out-of-pocket costs—$20,207, on average, per year—were for people in assisted living or other residential care settings, and they were about six times greater than for people still at home or otherwise living in their communities.
For women and minorities with dementia, the financial hardship is even steeper. Latinos, for example, make up the nation's fastest growing ethnic group. A 2016 report by UsAgainstAlzheimer's estimates that the number of Latinos living with Alzheimer's disease will increase to 3.5 million by 2060. Yet Latinos in general have lower incomes and fewer resources, such as pensions or retirement benefits, to help them manage. A higher percentage of Latinos care for an older person with dementia and, as a younger demographic group, must often balance that with caring for children as well, the report says.
When Arturo Vargas' father died in 2010, he began noticing worrisome signs in his mother: a dangerously neglected abscessed tooth; stove burners left on; a moment of panic when, waking at home after a trip to Mexico, she had no idea where she was. After his mother was diagnosed with Alzheimer's disease at age 88, Vargas, 54, who lives about an hour from her in Los Angeles, said he and his siblings patched together caregiving through public and private resources. They gave of their own time and hired homecare workers. But as the disease progressed, so did the need for more intensive care and more money.
His mother qualified for California's In-Home Supportive Services program, but the family's required financial contribution—after factoring in his mother's Social Security benefits and her pension for working as a teacher's aide—still forced Vargas to dig deep. He refinanced his house with a new 30-year mortgage to lower his payments, even though he had been only six years away from paying off the original loan. He says he wished the state had been more helpful.
“The agency representatives were unhelpful, which only added stress,” says Vargas, who is executive director of the National Association of Latino Elected and Appointed Officials (NALEO) Educational Fund, a nonprofit group that advances the interests of Latinos in all areas of society.
As the Vargas family experienced firsthand, the cost of managing a chronic disease doesn't just affect the patient's income. A November 2016 report by AARP found that family caregivers spent an estimated $6,954 a year on out-of-pocket costs related to caregiving, or nearly 20 percent of their annual income. Many of the expenses are household-related costs, including mortgage payments or home modifications, followed by medical expenses.
Caregivers who live an hour away and need to travel to their relative's home may spend 38 percent more than caregivers who share the same household. And most of those caregivers are women, who are more likely than men to take a leave from work to care for sick children or elderly parents—a decision that can have long-term negative consequences. A 2016 study by Financial Finesse—a financial planning firm in El Segundo, CA, that focuses on “financial wellness”—found that women who take a mid-career break between the ages of 45 and 55 could forego more than $1.1 million in retirement savings.
In a study published in the September 9, 2015, edition of Women's Health Issues, a journal of the Jacobs Institute of Women's Health of George Washington University in Washington, DC, researchers at Emory University in Atlanta found women bear six times the costs of caregiving than men, largely due to caring for family members. Women also often provide the most stressful care, such as daily feeding, dressing, and toileting—compared with transportation and spiritual support more often offered by men. Young adults may also be affected if they have to postpone graduate school or pass up on job offers that would require them to move away after a parent is diagnosed with a progressive neurologic condition.
As the Vargas family learned, getting financial advice isn't always easy. Part of that is because many financial advisors are not well-versed in the intricacies of long-term care costs for chronic or progressive neurologic conditions. When Patti Klein was diagnosed with multiple sclerosis 10 years ago, she and her husband, Martin Shenkman, JD, MBA, CPA, an estate planner in New Jersey, began looking into paying for her long-term care and were surprised to find little information. “There was really nothing out there,” Shenkman says.
Since then Shenkman has written more than 60 articles and four books and produced more than 80 webinars and seminars to help people make provisions for the financial impact of long-term care. He and his wife, an anesthesiologist who had to quit working about three years after her diagnosis, tour the country helping financial planners understand how to assist people with chronic or progressive diseases.
“We had the knowledge and connections and resources to fight a lot of battles,” Shenkman says. “It's troubling how many people with these challenges get steamrolled by so many institutions and people in society.” For example, employers may be unwilling or slow to make accommodations, particularly for people whose disability may not appear obvious. Or insurance policies may not cover what people thought they'd cover. And navigating the process for obtaining assistance through Social Security can be maddening, he says.
Fiona Van Dyck found this out the hard way after her father was diagnosed with Alzheimer's disease. “I was an estate-planning attorney, and my sister was a nurse. And we were blindsided by what we didn't know,” she says. For example, even as a lawyer, she wasn't aware of the nuances of writing a power of attorney such as explicitly allowing a financial agent to make gifts of assets.
That's one reason why Van Dyck specializes in helping people who are dealing with chronic progressive diseases.
Savvy Savings Strategies
Fiona Van Dyck, JD, and Martin Shenkman, JD, MBA, CPA—attorneys who have personal experience paying for long-term care—devote much of their respective practices to helping families in similar situations. Here, they and other experts offer advice.
Plan ahead. Too often people wait to talk to a financial advisor. “Sometimes family members come to me when their parent is already in the memory care unit,” says Fiona Van Dyck, JD, an estate planner with offices in New Jersey and Pennsylvania, whose father had Alzheimer's disease. “And maybe a spouse is still at home and the family needs to figure out how to best protect that spouse financially.” Thinking ahead allows families to shift some assets, such as a home, to another family member in the hopes that the patient will then qualify for Medicaid to pay for long-term care in a memory-assisted residence. This can help families meet Medicaid's five-year “lookback” period, which allows a federal or state-funded program to calculate how those assets could have been used to pay for long-term care and to require families to pay for the equivalent cost of care before government payments kick in.
Be flexible. Every care plan must match individual needs and preferences with available resources. And, given the progressive nature of many neurologic diseases, that plan must anticipate changing needs, says Martin Shenkman, JD, MBA, CPA, an estate planner in New Jersey, whose wife, Patti Klein, has multiple sclerosis. For example, a person in the early stages of a disease may require in-home aides—which cost about $20 an hour, according to the Alzheimer's Association—while someone in the later stages may need a semi-private room in a nursing home at a cost of $225 a day. Several organizations, such as AARP and the Family Caregiver Alliance, offer guides and online calculators to help plan or calculate costs. The Family Caregiver Alliance, for example, has a state-by-state guide to available public services at http://bit.ly/FCA-FamilyCareNavigator.
Sign up for insurance. “Everybody should have life insurance, long-term care insurance, and medical insurance,” Shenkman says. He and Klein note that people often don't buy long-term care insurance, which is designed to pay for care over a long period of time, when they're young and healthy, because they can't imagine they will need it. “But you never know what curveball life is going to throw you. So when you're young and healthy, you should have a disability policy,” says Klein. “Once you get diagnosed with an illness like I have, you can't get long-term care insurance.”
Researching insurance companies before signing up is a must, says Bernie A. Krooks, JD, CPA, an attorney in New York who specializes in elder law and special needs. “A whole cottage industry” of law has developed involving claims from people saying the long-term care insurance didn't pay for coverage they thought they had.
Organizations such as Consumers Union (http://bit.ly/ConsumersUnionChoices) and AARP (http://bit.ly/AARP-InsuranceResource) offer a variety of tools to help you understand and shop for health insurance.
Craft and document clear end-of-life directives. Talk to the person for whom you're caring about the kind of care she wants toward the end of her life. Does she want to be kept alive at all costs? If not, be sure her wishes are documented or the family will continue to be responsible for paying the bills even if her life is extended against her wishes. Forms to discuss with your relative include Do Not Resuscitate (DNR) orders, which are signed by physicians and placed in a person's medical records, or living wills and other advance directives. Each state has different rules on how to draft these documents, so it's best to check with the American Bar Association's national website at http://bit.ly/ABA-HealthCareDecisions. Some states recognize Physician Orders for Life-Sustaining Treatment (POLST), a medical form to be used close to the end of life that dictates specific orders for emergency medical care, such as allowing CPR or full resuscitation treatment or nothing. For more about this document, visit http://bit.ly/POLST-FAQs.
Assign a trusted partner. At some point in the course of a progressive neurologic condition, the patient may not be able to make his or her own decisions. “If the person you're caring for has Alzheimer's disease, for example, who is going to make decisions about his or her care as the disease progresses?” Shenkman asks. He advises families to designate a family member or another trusted person to help co-manage the person's financial affairs for when the condition progresses. Also consider appointing a health proxy to make health decisions on behalf of the patient and a power of attorney to handle legal affairs.
Get legal help. If you can afford it, talk to an estate planner or even an attorney in general practice, Shenkman says. If that's out of reach, he recommends checking the local bar association to see if it offers legal advice at reduced cost. Some health organizations also offer subsidized legal advice. The National Multiple Sclerosis Society, for example, offers such a service through the Foundation for Financial Service Professionals at http://bit.ly/NMSS-FinancialPlanning. The next best option is to join with friends in similar situations and educate yourselves together using resources online and at the public library.
Understand Medicare and Medicaid. Many families expect Medicare to take over when their parent or loved one reaches 65. But Medicare doesn't cover long-term care, says Krooks. And people often don't realize that until it's too late. Medicaid, on the other hand, does provide long-term care, but only for those who are below a certain income, he says.
“Medicaid has strict income and asset financial requirements. You've got to be poverty stricken or destitute in order to qualify. So you've got to spend down all your money,” says Krooks. The 2017 Poverty Guidelines define poverty in the 48 contiguous states as an income of $12,060 for one person and up to $41,320 for a household of eight. For Alaska and Hawaii, the income cutoffs are slightly higher. If your income qualifies you, Medicaid will pay for your health care. If not, you have to find other sources, says Krooks. If you can afford it, he suggests working with an estate planner or an attorney who can help you make plans to redistribute your assets, perhaps by using trusts, to shield you from the impact of paying for long-term care.
For lower-income families who may qualify for Medicaid, its rules are too complex to give one-size-fits-all advice, Krooks says. Since the program is jointly funded and run by the federal government and the states, the details of how it works are highly variable. Keep in mind too that even with government assistance, such as through Medicare, the cost of some prescription drugs can be daunting. To navigate the complexities of Medicaid, Krooks advises finding a local attorney or financial planner knowledgeable about the state's program. A local bar association can help locate an expert. The federal government's website offers an overview of the program and links to state resources at http://Medicaid.gov/Medicaid/benefits.
Establish a power of attorney. Power of attorney formally grants someone the power to handle another person's financial and legal affairs due to incapacitation and saves families from having to go to court to appoint a legal guardian, which is an expensive, time-consuming process, says Van Dyck. Basic powers of attorney confer only enough authority to handle routine financial matters. Others provide flexibility to allow someone to dispose of major assets to meet Medicaid requirements or state and federal tax policies, she says.
“Not all powers of attorney are the same,” Van Dyck says. For example, a power of attorney can be set up to accommodate the changing nature of a person's capabilities. An agent might have power of attorney temporarily, allowing for control of affairs to be returned to the patient if his or her situation improves.
Consider a revocable trust. Revocable trusts—which allow the person who sets one up to alter or cancel some of its provisions under certain circumstances—let a spouse, a sibling, an adult child, or another guardian to help manage a person's affairs, says Shenkman. With forethought and a specific diagnosis, financial planners can craft financial and legal strategies that also give some flexibility to the person who has been diagnosed with a chronic condition.
“I modify living wills and health proxies to address the specifics of the disease,” Shenkman says. For example, setting up a trust with a family member or another guardian as a co-trustee might allow a person with Parkinson's disease to retain a degree of control until a hospitalization or a setback forces the guardian to take over. If the person recovers, he or she could resume managing financial affairs.
Consolidate accounts. If your relative keeps accounts in multiple banks, help him or her consolidate them, says Shenkman. “I've seen people with [accounts at] 20 different institutions. Think how much easier one institution is. It's not rocket science, but it has a big impact.”
Establish clear oversight. Set up financial accounts so a designated trustee receives duplicate financial statements and can ensure that the patient is handling affairs correctly and not being taken advantage of. One copy could go to the person with power of attorney and extra copies should go to someone who is not living with the person and who has no power to conduct financial transactions, Shenkman says.
Keep it simple. Arrange to have your relative's routine bills paid automatically through a bank account or credit card. Shenkman and Klein have done this with their mortgage, utilities, and other household expenses. “These things are not complicated and they don't cost much,” says Shenkman. “And everybody should do them because who knows who gets what down the road?”