Chronic illnesses can be devastating to a family both emotionally and financially. As financial counselors, we can help families set up budgets and financial plans to prepare for such an event. Setting up a good financial plan can help minimize a family’s stress and control spending.
The approach you take depends on when you begin meeting with the family. If you can assist them at the beginning of the illness, then you may be able to help set up a budget to keep debt to a minimum. That is what this article focuses on. However, you may meet with the family in the middle or end of an illness when medical debt has become a problem. It is vitally important to set up a spending plan as well as look into any resources and options available.
A good spending plan will not be able to solve everything when coping with a chronic illness. Medical debt and income reduction are the two primary reasons for bankruptcy during this time according to a study by Harvard University. Every situation is unique and nothing occurs in isolation. When assisting clients, it is important to allow them to be empowered by the decision making process, regardless of the size, because they may already feel powerless.
There are two primary parts of the spending plan that need to be addressed: (1) potential increase in medical costs and (2) possible decrease in income. Other issues to keep in mind are transportation, food, and legal documents.
Health insurance is a big part of managing the financial aspect of any disease. What the client pays varies greatly by plan. Some questions to ask clients: Do you have health insurance? What is covered? What is your deductible? Who is in-network? When discussing how much they might spend, this is a good time to emphasize that good communication with the health insurance company will help avoid surprise bills and costs. For example, Herceptin, a chemotherapy drug for breast cancer, costs around $4,500 a month. If someone has to pay 20 percent coinsurance then it will cost $900 a month for that one drug, not including doctor's visits and other costs.
If the client does not feel that they can manage these details, ask them if they have someone they trust to track expenses and communicate with doctors' offices and the insurance company. The American Cancer Society has some resources and information to assist patients in managing treatment. Receiving the best treatment at the best price is the goal, and a financial counselor can offer pointers to help clients communicate this with their providers and insurance.
Depending on the situation, the patient and other family members may need to take time off for surgery, doctor appointments, and treatment. The financial counselor can help the family devise a plan if a reduction in income occurs. First, it is important to stress communication with human resources department of their employer. There are many variables that may impact income. Not all employees are entitled to FMLA while others have short- and long-term disability available. If the emergency fund is already being used for medical expenses, help the family look into other ways to maintain income or reduce spending. This could include a second job for a family member or contract work for the patient if they are able. There are organizations that offer financial assistance, but they are not guaranteed and the amount they offer always depends on donations and need.
A smaller part of the budget to be mindful of is transportation and food costs. Extensive travel may be required for treatment, meaning more money is spent on gas and parking costs. Families may eat out more if travel is required or if no one has the energy to cook. Although travel costs can appear minimal, it is important to stress maintaining a travel and food budget so they continue to have money for other expenses. Although the focus is on getting through this difficult time, it is important to help them minimize the financial impact.
A final thing to mention to clients are legal documents. Health directives, wills, and power of attorneys so a family member can assist as needed. Current life insurance information is important. Therefore, if the prognosis becomes terminal, the family can evaluate whether to cash out early to spend quality time together. Also, if the patient is the one who manages the finances, it might be a good idea to discuss how their partner can become more involved in assisting or taking over the finances.
A chronic diagnosis may change what we emphasize in a spending plan. However, our approach may need to be more gentle. The client’s thoughts will be on their illness and their family. You can help ease some of the financial stress and it is important to address their financial concerns from that perspective.
Jessica Padden is an Accredited Financial Counselor and 2011 FINRA Military Spouse Fellow. She enjoys teaching financial education and seeing the lightbulb moment and is currently working with military servicemembers. She enjoys going on adventures with her family on the weekends.