Coping with illness

Medical problems, especially long-term illnesses, can lead to some of the most challenging personal-finance issues that you'll ever face. If you're coping with an illness, here are some important financial issues you'll want to address.

8 financial steps you should take when coping with illness

1. Understand what your health insurance covers and doesn't cover.

This can require an in-depth reading of the document that outlines all the specifics of your policy, particularly if you have an unusual ailment or treatment. Speak with your health insurance agent or insurance company if you have any questions.
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2. Know your out-of-pocket expenses.

If your health insurance has gaps or you don't have coverage at all, figure out how the costs of your care will affect your budget. There are many variations on this, from it being a minor annoyance all the way to something that potentially wipes out your savings or causes debt. 

It's essential, though, to figure it out and start planning once you know the impact. If your employer offers a flexible spending account, use it to save pre-tax money for these out-of-pocket medical expenses.
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3. Learn how Medicare and Medicaid work both generally and in your state.

Medicaid is a state-run federal program that covers health-care costs for low income individuals. Medicare is a federal program that covers individuals over age 65, plus those who have had kidney failure, or those who are permanently disabled and cannot work. If you are not working, these programs may cover your medical bills. 

You can find a lot of information about eligibility at the Center for Medicare and Medicaid Services at www.cms.gov.

4. Look into Social Security disability insurance benefits.

Do this before your illness is ongoing. These are available for those with life-long medical conditions that are regarded as disabilities, but you can qualify if your illness is expected to last more than one year. 

More information is available at Center for Medicare and Medicaid Services and Social Security Administration.
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5. Know the specifics about Alzheimer's and dementia.

If the illness you're coping with is Alzheimer's/dementia in a parent or other family member:

• Understand the illness.
  Visit the Alzheimer's Association at www.alz.org and learn as much as possible about the disease and its progression. The time frame for this illness varies quite a bit and is currently unpredictable, but it's helpful to understand the ranges.

• If there's a family history, get long-term care insurance before diagnosis. If you have a family history of the illness, get long-term care insurance before diagnoses. If the person you know with this illness has purchased long-term care insurance, find out what it covers and when. Get a full understanding of the triggering factors for the policy, and how you go about documenting them to start benefits. For more information about Long-Term Care Insurance, visit www.aarp.org and search "long term care."
  More about long-term care insurance >

• Appoint a power of attorney as soon as possible.It's essential that all access to money be disconnected before an individual with dementia reaches the point where it's a problem. The legal documents necessary to do this can only be signed when the person has "legal capacity" to do it, so before the disease progresses. Individuals who have not done this are common victims of financial fraud. With the right power of attorney in place, you can prevent that from happening.

• Learn about Medicaid.
  Learn about eligibility for Medicaid and how it can factor into your plans for covering the costs of care. Speak with an attorney who specializes in "elder law" or benefits in general. Keep in mind that a lot of dementia care is provided in the home and isn't medical in nature. Research Medicaid in your state to see what benefits may apply in your case. More information is at www.cms.gov.

• Review and update legal documents.
  Get all legal documents in order as early as possible because it will become progressively more difficult as the disease advances. Consider a living trust as part of the mix, as trusts can be a bit easier to administer than alternatives. Speak with an attorney who specializes in setting these up.
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6. Understand your legal rights.

If medical bills are stacking up, and bankruptcy is a possibility, understand your rights in that process. Some of your assets, such as retirement accounts, are likely to make it through a bankruptcy. In some cases, it can be better to avoid tapping retirement accounts to pay for medical expenses or other costs during an illness, even if it results in bankruptcy. Speak with an attorney because this is a complicated area of law.

7. Know your employment rights.

If you are fired from your job after a lengthy illness, talk with an employment attorney to see if the firing was legal. This is even more relevant if the illness resulted from your work. For more information on employee rights, see: Nolo: www.nolo.com/legal-encyclopedia/employee-rights

8. Make sure your health directives are in order.

The person coping with illness needs to set in place a living will and a health care power of attorney to make sure that he or she is taken care of in the case that he or she is unable to communicate. An estate lawyer can help prepare the right legal documents. You also want to make sure wills, trusts and estate plans are current and up to date. Check that all accounts have the proper beneficiaries named.
More on wills and estate planning >

Links we like

Here are some online resources you may find useful:

• Center for Medicare and Medicaid Services: www.cms.gov
• Social Security Administration: www.ssa.gov/pgm/disability.htm
• Nolo: www.nolo.com/legal-encyclopedia/employee-rights