Per Larson, who writes for Body Positive frequently on disability, back-to-work, and related issues, is a financial advisor to people with HIV and other serious illnesses and author of 1997's Gay Money_. Excerpts from the book are printed below, along with the author's comments-in-hindsight about his three-year-old advice._
Financial Health and Illness
HIV has wrought financial havoc in our community, with no signs of slowing down. In major urban centers one third to one half of all gay men have HIV. In small cities it's one in ten.
HIV -- or just the possibility of HIV -- remains the crucial financial challenge for gay men. HIV has not just revolutionized the way people fight disease; it's spawned new techniques and resources in personal finance as well.
Providing for Catastrophe: Last Things First?
The most fundamental financial change with HIV has been to shift thinking from catastrophe planning to crisis management, from a last-things-first mentality to a first-things-first focus.
What are we providing for, anyway? Up to now the job of financial planning has been seen as providing for our last days. Nursing-home care is the bogeyman that insurance salesmen, investment brokers, and financial planners have used to convince us to save for that last great battle.
On the surface it seems logical. A medical frenzy accompanies life-threatening illness and our days of dying -- our last big blowout. About 20 to 30% of all medical costs are expended in those last days before death.
As people with AIDS have found out, the real financial impact of illness happens during our lives -- when disease suddenly stops our money machine, when we care as much about comfort as about care, and when the costs of fighting illness count.
Cash as a Treatment Tool
Treatment for HIV averages well over $100,000 and often runs up to $1,000,000, totals that can easily go beyond health-insurance policy maximums, approaching average lifetime earnings.
Crisis Management: First Things First
Illness can make finances seem unreal. We become a battleground not just for microbes but for medical providers and insurers fighting over large sums.
Our only practical defense is crisis management. Cash and credit become king, and cash flow estimating is key. Preapprovals are crucial. Mistakes in billing and reimbursement are widespread. It may pay to have a technical specialist take over the claims payment and reimbursement process. Some guidelines to keep in mind:
- First determine how much cash will be needed, and on what likely timetable.
- Nail down tax considerations before taking any action.
- Think through the impact on estate planning.
- Keep your options open; the more choices you have, the greater your chances for substantial savings and better care.
- Remember that the sequence of action is as important as the actions themselves.
Truck Route or Expressway?
How do we get that kind of cash when disease hits in midlife? We have two choices: the public welfare truck route or the private insurance expressway.
Welfare just isn't very gay. We not only lose choice, we lose dignity, turning control over both our finances and a wealth of information about every detail of our lives to a potentially uneducated bureaucrat of unknown homophobic tendencies.
Group or individual insurance now becomes an asset greater than any real estate or investment holdings we might own. In fact, those traditional focal points of personal finance must take a backseat if illness strikes, since their long time frames are ill suited to the need at hand.
- Employment benefits are now as important as salary or the job itself if we're seriously ill. They're cheap, and they don't require medical screening.
- Medical insurance is priority number one. We need to make sure it won't disappear if we change a job, lose a job, go on disability, or become eligible for Medicare.
- Disability insurance is priority number two. Fighting illness is a full-time job, and we can't do it if our income tank is nearly on empty.
- Life insurance now ranks number three, offering the possibility to get cash out of life insurance if our illness is seen as life threatening.
- It now makes sense to buy what is otherwise needless and expensive insurance: catastrophic medical coverage and old-fashioned hospital indemnity plans that literally pay cash when we're in the hospital.
- Liquidity becomes primary. Credit records must be impeccable, credit limits must be expanded, and otherwise expensive and needless disability and life insurance options on credit balances may now be appropriate.
Jobs: The Back Door to Security
What if key insurances are missing? If we already have a serious illness, our best bet is to search for jobs because of their benefits, not just their salary. Follow the benefits, the money will follow.
Certain industries, such as finance and computers, offer liberal and luxurious benefits that are often effective soon after employment starts. Medical insurance is usually cheap and with few limits. If the employer is large enough, we can take the insurance with us for eighteen months under the COBRA laws -- and if we leave on disability, our COBRA coverage will continue right up to the point where Medicare kicks in.
Corporate coverage is not without pitfalls. Beware of maximums on pharmaceuticals and even specific diseases. Look out for poor-quality managed-care offerings, because you usually can't change plans more than once a year. And keep in mind that if the company goes out of business while you're employed or on disability, its group-based medical insurance will also disappear.
Disability benefits are offered by fewer than half of all employers, mostly in prosperous, "benefits-rich" industries. Get to know what those industries are in your locale. Look for plans that pay 60 to 70% of current compensation, including bonuses. The best plans make you pay the low premium, making the benefit tax free and usually near-equal to take-home pay; in portable plans the coverage can be convertible to an individual plan if you leave.
Upside-Down Credit Debt
Illness often prompts worries about debt, leading many people to cut up their credit cards in one last attempt to be good. In fact, this is the opposite of what should be done. What's crucial with illness is liquidity. It's time to buff up that credit record, pay bills promptly -- and get more credit.
It is often possible to get disability and life-insurance coverage on card balances with no medical screening, although it usually needs to be in place for six months before it's effective. If illness forces expenses onto cards and forces you onto disability, this back-door insurance will pay off the balance.
If you insure your cards you can reduce premiums by keeping your card balances low, ideally using them only once a year to keep them current. If you do have outstanding uninsured balances at the time of disability, you can sometimes argue that the sudden shift to disability income is a valid basis to negotiate extremely low repayment plans, to freeze interest, or to forgive accounts -- especially if individual card balances are but a few thousand dollars. Sometimes much disability income is exempt from creditors.
Lastly, federal student loans and many other types of student loans are often forgiven automatically on disability. If this is true, it pays to keep payments minimal until disability starts.
Health Insurance: The Buck Stops Here
We need insurance we can take with us from job to job -- insurance that will stay with us if we leave a job or become ill. Modest health-insurance reform has in fact now made insurance more portable. But in many states restrictions remain. Many gays fighting illness cannot leave their job without the risk of being slapped with a preexisting-condition waiting period, during which time there's no reimbursement for that illness.
As someone trained to run HMOs, I recommend managed care only for people who have little need for the medical system. HMOs are taking power away even from physicians, much less consumers. They see sick people as costs -- to be eliminated.
We can fight back. Find out if the HMO has an ombudsman -- and become a squeaky wheel. We are, after all, ultimately in charge of our own care. One of the great revolutions of HIV needs to be repeated. In New York the major disease groups banded together to change state insurance laws. For the first time in history representatives of people with heart, lung, kidney, blood, HIV, and cancer problems converged on lawmakers. Think about it; this is an incredible lobby -- if we will but band together.
What about Medicaid? Only as a last resort. Its low reimbursements are incentives to providers to channel patients into low-cost treatments; its delays can literally mean poor care. It is no accident that three quarters of long-term survivors have private insurance.
Well-meant advice to "spend down" (i.e., get rid of assets and income) to get onto Medicaid is a bad bargain financially as well. Poor is not gay. It is far preferable to seek health insurance through work, domestic-partner benefits, or, after legal consideration, a marriage of convenience.
Disability Insurance: Funds for Life
HIV teaches that health insurance without disability coverage is simply not enough. Often more income is needed than was earned before: many expensive treatments of new diseases are poorly reimbursed, if reimbursed at all.
Disability benefits can also help us build a bridge back to life, to realize the dreams that acquire a new urgency when time becomes precious. Clearly, they are resources worth planning for -- but far more difficult to acquire after the barn is already burning. People whose illness has already progressed to disability levels can still get these benefits through group plan employment benefits packages, and are encouraged to do so if health at all permits.
There are two other methods that people have tried, but both are fraught with risks so high and success rates so low that they cannot be recommended.
- The first is to lie on a private disability policy application form and not make a claim for the two years that the incontestability clause runs. The policy writers are a step ahead of such schemes; since 1990, insurers put escape language into incontestability clauses, such as "except in case of fraud," that can render such policies worthless.
- The second approach is to find questions on an application form on which all medical screening questions could possibly be answered no. You are urged to do this only if you have a lawyer review the form. Practically speaking, this is a poor course. Some disability policies are easy to get because those insurers screen out people when they make a claim -- not when they apply. Then, of course, it's too late.
In the summer of '96 good news about new drugs broke at the annual AIDS conference. The remarkable promise of these new drug therapies has deservedly been a cause for celebration throughout our community. However, the financial fallout has been complex and chaotic -- and often less than good.
Social Security doesn't change their criteria quickly with the advent of the new treatments. Because Social Security's criteria are written, a change is also a political act and may take a long time to take effect.
Few realize those on Social Security already have an elaborate system for returning to work. [Editor's Note: The trial work-period program is discussed in detail in the author's "Getting Back In -- A Two-Pronged Approach" and "Hitting the Streets -- Getting the Job and Keeping It" in the April and May issues of Body Positive_.]_
There are also government programs that pay the educational fees and retraining expense of people on disability; these are usually run through the states. Other programs exist by which people on welfare can put money aside tax free to start a business, while continuing to receive benefits. Turning to such programs should be a first step when news turns good.
Private disability carriers are neither so structured nor so helpful. Bad insurers suddenly stop benefits whether there's good news or not, effectively shifting the burden of proof to the person on disability. For example, insurers may approve mental health claims -- but stop paying soon thereafter. Insurers are very good at putting words in the mouths of physicians and twisting the words on their reports; instruct your physician accordingly. Bad insurers send field hacks around to eyeball people on disability, but rarely go to the expense of hiring detectives. The real danger is not from insurance detectives, but from panicked physicians and patients. The problem to avoid is a premature return to work -- and patient panic.
Back to work is often a misnomer, because life moves forward and we rarely return easily to any early life stage or job. People on disability aren't put on ice. They grow, they age, they reflect. They often come to appreciate other things of value in life than money making; they come to realize that needs can be very few and wants don't necessarily require money; they move on to new interests. People on disability need new training before working again. The world of work changes in but a few years, especially in high-tech fields.
Beware of reentering the workforce at a low level; people tend to get pegged where they start. It's far better to learn a new trade, adopt new interests, and take the time necessary to thoroughly plan what role career is going to play.
The first dilemma with new treatments for any illness is paying for them. Insurers wait as long as possible before paying for new treatments. I have seen patients wait nine to twelve months before review committees got around to passing judgment on new-medication literature -- and they wouldn't have bothered to do that unless forced to. I've seen these committees dissolved when insurers were changed by employers, or when insurers merged. Patients with no money to pay for new treatments literally can't afford such delays.
The new treatments for AIDS have revealed how shredded the public safety net has become. A year after their introduction, fewer than half of the states were paying for the new AIDS drugs for people without medical insurance.
Credit and Debt
When disability seems like it is a one-way street, many people going out on disability either declare bankruptcy or, more likely, write their creditors saying that they cannot pay their bills and that their only income is disability income.
Going off disability means either paying the piper on these bills or -- more likely -- facing a damaged credit record. Usually old balances have been written off. What many don't realize is that rebuilding credit has become much easier.
Selling Life Insurance
The greatest impact of new treatments is on viatication. As in any financial market, the funding of viatical firms can react to news and hype wildly. Only a few months after the protease-inhibitor news, bank and insurer funding had virtually dried up and private-investor funding had mushroomed with the new AIDS drugs. Sellers overreacted as well, unloading policies without concern for the tax consequences.
The shift in funding has dramatic, unintended tax consequences for sellers, since investor-funded firms often are unlicensed -- and licensing is required for settlements to be tax-free in many states where those with HIV live. For example, nine out of the thirteen licensed viatical firms effectively withdrew from the New York market.
Since most sellers do not understand how the industry operates, since the industry changes a great deal, and since illness prevents the sellers from fully acting as cautious consumers, much more consumer abuse has resulted.
These events highlight how the sporadic way medical information is released causes artificial overreactions that hurt the seriously ill financially. Medical news is kept under wraps until publication in periodic scientific publications or release at annual medical news events (such as the annual AIDS conferences). This makes progress seem sudden and prompts patients and their financial suppliers to lose perspective. Panicky sellers are a problem in any financial market; in viatication a lot more is at stake than money.
The true situation is not too dissimilar from other serious illnesses. At some point things get better -- but not for everyone. New treatments are expensive; not everyone has insurance or funds. They require strict compliance or diet discipline, produce side effects, generate mutant viruses, and may simply run out of steam. Some people can't tolerate them; others are too sick to benefit. In such a situation impulsive financial changes are totally uncalled for, on the part of insurer and patient alike.
Whether or not an illness is life threatening or chronic has major implications in both medicine and finance. When illness becomes chronic we return to standard operating procedure where planning is possible. As long as illness remains life threatening, crisis management is the order of the day. New treatments can in fact increase uncertainty and shatter time frames, making an illness like AIDS an even great financial crisis than before.
Amazingly, virtually all of the above advice, given in 1997, applies today -- especially to someone newly diagnosed or considering disability. The key exception is anything related to viatication -- the sale of life insurance -- a totally changed market.
In other key areas, the change is one of emphasis:
_* In medical insurance, a change in focus from COBRA to Medicare regulations.
- In disability insurance, the addition of questions about returning to work.
- In investment, a shift from liquidity to concerns about income generation through bonds and dividends.
- In real estate, a move from the holding pattern of renting to possibly acquiring property that will furnish rental income.
- In work for hire, the wish for strong retirement benefits and opportunities for tax-deferred income plans in addition to strong employee benefits.
- In couples, a de-emphasis on independence and an emphasis on cooperative arrangements and joint ventures.
- In legal affairs, an interest in trusts in addition to the need for wills and powers of attorney.
- In credit, replacement of attempts for forgiveness of debt by efforts to restore credit records.
- In taxes, replacement of attempts to shelve or forgive past obligations with preventive tax planning._* In life insurance, a marked decline in the ability to sell life insurance -- which I will discuss in "Money Matters" in next month's Body Positive.
Some of the more than 100 articles Per Larson has contributed to Body Positive, Positively Aware, and POZ, among other publications, are available at www.GayMoney.com. He can be reached at PerLarson@aol.com or (212) 734-0941.