Financial Planning for the Unexpected Accident

A broken sternum. It turns out that there is a significant amount of financial planning that results from breaking your sternum.

One week after my wedding (and the day before I was to leave for my honeymoon), my mother called to tell me that my grandmother (“Nanaw”) was at the hospital. Nanaw had tripped and hit her chest on a bedpost, breaking her sternum and rib in the process. What was particularly frightening was that the impact produced internal bleeding. She was admitted to the intensive care unit of the hospital for nearly a week.

I’m pleased to report that Nanaw is doing well and has been moved to a rehabilitation facility 10 minutes away from her home. She’s Italian, so you can imagine how she’s “cooperating” with her nurses as they guide her through her rehabilitation exercises (“I’m 81 years old, and I’ll do what I want!”).

Joking aside, I was continuously reminded during the course of my grandmother’s ordeal of all the financial planning required to tend to a situation such as the one described. Many people think that financial planning mainly pertains to investments, but it is so much more than that. For example:

1. When Nanaw was admitted to the hospital, we had to provide the doctors with her advance directive. What’s an advance directive? In Maryland, it is a combination of a health care power of attorney and a living will. The health care power of attorney allows Nanaw to choose a representative to make medical decisions on her behalf if she is unable to do so. The living will allows her to convey what type of medical treatment she would prefer if she was in a circumstance in which she could not communicate as much. This document is critically important because it ensures that her wishes will be fulfilled.
2. When Nanaw moved from the hospital to the skilled nursing facility for rehabilitation, who covers the rehabilitative care expenses? Medicare covers the first 20 days of qualified care in full; however, after 20 days, a co-payment is required, and after 100 days, the patient is responsible for the full amount. Another caveat is that for Medicare to cover this small amount (i.e., the first 20 days), the patient must move to the skilled nursing facility within a short time (generally 30 days) after leaving the hospital. So what happens if the patient needs more than 100 days of rehabilitative care?
3. If a patient requires more than 100 days of rehabilitative care, then they will need long-term care insurance. Long-term care insurance is very different than health insurance. Luckily, Nanaw did not need to be in the skilled nursing facility for more than 100 days, but if she did, then she would have required a long-term care insurance policy to cover the cost of her stay. These long-term care policies generally cover costs per day (e.g., $200) for a specified term, often ranging between three and six years. Although we are all at risk of potentially needing long-term care, this does not mean that we all need insurance policies to cover such a risk. I would encourage you to talk to a fee-only NAPFA Advisor (such as the advisors of The Financial Consulate) about whether you should purchase a long-term care policy if you currently do not have a policy. I would, however, strongly caution against being advised on the benefits of long-term care insurance from the same person who is “selling” long-term care insurance.

We all hope that accidents and medical issues like the example described will never happen to us, but inevitably, personal situations arise in which financial and medical planning becomes very important. Consider having these discussions about medical care and associated financial coverage with your family before any such issue occurs. If your family is anything like mine, you can bring up this fun, cheery topic during Sunday dinner as you are all eating rigatoni with Nanaw’s homemade tomato sauce.

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