Cover Story – Planning for Future Care

couple discussing finances

Options for future care and how to plan ahead financially

By Tom Garry

Edited by Susan Courtney
Reviewed by Barry A. Hendin, MD

Introduction

“I don’t want to become a burden to my family” is a frequent concern voiced by people with multiple sclerosis (MS). In addition to worries about current symptoms and the physical toll that the condition may take in the years ahead, individuals with MS can anguish over the prospect of exhausting not only the emotional reserves of their loved ones, but financial resources as well.

The concern is real, but the outcome is far from inevitable. In this article, experts outline six steps that people with MS and their families can take to establish a solid financial foundation. However, before addressing these six steps, to follow is a brief overview of long-term care options that provide the appropriate care needed as all individuals age and may become less able to care for themselves.

Types of Long-Term Care

The Six Steps to Planning for Long-Term Care

planning for care Thinking about the care that may be required in the years ahead, and how to fund it, can be a daunting proposition, but experts say that a proactive approach can go far toward easing current anxieties and avoiding future problems. To follow is a six-step approach to preparing for what tomorrow may hold.

Step #1: Act today in anticipation of tomorrow’s needs

Martin M. Shenkman, CPA, MBA, PFS, AEP, JD, knows from personal experience how difficult it can be to focus on long-term financial matters when a diagnosis of MS has just up-ended a family’s world. But he also knows from professional experience how important it is to do just that.

“In the days and weeks after you learn that you or a loved one has MS, you’re processing that news, trying to learn all you can about the condition, making decisions about treatment, and dealing with a range of emotions and issues,” says Shenkman, whose wife, Patti, was diagnosed with MS in 2006. While acknowledging those challenges, Shenkman knows from his work as an attorney whose practice is devoted to estate planning that it is critical for people with chronic conditions to devote time and thought in the near term to planning for the long term.

“The sooner you start, the better, even though it’s hard,” says the attorney, who practices in New York City. Shenkman adds that while focusing on financial planning is critical for everyone, the need is significantly heightened for people with MS because they may face the potential for both reduced lifetime earnings due to a shortened or otherwise limited work span and a greater need for medical and related care.

“One of the first steps people should take is to evaluate their spending. The day before receiving a diagnosis of MS, you may have had certain aspirations about what you would be earning in the future and about the lifestyle those earnings would support. Learning that you have MS is cause to reexamine all of that, and to make adjustments now – not at some point down the road. Cutting back on expenditures can help fund savings and investments. You don’t have to go crazy and immediately make drastic reductions, but you also can’t pretend that nothing has changed,” says Shenkman, adding that people should also consider questions such as whether converting term insurance to permanent coverage, refinancing their mortgage, paying off credit cards, or evaluating their investments, may make sense.

The attorney notes that a diagnosis of MS is also reason to ensure that basic documents that all people should have – including a will, a power of attorney form, and a healthcare proxy document – are in place and up-to-date. In addition, people need to consider whether they should establish a trust. For details, please see A Matter of Trusts: Exploring approaches to setting aside money for future use.

While taking a clear look at the range of future scenarios is essential, the attorney adds that people should not make rash decisions out of fear. “For example, I have seen people cancel life insurance policies to save on paying the premiums, when those policies could have been sold in the secondary market,” he said, referencing the market in which previously issued policies are bought and sold. Shenkman adds that in other cases, younger adults newly diagnosed with MS have switched their investment strategies to extremely conservative approaches that may give them a sense of security in the near-term, but may not serve them well over the long-run.

Shenkman says the key is to navigate between avoidance and denial on the one hand, and over-reaction and ill-advised moves on the other. And that, adds the CPA and attorney, is why the next step is critical.

Step #2: Assemble a team of trusted advisors

four professional roles People with MS need to draw upon the expertise of at least four different professionals in planning to finance their future care needs, says Shenkman. “You want an accountant, a financial planner, an attorney who specializes in estate planning, and a social worker,” he explains. But recognizing that not everyone can afford all these professionals, you still need to obtain the guidance that each of these disciplines can provide.

The attorney adds that it is essential to identify and start working with those professionals now, not when an urgent need arises. “You want time to find the people who are right for you, to develop a level of comfort and rapport with them, and to enable them to become familiar with you and your specific circumstances.”

Shenkman notes that while it’s obviously preferable to connect with legal and financial professionals who have experience with multiple sclerosis, or chronic illnesses generally, that should not be the top consideration. “First and foremost, you want to make sure that they are really good at what they do. You need them to be the experts in taxes, investments, or setting up a trust. You, with the guidance of your healthcare professionals, are the expert on your MS and your overall situation. Just as they will educate and guide you in their areas of expertise, you need to educate and guide them about how MS affects you, and about your hopes, concerns, plans, and preferences.”

Meanwhile, says Shenkman, a social worker can help identify issues to discuss with the financial and legal members of the team. He or she can be an invaluable resource in addressing workplace issues, navigating the healthcare and health-insurance systems, and understanding and dealing with the eligibility documentation requirements for government programs, and designing a care program if neeeded.

Step #3: Understand your current benefits

having benefits explained by a professional “People newly diagnosed with multiple sclerosis often don’t realize that the insurance coverage they have may not cover all aspects of their care, or the full cost of those services that are covered,” notes Angel Blair, MA, Manager of Mission Delivery – Client Services for the Multiple Sclerosis Association of America (MSAA). “Becoming educated on what your various insurance plans cover – including health, disability, and others – is an important initial step following a diagnosis of MS,” Blair says in relaying advice that she regularly shares with people who call the MSAA Helpline at (800) 532-7667, extension 154.

Shenkman wholeheartedly agrees. “People tend to focus on their health insurance coverage following a diagnosis of MS, because they want to understand to what extent tests, treatments, and visits to various healthcare professionals are covered. All of that is very important. In addition, you also need to have someone with expertise examine the specifics of your life insurance policy and any employer-based or private disability coverage you may have,” says the attorney. Shenkman notes, for example, that some term life insurance policies have provisions that allow for their conversion to whole life insurance, which may be advantageous after an MS diagnosis.

In other cases, life insurance policies have provisions that allow for people with a terminal illness or a permanently disabling condition to receive some portion of the policy’s value on a tax-free basis while still alive.¹ This early payment obviously reduces the amount that the policy’s beneficiaries will receive after the insured person’s death, and sometimes is capped at a certain percentage of the death benefit. Further, these provisions – often called accelerated death benefits – more often apply to people with a terminal illness rather than to those with a chronic illness with a modest or minimal impact on life expectancy, such as MS.

Other life insurance policies are hybrid products that also encompass paying for long-term care. As the government’s Administration on Aging explains, “The idea is that policy benefits will always be paid, in one form or another [either after or before death]. These products are relatively new and the features are changing as the product evolves. The amount of the long-term care benefit is often expressed in terms of a percentage of the life insurance benefit.”¹

Please note that early-payment provisions are not included in all life insurance policies, and combination life and long-term care insurance policies are relatively new and not common. Life insurance policies should be thoroughly reviewed for these and other provisions and features.

Turning to disability insurance, Shenkman notes that people need to understand how an insurer defines “total disability” vs. “partial disability,” and what notifications and documentation are required – and in what timeframe – to demonstrate disability. You don’t want to violate a requirement of the policy and risk jeopardizing your coverage.

Another consideration, the attorney adds, is whether the disability insurance will pay out if a person can no longer work in his or her own occupation or whether it has a more-stringent requirement that the person not be able to work in any occupation.

“These policies can be quite complex, and you want someone who is familiar with their provisions to examine them closely before you take any action,” says Shenkman. Additionally, homeowners should review their mortgage paperwork to see whether they purchased, and may have forgotten, insurance that provides for their home payments to be made should they become disabled. Experts add that it is important for people to realize that long-term disability policies are not designed to match the full amount of money a person had been earning, and often provide only 40% to 60% of a person’s prior income.

One of the best forms of insurance for meeting future needs related to MS is long-term care (LTC) insurance, which typically covers personal care in the home, the community setting, and nursing homes. However, only about 8.1 million Americans have purchased LTC coverage.² A recent survey of 2,507 people with MS conducted by researchers at the Cleveland Clinic’s Mellen Center for Multiple Sclerosis Treatment and Research in Cleveland, Ohio, found that just 9.7% of respondents had long-term care insurance.³ If you are among that minority of people who had the foresight to purchase LTC insurance, Shenkman explains that it is particularly important to review the terms of that policy.

Selena Fisher, MA, Manager of Mission Delivery – MRI for MSAA, notes that people should also explore the benefits offered at the state level and by their county Disabilities Services Office or similar agency.

Step #4: Understand your future options for financing care

understaning your options Beyond insurance policies and other financial products and plans already in place, people with MS should become familiar with funding and care sources they may need to draw upon in the future. These include government programs such as:

Social Security Disability Insurance (SSDI)
Supplemental Security Income (SSI)
Medicare
Medicaid
Veterans Benefits

The Social Security Disability Insurance (SSDI) program provides monthly payments to people who are disabled and who have a “qualifying work history” of their own or of a spouse or parent, meaning that work-related taxes were paid into Social Security. SSDI is available only to people who are deemed totally disabled; people with partial or short-term disabilities are not eligible. The Social Security Administration applies a strict definition when assessing disability. Three key provisions include:

The person cannot do work that he or she did previously
The person cannot adjust to other work because of his or her medical condition, and
The disability has lasted or is expected to last for at least one year or to result in death.⁴

The monthly amount paid is based on earnings over a person’s career. For 2021, the average amount for all qualifying people with disabilities is $1,277, with that average rising to $2,224 for a qualifying worker with a disability who has a spouse and one or more dependent children.^4,5 With a few exceptions, people who qualify for SSDI payments must wait five months after approval to start receiving payments.

Supplemental Security Income (SSI): This program is also operated by the Social Security Administration. Unlike SSDI, however, eligibility is not based on a person’s work history. Rather, the program provides basic financial assistance to people with disabilities and older people with limited or no income and assets. The financial requirements are quite stringent, with individuals required to have savings and/or other assets of $2,000 or less, and married couples living together having resources, savings, and/or other assets of $3,000 or less. Homes that people live in are not counted toward the valuation of their assets. The value of their cars typically is excluded as well. The monthly payment to individuals is $783, while that for couples is $1,175. Most states provide an additional stipend to SSI beneficiaries and automatically qualify these people for Medicaid.^5,6 Medicare pays for healthcare for people aged 65 years and older, and for people younger than 65 who are receiving Social Security Disability benefits.¹

taking careful notes Medicare primarily covers doctor visits, medications, and hospital stays, and does not pay for most long-term care or personal care. There are some exceptions, however. If a person has had an inpatient hospital admission of at least three days and then is admitted to a Medicare-certified nursing facility within 30 days of that hospital stay and needs skilled care, Medicare will pay a portion of the costs for up to 100 days of each benefit period. For the first 20 days, Medicare pays the full cost of care, while patients are responsible for a co-pay for days 21 to 100, at which point Medicare stops covering long-term care. Medicare Advantage plans follow the same approach, but the co-pay costs to patients may vary from those of the traditional Medicare program.¹

Medicare will also pay for part-time or intermittent skilled nursing care when a physician deems it medically necessary, as well as physical therapy, occupational therapy, and speech therapy provided by a Medicare-certified home health agency. Additionally, Medicare will cover 80% of the cost of durable medical equipment, such as wheelchairs or walkers, with the Medicare beneficiary being responsible for the other 20%.¹

Medicaid is a joint federal-state program, so it is important to keep in mind that eligibility requirements and covered services vary considerably from state to state.

Medicaid differs from Medicare in important ways. On the plus side, Medicaid will cover ongoing long-term care services, whether delivered at home, in the community, or in a nursing home. On the negative side, eligibility is based on financial and other requirements, meaning that if you earn or have too much money, you will not be eligible. As a result, many nursing home residents have to first exhaust their personal funds to become eligible for the Medicaid program.

Further, when Medicaid covers long-term care services, federal law mandates that states attempt to recover the amount Medicaid spent on a person’s behalf from his or her estate following the person’s death. This requirement can involve assets such as the person’s home and property, although estates are exempt from this recovery while a Medicaid recipient’s spouse is still alive.¹ Given the complexity of getting into the Medicaid program, and of trying to keep any assets out of Medicaid recovery after death, obtaining guidance from an elder law attorney or other professional well-versed in how the program works can be very advantageous both for people with MS and their families.

Veterans’ benefits. People who served in the military may qualify for a range of nursing home, assisted living, and home healthcare services provided by the United States Department of Veterans Affairs. Information on these services is available at https://www.va.gov/health-care/about-va-health-benefits/long-term-care/.

In addition to government programs, many people with MS draw on their assets to fund care in their own home, an assisted living facility, or a nursing home. Beyond savings and investments, those assets can include the value of their home or life insurance policy.

For example, a reverse mortgage is a type of home equity loan that provides people with either a lump-sum payment or a line of credit they can draw upon as needed. In either case, the money can be spent for any purpose the person chooses, including paying for long-term care. You continue to live in your home and retain the title to the home, and do not have to repay the loan so long as you live in the home. Further, so long as you spend the money in the month it is received, the money is not taxable, does not affect Social Security or Medicare benefits, and is not taken into consideration when determining eligibility for Medicaid.¹

For all of those attractive features of a reverse mortgage, several other factors must be considered. First, the home must be your primary residence, and you must continue to live in it and to pay all property taxes and maintenance costs. Any existing mortgages or other debt tied to the home must be paid before the money can be used for other purposes, and the company providing the reverse mortgage can also stipulate that money be spent to make specific repairs that affect the value of the home. People generally have to be age 62 or older to qualify for a reverse mortgage, and meet with a counselor to examine whether a reverse mortgage makes sense for them. Payment of the amount borrowed and interest accrued is due when the last borrower, which typically is the remaining spouse, sells or moves out of the house, or dies. If heirs want to retain ownership of the home, they can repay the reverse mortgage. Alternatively, they can sell the house and keep the difference if the sale price is higher than the amount due on the mortgage.¹ The complexity and potential pitfalls of reverse mortgages argue for close consultation with an attorney.

Beyond hybrid life/long-term care policies and accelerated death benefits, there are other ways life insurance policies can provide a source of income to pay for long-term care needs. One such approach is known as a viatical settlement. In this arrangement, a company buys the life insurance policy for a percentage of its value. The seller designates the company as the policy’s beneficiary, and in return gets cash. The company continues making payments on the policy, so that it receives the full value of the policy when the person dies. In most cases, a person must be terminally ill, with a life expectancy of two years or less, to enter into a viatical settlement. However, some states allow people who are chronically ill to sell their life insurance policy in this manner. The payment is tax-free, but in the case of a chronically ill person expected to live for at least two years, may represent only 50% of the policy’s total value.¹ Again, consultation with an attorney is imperative.

Experts say that while a diagnosis of multiple sclerosis essentially precludes people from obtaining long-term care insurance, it does not necessarily prevent them from obtaining life insurance and even, in some cases, long-term disability insurance, although MS-related disability may be excluded from the scope of the policy’s coverage. Similarly, with life insurance, the amount of coverage available may be limited, and companies may choose to defer issuing policies to recently diagnosed people, preferring to see how their disease course unfolds over subsequent months or even years. Whether with life or disability insurance, however, people with MS should expect to pay higher-than-average premiums that reflect the risk associated with their condition. For a fuller discussion of obtaining life insurance following a diagnosis of MS, please see the article Life Insurance with Multiple Sclerosis by Jeff Rose, CFP^®.

Other options for funding care include retirement savings and annuities. In most cases, if an individual withdraws money from a 401(k) retirement plan or Individual Retirement Account (IRA) before reaching age 59½, he or she must pay a 10% early withdrawal tax, in addition to any other taxes. This 10% tax is waived for people documented to have a total and permanent disability.⁷ However, people contemplating such early withdrawals should consider the long-term impact of dipping into their retirement savings sooner than expected, and discuss the ideas with a financial planner or other professional.

Meanwhile, annuities are contracts between a person and an insurance company. The person pays the insurance company “up front,” in a single large payment or a series of payments, in return for the insurance company providing subsequent periodic payments. There are several forms of annuities, including a deferred long-term care annuity that generally is available to people up to age 85.⁷ As with reverse mortgages and other financial instruments, the calculations and considerations entailed in determining whether an annuity makes sense for you can be quite involved, and merit discussion with a financial planner, estate planning attorney, or other professional.

Step #5: Optimize your work situation

working with pallets People with MS may believe that their financial interests are always best served by working as long as possible, even if that means switching from full-time to part-time employment, to keep a paycheck coming in. It’s a natural assumption, but one that can have unintended negative consequences, says Deborah Miller, PhD, a social worker at the Cleveland Clinic’s Mellen Center for Multiple Sclerosis Treatment and Research.

“All too often, I see people with MS who have continued working well beyond the point when they really should have stopped given their degree of disability,” says Dr. Miller. Besides the negative impact on their health, this approach can be detrimental in two ways, she explains.

“If people have taken a lower-paying job because it entails work they can do more easily than their former, better-paying job, or if they switch from full-time to part-time work, they may be adversely affecting the amount of their Social Security Disability Income payment because the government considers their earnings history in determining the benefit amount,” she explains.

Similarly, people who are experiencing MS-related difficulties doing their work, but who are reluctant to seek reasonable workplace accommodations under the Americans with Disabilities Act (ADA), are taking a considerable risk, Dr. Miller noted. “I can’t count the number of people who worked until they were fired because of performance issues, and then they got nothing. Had they disclosed the challenges they were facing, they could have had accommodations made, or perhaps gone out on short-term disability through their employer’s plan.”

Dr. Miller cites the case of a data analyst who doesn’t want her employer to know about the cognitive issues being caused by her MS. However, the employer has noted repeated problems with her “number crunching” and has put a corrective action plan in place – a step that could result in her being fired in the absence of improved performance. “So now she’s staying two-to-three hours after regular working hours every night to check and re-check her numbers, and is exhausting herself, which is not good for her health or, ultimately, her job performance,” Dr. Miller notes.

“I understand the reluctance to raise these issues with an employer, and the determination to keep working is admirable, but it is really important to step back and focus on the long-term impact of these decisions,” says Dr. Miller.

Dr. Miller adds that while some people with MS are hesitant to invoke the provisions of the ADA, others have an exaggerated view of the protections the law provides.

As detailed in MSAA’s publication, Employment and MS: The Challenges and Opportunities, the 1990 law does not mandate that an employer keep an employee with a disability in his or her job no matter what. Rather, it requires that companies with 15 or more employees make “reasonable accommodations” to enable an employee to perform his or her duties. At the same time, the employer does not have to make changes that would represent an “undue hardship” for the company.

The law specifies that it is the employee’s responsibility to seek an accommodation, rather than the company’s obligation to proactively offer to make adjustments. And this, says Dr. Miller, can be a stumbling block for many people with MS. “Often, people won’t want to disclose to their employer that they have multiple sclerosis, whether out of a desire to preserve their privacy or for fear that they will be stigmatized. However, they needn’t disclose the diagnosis of MS itself. Rather, they can just talk about the particular issue that is making it difficult for them to do their job. So if a woman with MS is having visual issues, she can disclose that problem and ask for a larger computer monitor without explaining that the visual issue is caused by MS. The physician note supporting that request need document only the visual problems, not the underlying diagnosis.”

Step #6: Optimize your health

A growing body of evidence suggests that as people with MS seek to secure their financial future, the best investment they can make may be in their own health.

For example, a study that followed more than 1,200 working-age people with MS for two-and-a-half years found that a higher level of disability at baseline predicted loss of employment at follow-up.⁸ This finding reinforces the common-sense idea that the less disability a person with MS experiences, the greater ability he or she has to remain in the workforce and continue earning a paycheck. While people do not have the power to fully dictate the course of their MS, steps such as taking their medications regularly and adopting a healthy lifestyle can have a major impact.

Meanwhile, a Canadian study compared 226 people with MS who were admitted to a nursing home from 2005 to 2013 with almost 900 other people with MS not admitted to nursing homes during that period. The researchers found that the people who entered nursing homes had more comorbidities – conditions in addition to MS, such as diabetes, heart disease, chronic lung disease, and depression – than their counterparts, while the people who continued to live in the community had more office visits to their clinicians. The investigators noted, “These visits may provide greater opportunities for regular health monitoring and preventive care, thereby reducing the risk of [nursing home] entry.”

Taken as a whole, these and other studies suggest that when people take steps to control their MS, its symptoms, and comorbid conditions such as diabetes and high blood pressure, that proactivity is likely to yield long-term benefits in terms of their financial as well as their physical health.

In Summary

People living with MS have never had greater cause for optimism. Medical therapies and other interventions are improving outcomes and enhancing quality of life, and still more advances are on the near horizon.

At the same time, people with MS always need to look realistically at what issues may arise in the future. As people age, the passage of time reduces capabilities for everyone – it’s just the natural progression of the body after reaching one’s prime. However, the nature of MS means that those living with the condition need to be prepared for the possibility of an earlier and potentially greater degree of disability than the average person. Should this occur, individuals may benefit by planning in advance for an increased need for care.

Just as a proactive approach to medical care and a healthy lifestyle can enhance long-term health, addressing financial planning today – rather than waiting until critical decisions loom – can provide a solid foundation for meeting future needs.

References

1 longtermcare.gov
2 American Association for Long Term Care Insurance (AALTCI). Long term care insurance facts – statistics. Available at https://www.aaltci.org/long-term-care-insurance/learning-center/fast-facts.php. Accessed August 31, 2021.
3 Planchon SM, Cofield SS, Musil CM, et al. Sociodemographic factors associated with insurance acquisition in MS. Poster 295. American Committee for Treatment and Research in Multiple Sclerosis 2019 Meeting, February 28-March 2: Dallas, TX.
4 Social Security Administration. Benefits Planner: Disability. Available at https://www.ssa.gov/planners/disability/. Accessed August 31, 2021.
5 Social Security Administration. Fact Sheet: 2021 Social Security Changes. Available at https://www.ssa.gov/news/press/factsheets/colafacts2021.pdf.. Accessed August 31, 2021.
6 Social Security Administration. Understanding Supplemental Security Income (SSI) and other government programs. Available at https://www.ssa.gov/ssi/text-other-ussi.htm. Accessed August 31, 2021.
7 Internal Revenue Service. Retirement topics – exceptions to tax on early distributions. Available at https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions. Accessed August 31, 2021.
8 Marck CH, Aitken Z, Simpson Jr S, et al. Predictors of change in employment status and associations with quality of life: a prospective international study of people with multiple sclerosis. J Occup Rehabil. 2020;30:105-114.
9 Finlayson M, Ekuma O, Finalyson G, Jiang D, Marrie RA. Ten-year trajectories of health care utilization by Manitobans with MS predict nursing home entry. Neurology: Clinical Practice. 2019;9(1):16-23.
Administration on Aging. U.S. Department of Health and Human Services. Using life insurance to pay for long-term care. Available at https://acl.gov/ltc/costs-and-who-pays/who-pays-long-term-care/using-life-insurance-to-pay-for-long-term-care Accessed August 31, 2021.
Thorpe LU, Knox K, Jalbert R, et al. Predictors of institutionalization for people with multiple sclerosis. Disabil Health. 2015;8(2):271-7.

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