Feb
25

Financial Planning for Chronic Disease: Parkinson’s Disease
Print
PDF

One of the issues many older adults face is learning to live with a chronic disease (in many cases, having to learn to live with more than one chronic disease). A chronic disease is a serious illness that develops over time. It may be managed but is unlikely to be cured. Parkinson’s disease is a chronic condition. Other examples include multiple sclerosis and Alzheimer’s disease. By contrast, acute conditions are severe and sudden in onset. A broken bone is an acute condition (although it may be caused by a chronic condition such as osteoporosis).

Financial planning for clients and their families impacted by chronic disease raise unique issues.  At Core Capital Solutions, LLC we specialize in planning and developing investment strategies for older adults with chronic disease. Such planning typically involves not just the client but his or her spouse and their adult children.

Of course, chronic disease impacts those under age 65 as well. Martin Shenkman, CPA, JD points out, 60% of those living with chronic disease are between the ages of 18 and 64. See Estate Planning for People with a Chronic Condition or Disability (2009 demosHEALTH) and www.rv4thecause.org . At Core, we have found that the natural aging of our client base has only increasee the importance of these issues.  This is especially true of Alzheimer’s disease and other diseases closely associated with aging.

Why Working with a Specialist is Important Before proper planning can begin, a planner specializing in this area must learn more about the particular disease (such as how the disease presents in the patient, how it progresses and the progression of care that may be needed). Some diseases, such as Alzheimer’s disease will shorten life expectancy, while others, such as Parkinson’s disease do not necessarily shorten life expectancy.

In this blog, the focus is on clients diagnosed with PD after age 60. Keep in mind, however, that Parkinson’s disease is not as associated with aging as (for example) Alzheimer’s disease. Each year, 40% of the new cases of Parkinson’s disease are diagnosed in someone younger than fifty years old. For example, Michael J. Fox, the actor was first diagnosed with PD in his 30s (go to www.michaeljfox.org ).  Working with clients with a chronic disease is not always about working with older adults. Rather, it is learning how to plan for clients of all ages struggling with the physical, cognitive and financial challenges brought about by chronic disease.

How Prevalent is Chronic Disease? Today, 120 million Americans live with a chronic illness or disability. Within ten years, that number will increase to 157 million. This number includes individuals of all ages. Among older adults, one quarter of those ages 65 through 74 are significantly impacted by chronic illness; 50% of those over age 85 have cognitive impairment.

At Core, we have found that for a number of reasons, people living with chronic disease do not want it generally known. They may believe there is little their financial advisor can do to help. We have learned to ask! Even a healthy looking client may suffer from a chronic disease. Clients with no immediate need may eventually be diagnosed with a chronic disease or refer family members or a friend that you can assist.

Parkinson’s Disease Parkinson’s disease is a movement disorder caused by the loss of the brain’s control of voluntary movements. It is a chronic as well as a progressive disease meaning the symptoms will get worse over time. With PD the progression can take many years, even decades. It is also manageable for years with the proper treatment and lifestyle changes.

While there are a number of symptoms, the four primary symptoms are:

  1. Tremor
  2. Rigidity of the muscles
  3. Bradykinesia  (the slowing down and loss of spontaneous and automatic movement)
  4. Impaired balance

By itself, Parkinson’s disease is not a fatal disease. In the late stages of the disease, Parkinson’s may cause complications such as choking, pneumonia, and falls that can lead to death.

Parkinson’s disease does not affect everyone in the same way. The rate of progression differs among individuals and presents in different ways. For these reasons, it is difficult to plan for the amount of care that may be needed. Some Parkinon’s patients may eventually have to move to an assisted living facility or a skilled nursing facility. For others, independent living may be possible for years with only a limited amount of assistance needed. As the Parkinson’s progresses, however, almost all patients will eventually have to rely on someone’s help.

Given such a wide range of possible outcomes – and care expenses – how can we plan for a client just diagnosed with PD? Let’s look at a recent case.

Male client, age 70 Howie was diagnosed with Parkinson’s at age 73. Howie is familiar enough with the disease to know there is no typical progression. He is concerned that his assets are insufficient should he need extensive care. A widower, he lives alone. He has two adult daughters with families of their own. He does not want to look to them for care.  Howie was referred to us by his attorney.

Howie’s finances are relatively simple. He owns his home, receives $20,000 in annual Social Security benefits and has investable assets of $2 million. He does not own a long term care insurance policy. How much, he asks, should he set aside for future care? Does he have to cut down on his current spending in anticipation of his future care needs?  It was clear to us that Howie’s anxiety was caused, at least in part, by his lack of planning and not knowing how the disease would impact his finances.

Doing a capital sufficiency calculation (a study of how much annual income a client may draw from his or her nest egg with a reasonable chance that the nest egg will not be depleted before they die) is difficult enough for a healthy client due to unknown factors – life expectancy, inflation, rates of return, etc. Layer on a chronic disease and the challenge becomes even greater due to the difficulty in anticipating the progression of care and associated costs the client may incur.

In Howie’s case, the first step in planning involved doing projections assuming no incremental costs of care. Of his $2 million nest egg, it was determined that he would require approximately $1.3 million to maintain his current standard of living to age 95. This left $.7 million for his potential incremental health care costs.

Using a computer program containing cost of care data from around the U.S., several care scenarios were modeled making different assumptions regarding his progression of care - the need for home care (both non health and health care; making modifications to the home so he could remain as long as possible), the length of time spent in a facility (in this case inputting various lengths of time in assisted living and skilled nursing).

After reviewing the results, Howie was better able to determine what risks he ran that his nest egg would be consumed before his death. Working with us, we determined that Howie could maintain his current lifestyle on just a portion of his nest egg - $1.3 million. The balance or $.7 million would be looked to for any extraordinary care expenses he may need.

As his investment advisors, we recommended that Howie split his portfolio in two: $1.3 million (or lifestyle portfolio) would be used to provide for his everyday living expenses, the second of $.7 million (or care portfolio) would be available to pay for incremental care costs not otherwise covered by Medicare or his Medicare supplement policy. We knew the lifestyle portfolio would be drawn on regularly in predictable amounts. The timing and amount of distributions from the care portfolio, however, would be more uncertain.  Given these differences, each portfolio would have a slightly different investment strategy.

At Core Capital Solutions, LLC we specialize in the planning needs of clients facing the challenges of chronic disease. If you have any questions, or would like to learn more, go to www.corecapitalsolutions.com or call Jim Sullivan at 630-753-9900.

Written by Life after 65.