Can Caring for Parents Lead to Medical Bankruptcy?
These days, the rising cost of health care is a serious worry for many Americans. Bankruptcy filers often cite high medical bills as one factor that led them to seek protection, leading analysts to coin the phrase “medical bankruptcy.”
But one less-discussed phenomenon involving medical debt and bankruptcy revolves around this issue of elder care. The truth is, though, that taking care of aging parents or family members may lead to bankruptcy. Here’s a look at the problem and some methods to prevent it.
Various studies have shown that long-term care for older people can be shockingly expensive. Sources report that:
- After Alzheimer’s diagnosis, the average patient spends $400,000 for medical care.
- On average, nursing homes come with a price tag of $7,000 per month.
- Assisted living facilities cost a monthly $3,300 on average.
- An average couple that retires at 65 in 2011 can expect to fork over $230,000 in medical costs during the course of their retirement.
- As many as 65 percent of people over 65 will need long-term care at some time in the future and there’s a 75 percent chance that one member of a retirement-age couple will.
Because many people don’t save enough money to cover these expenses, the burden of providing long-term care may fall to other family members (particularly those who are still working).
Filing for bankruptcy can provide relief from medical debt. But if you take some precautionary measures, you may be able to keep yourself out of bankruptcy court while still keeping your aging family members in good health.
Insiders recommend taking the following steps:
- Buy long-term care insurance. This is a kind of health insurance exclusively for those who end up needing long-term care. The earlier in life you begin paying into the system, the lower rates you’re likely to get. Sources recommend doing some research on long-term care insurers, though: the costs and services vary widely and you can save yourself money by getting insurance tailored to your likely needs.
- Understand the Medicaid option. While retirees have access to Medicare, that program doesn’t cover long-term custodial care. It is possible to qualify for Medicaid as a retiree, though, a program that does offer long-term care. Talk with a healthcare professional about your potential to qualify.
- Don’t drain your retirement account early. During tight financial times, the temptation to drain a retirement account or 401(k) may be hard to resist. But it’s important to remember that using money from those accounts before they’ve “ripened” will result in serious tax penalties. Plus, the money can’t be replaced. Further, retirement accounts are protected in bankruptcy court, meaning that even if you file for bankruptcy, you’ll get to hang on to your future funds.
Medical costs can be frustratingly high, especially for those who need intensive or persistent care. Taking action while you’re healthy can save you serious money when you get sick.
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