How to Afford Healthcare, Ongoing Medical Care and Aging

I'm Nicole Lappen, the only financial expert you don't need a dictionary to understand.

It's time for some money rehab.

Yesterday on the show, I spoke with a money rehabber, Erin, who was diagnosed with stage four breast cancer and wanted to talk through estate planning.

If you haven't listened to that episode yet, please queue it up next.

It is one of the most powerful conversations I've ever had on the show, and I cannot thank Erin enough for choosing me to have it with her.

In the episode, Erin and I talk with an estate planning attorney to talk through what Erin needs to do to make sure her mother and her husband are protected if she passes away.

We spoke for over an hour, but still didn't get to her second set of questions, which was around budgeting and saving for health care costs.

Before we spoke, she had told me that she wanted to know, quote, how to best save and plan for health and care costs down the line, such as ever needing home care or private nurse, things of that nature.

My employer has short-term and long-term disability benefits and their health plan offers hospice care, but I want to have options and plan accordingly.

End quote.

Okay, so many great questions here.

These are questions that I definitely wanted to make sure did not go unanswered for Aaron or for anyone.

Aaron is truly my hero.

Erin, if you're listening to this, thank you for thinking through these things in the face of a life-changing diagnosis.

But the truth is we should all have a financial plan to support us as we age.

It is inevitable.

It will definitely bring peace of mind for you and also for your loved ones.

So today I'm going to walk you through how you can plan for future care expenses with the resources you might already have and highlight some additional tools, accounts, and strategies to help you prepare for getting older, surprise medical costs, and the unknowns ahead.

It is never ever fun to think about all this stuff.

I know this firsthand, but it's a plan that you need regardless to have your own back.

So I'm going to go over this by breaking it down into five categories.

So first, understanding what your insurance covers.

Second, saving and investing strategies for care expenses.

Third, specialized tax advantaged accounts.

We love those.

Four, budgeting and negotiating for end-of-life care.

And five, resources and support systems that you might not know about.

So first, I want you to start by understanding what you already have.

Short-term disability, long-term disability, and health insurance that includes hospice care.

Disability insurance policies replace a portion of your income if you're unable to work due to illness.

Typically, short-term disability replaces around 60 to 70 percent of your salary for a few weeks to a few months.

Long-term disability may cover 50 to 60 percent of your salary for years, sometimes until retirement.

These plans can be really confusing and require a lot of reading between the lines, so I'd set aside some time to talk through this with HR or plan administrator.

You want to understand what's called the elimination period, aka how long you have to wait before benefits kick in, how long the policy pays out, out, and whether it's taxable or non-taxable income.

This all matters for your budget planning.

If you can't wait to do that and you want just a general overview of breaking down the policy in plain English, think about running it through ChatGPT or something similar.

Most employer-sponsored health plans like Medicare cover hospice care.

Hospice focuses on comfort and not curative treatment, and it typically covers visits from nurses, doctors, social workers, medical supplies, and medications related to your diagnosis, and some respite care for family caregivers.

But what they often don't cover is 24-7 home care, private nursing beyond a few hours, or extended custodial care like help with bathing, dressing, or meals.

That's where the planning part comes in.

And this is part two: saving and investing strategically.

When you're planning for the possibility of future care needs, the goal isn't about saving for retirement in the traditional sense.

It is about building a healthcare fund that is accessible, stable, and flexible.

In this situation, liquidity is king or queen.

That means cash or cash-like accounts that don't fluctuate wildly in value.

Consider high-yield savings accounts or high-yield cash accounts, easy access, FDIC insured, and earns interest.

Or there are money market accounts.

These are similar to high-yield savings accounts with some checkwriting ability.

If you're looking for a recommendation here, I personally like Publix's high-yield cash account that is earning 4.1% annually at the time I'm recording this.

So that's the savings part.

Investments will be important too.

If you already have investments in a taxable brokerage account, you might consider gradually shifting those funds into more conservative options, think short-term bond ETFs or even a CD ladder so that you don't risk needing the money when the market dips.

But please keep in mind, you want low volatility here and accessibility, not super high returns right now.

Part three is a really important one.

Tax advantaged accounts for healthcare expenses.

There are a couple of accounts that are built specifically for healthcare costs, and they come with major tax perks.

There are two big ones that you've definitely heard of before, health savings accounts, HSAs, and flexible spending accounts, FSAs.

If you're enrolled in a high-deductible health plan, you might be eligible to contribute to an HSA.

These accounts are awesome.

They are triple tax-advantaged, my favorite kinds of accounts, which means that you can contribute pre-tax money.

It grows tax-free and you withdraw tax-free for qualified medical expenses.

That includes home health care, hospice, long-term care services, and even some medical travel expenses.

The 2025 contribution limit is $4,150 for individuals and $8,300 for families with a $1,000 catch-up if you're over 55.

Pro tip, even if you stop contributing, you can continue to use your existing HSA funds even after you leave your job or go on Medicare.

If you're not eligible for an HSA, but you have an FSA, it can also be used for medical expenses tax-free.

Just remember that FSAs are the use it or lose it kind.

So spend that money strategically and quickly.

But regardless of HSAs or FSAs, know that if your out-of-pocket medical expenses exceed 7.5% of your adjusted gross income, you can deduct those medical expenses when you itemize your taxes.

And lots of things qualify as medical expenses here.

Home nursing care, long-term care services, hospice expenses not covered by insurance, and transportation to and from medical appointments.

Another thing to keep in mind here is that you might be able to use your retirement accounts for medical expenses.

If you take money out of a traditional IRA or a 401k before you're 59 and a half, for example, you typically face a 10% early withdrawal penalty plus income tax.

There are some exceptions and medical expenses is one of them.

You can avoid the 10% penalty if that money is used for qualified unreimbursed medical expenses that exceed that same 7.5% of your adjusted gross income in the year of withdrawal.

So for easy math, if your AGI is 100 grand, only medical expenses above 7,500 bucks qualify for the exemption.

Just know that you still owe income tax on the amount withdrawn.

But this IRA rule is a bit more useful than just deducting expenses.

It actually helps you pay for those expenses.

This is really annoying, but try to keep every single receipt and track costs carefully.

You may be eligible for more more deductions than you think.

Part 4, budgeting and negotiating.

Sadly, when we talk about private nurses, home aids, and long-term support, these services can get expensive fast.

A home health aide can run about $25 to $40 an hour.

A licensed nurse is $75 to $150 an hour, depending on your location.

24-7 care, that could top $15,000 to $20,000 a month, depending on where you live.

That's why it's important to get strategic now.

So I'd recommend making a care budget where you sketch out possible future care needs and preferences.

You'll need to think through questions like: do you want to stay at home as long as possible?

Will a family member be helping you with your care?

Who is that family member?

Would part-time or overnight care offer enough relief?

Then assign a rough dollar estimate for each tier of support.

This helps you understand what to save and what to negotiate for.

And let me blee state the obvious.

You don't need a financial expert to tell you that it is useful to have estimates of costs.

But just because we know we should make a budget doesn't mean we will actually open up a computer and start a spreadsheet.

But I'll tell you another obvious truism.

The only way to have enough money saved for your care is to know how much you need.

You might find that it makes more sense to contribute to a high-yield savings account rather than a retirement account.

The only way to know that is to run the numbers.

As part of this process, start thinking about interviewing agencies now or ask your loved ones for help with this.

If you're looking at home care, get a sense of the pricing and what's included.

You should try to get details like are there minimum hours, what licenses or certifications caregivers have, and can you lock in any rates in advance?

Sometimes agencies offer discounted rates if you commit to a certain schedule or number of hours upfront.

Others may offer sliding scale fees based on income.

And lastly, part five, support programs.

I'll be honest here, historically, states have had programs that provide in-home care subsidies, respite grants for family caregivers, or case management support.

But these programs have historically been through Medicaid.

So these will be more challenging to find.

Start with your state's Medicaid waiver programs and how the Big Beautiful bill might impact relief.

Even if you don't qualify right now, a terminal diagnosis can open eligibility doors.

Also speak with your state's area agency on aging.

They're like a concierge service for elder care and palliative resources.

There's also a bunch of nonprofits that can help out and are likely working harder than ever to compensate for the gaps left by Medicaid cuts.

Triage Cancer offers free legal and financial navigation for people facing cancer.

Cancercare.org offers free counseling, case management, and grants for home care and transportation.

And United Policyholders can help you advocate if your insurance tries to deny coverage for medically necessary services.

I can personally vouch for them.

I spoke with one of the co-founders for an upcoming episode about the LA fires, and they do some incredible work.

To our dear, dear listener, Erin, I see you, I admire you, and I hope this episode gives you a sense of empowerment in a moment that might feel incredibly powerless.

You are already doing the most important thing, asking questions, taking action, and advocating for your future care and peace of mind.

And for everyone else listening, this is your reminder that we should all be thinking about how to plan for care and for dignity long before we think we'll need it.

For today's tip, you can take straight to the bank.

Before you go to any medical appointment, ask for an estimate of how much you'll be charged and get that in writing.

There was a federal law passed in 2022 called the No Surprises Act, which basically says that if you get billed for more than $400 of a good faith estimate for any medical appointment or procedure, you can dispute the charges through a patient provider dispute resolution process.

But you cannot know if you're getting billed for more than the estimate if you do not get the estimate in the first place.

So please try to do that every single time you see a doctor.

Money Rehab is a production of Money News Network.

I'm your host, Nicole Lappin.

Money Rehab's executive producer is Morgan Lavoie.

Our researcher is Emily Holmes.

Do you need some money rehab?

And let's be honest, we all do.

So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me.

And follow us on Instagram at MoneyNews and TikTok at Money News Network for exclusive video content.

And lastly, thank you.

No, seriously, thank you.

Thank you for listening and for investing in yourself, which is the most important investment you can make.