What Can Happen If You Get The Wrong Financial Advice

Last weekend I was presented with a rare scenario.  It does not happen often but it does happen more frequently than it should.

Someone’s “Financial Planner” had advised an individual to cancel their Medigap policy without getting something with which to replace it.

I cannot imagine any professional “Financial Planner” leaving such a gaping hole as the Medicare B co-pay unprotected.  My guess is that this individual was not a true “Financial Planner” but an insurance agent looking for a commission.

This type of advice is understandable for someone who is single, has hundreds of thousands of dollars in their retirement savings and has no children they want to leave an inheritance.

In this case, the individual in question does not have hundreds of thousands of dollars and there are children in the picture.   In this case, I would classify the advice to cancel a Medigap without replacing it, “malpractice.”

It has been illegal for years for an insurance agent to use the title of, “Financial Planner.”  Unfortunately, that law is only enforced when a member of the public complains and has proof.  It is one of the most common “cons” of my industry.

The way to know if your “Financial Planner” is legit is to see how he gets paid.  If you pay him a set fee, he is probably legitimate.  If he waives his fee, unless there is some sort of explanation why he would do that, the odds are that he is probably nothing more than an insurance sales person.

You may be able to trust him to do the paper-work involving your insurance purchase, however, I urge you to take any advice he gives you with a grain of salt.  He has already shown that he is willing to violate one law.  Who is to say that you can trust him in other areas.

THE SCENARIO

In any case, this individual is now 82 and on kidney dialysis.  He cannot medically qualify for Medigap.  If his dialysis is because of End Stage Renal Disease (ESRD) he may not even be able to get Medicare Advantage when it is next offered.

Below is the advice I gave him.  If you have a different idea that could help him, leave it in the comments area.

A SOLUTION

“If he is already on dialysis, he is not going to be able to pass any insurance company’s medical underwriting.  In my opinion, the first thing you need to do is question that financial counselor about his training.  No counselor that I know of is going to tell anyone to drop their Medigap without recommending a Medicare Advantage plan to replace it.  In my opinion, you are not working with a counselor but a sales person.

There is not much you can do but “suck it up” and pay your portion of the medical bills in 2012.  You missed Medicare’s Annual Enrollment for this year by about a month.  My recommendation is that you start looking at options for him for 2013 on October 1 for something called, “Medicare Advantage.”  It is a program operated under Part C of Medicare.  Many of the plans combine both Major Medical and Prescription drug coverage into the same low cost plan.  The only potential problem with Medicare Advantage is your dad’s dialysis.  If the doctors say that the reason for that treatment is End Stage Renal Disease he may have another problem.  If that is the case, Medicare Advantage may not be available in 2013.

Because of the dialysis, he would also not qualify for Long Term Care insurance.  He has no choice but “Spending Down” to qualify for Medicaid.

If he is already in poverty, I suggest you contact your local Medicaid office to see if he is “dual-eligible.”   That means that he qualifies for both Medicare and Medicaid.  That is the only option I can think of that would pay 100% of his medical bills for 2012.

I know that it sounds morbid and tasteless, but there is one other option available to you.  If you think that he is going to live for another two years, you may consider a Final Expense life insurance plan to reimburse you for any bills you have to pay for him.  As I said, this is not the emotionally best thing to do but it is a sound financial strategy.

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• Can You Rely On Medicare To Pay For Your Long Term Care Needs? (theinsurancebarn.wordpress.com)