What Can Happen If You Get The Wrong Financial Advice


Financial ProfessionalLast 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.

Click to buy

4 thoughts on “What Can Happen If You Get The Wrong Financial Advice

  1. One of the biggest problems our country faces is that most Americans still think that Medicare or their medical insurance covers the cost of long-term care.

    The CLASS Act addresses this problem by making a very clear statement: You have to pay for your own long-term care. You either have to pay for your own long-term care by using your savings, the average $50 per day CLASS Act benefit, long-term care insurance, or a combination of these.

    The CLASS Act will not be an option for those who are already disabled (and unable to work) or those who are retired and do not want to work. The law requires that in order to qualify for benefits, one must pay premiums for 5 years AND must be working for at least 3 of those 5 years.
    There’s a lot of confusion about the CLASS Act. Here’s a list of 13 facts about the program that are tucked away in the legislation:

    http://bit.ly/13_Facts_About_CLASS_Act

    Chris

  2. Chris, unfortunately, you are right. Many Americans still think that Medicare and Medical insurance will pay for Long Term Care. As you know, that is incorrect. Right now, the only options for Long Term Care is Medicaid or personal savings if someone does not have some form of Long Term Care insurance. You are right about the CLASS Act restrictions but things have changed since the law was passed. CLASS was declared unfeasible by Kathleen Sebelius during the last quarter of last year. Although CLASS was part of the PPACA, Obama has suspended it. The end result is that nothing has changed. For the foreseeable future people still have to pay for their own Long Term Care or rely on Medicaid.

  3. There are many good ones out there. Unfortunately, the bad ones are the ones who I have to clean up after. They give bad advice, take their commissions and disappear. The state may test for knowledge and even competency but there is no test for character.

If you have something to say about this post or additional information on the topic, leave your comment here.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s