Health care implications to consider under the Affordable Care Act [Financial Perspectives]

I attended a conference this week and while the topics covered the gamut of financial planning issues, two things really stuck out to me.  First, we are headed down a terrible path for health care.  Second, single and widowed women will face some significant issues as they age.

We all know that the Affordable Care Act is now the law of the land.  Effective Jan. 1, 2013, some of the provisions of the law require hospitals and insurance companies to be compliant with a slew of additional regulations.  Many of these new regulations will not necessarily improve the delivery and quality of care and are being seen more as a punitive way to reduce funding.

In the new regulations, there are requirements around reducing the number of infections patients develop or reducing the re-admittance rates for hospitalized patients.  The trouble is that they are taking the form of a penalty. Doctors will not likely keep patients in the hospital longer to reduce the chance that the patient will need to be re-admitted.

To make matters worse, hospitals are not getting adequate time to adjust to the new regulations. Many are already putting the penalties into their budget. In addition to the penalties, hospitals and doctors are looking at a 20 percent or more reduction in payouts for Medicare and Medicaid patients effective Jan. 1. Mind you, they are also expected to serve more patients with little or no insurance coverage who show up in the emergency room.

The imposition of these penalties could very well lead to the closure of additional hospitals, as this extra burden may become the straw that breaks the camel’s back.  The reduction in payouts will continue to cause prospective medical students to consider a different field, especially those that would go into family medicine or pediatrics (two of the lowest-paying practice areas)at a time when we are facing a significant shortage of doctors.

At this point, it would seem prudent for the government to do some extensive analysis of where its money is being spent for Medicare and Medicaid. We have known for years that there is an extensive amount of fraud in the system. Dealing with this issue will no doubt save the taxpayers billions of dollars and should result in a large number of prosecutions of those committing the fraud.

Single and widowed women are especially susceptible to rising health care costs, as it will do no doubt consume more of their income. Women actuarially live longer than men and women who live by themselves face significantly greater risk for running out of money. These women have to really think hard about how they will address planning for living to an older age. What will they do when they are not able to drive any longer? Who will help them if they need surgery, suffer a stroke or develop arthritis? Extended family and friends may be able to help, but it is critically important that these issues are addressed before they arise.

If you have a woman in your life in this situation, I encourage you to sit down with them and sketch out a plan. This review would include both a financial and qualitative review. Help her determine what their income and expenses are and then set up a fund to assist with future long-term care expenses. The qualitative part would involve the determination of what friends and family members may be able to assist should an urgent issue arise. If your relative is in good health, she could become a resource to another family member or friend. The important thing is that these women begin to converse about these issues so that a plan of action can be put together.

If these issues seem too overwhelming, it could make sense to bring in a professional to get some help.

Good luck with your planning!

The views expressed are not necessarily those of Cambridge and should not be construed as an offer to buy or sell any security.

Jim Heisler, CFP®, CDFA™, CASL™ Family Wealth Services, LLC 8725 Frankford Avenue Philadelphia, PA 19136 jim@familywealthservices.net 215-332-4968

Jim Heisler is a Certified Financial Planner with Family Wealth Services in Holmesburg. You can read all his Financial Perspective columns here.

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