2020 Update

It has been another good long time since I’ve posted… and what a strange time it’s been! I feel like the world has totally changed. COVID-19, baby!

First of all, I am very lucky to be able to say that my family and I have all been healthy. But I do have several friends who have had the virus, with varying degrees of seriousness. Thankfully all have recovered, but friends of friends have died, so I don’t feel too far detached from the real impact. My unlucky friend Mortimer, who I’ve written about here from time to time, had the virus in early April and barely avoided going to the hospital, which is a miracle as he has asthma and some other health issues. He still doesn’t feel totally recovered even all these months later. 

My life has been very hunkered down. Travel plans were canceled. ALL plans were canceled. I’ve mainly only left the house to go grocery shopping once a week. From mid-March until now, I have gotten maybe 3 take-out lunches and 4 take-out dinners. I ate in restaurants with outdoor seating for lunch a couple times over the summer, and exactly once for dinner, a couple of weeks ago. I went to visit my mom and sister once, and have entertained friends or family at home 6 times during the summer, always staying outdoors for most of the time. But groceries have definitely gotten more expensive, so I’m somehow still spending more on food. (This may be because Sweetie was the one tending to pick up restaurant bills while I paid in the supermarket.) My gym membership was on hold for a few months and I have yet to go back since they reopened. I spent about $45 on a new yoga mat and a resistance band for exercise (which, to be honest, I haven’t used much), and $60 on two sets of workout videos, which, again, to be honest, I haven’t used much. But I’m going to. I swear. Otherwise, I’m lucky to have outdoor options for walking and swimming so I haven’t been a total slug during the summer months. But once it gets colder again I’m going to have to try to go back to the gym. This will probably be my biggest risk factor for getting the virus. It’s also a big nuisance as attendance is very limited and you have to make an appointment, and you can’t take a shower. So I’ll have to weigh whether the motivational aspects of going to the gym outweigh the negatives, or whether I just have to find some other way of getting myself to exercise at home, instead of just fantasizing about it. 

I spent some money on plants for my garden, which has been getting a bit more ambitious. This summer’s tomatoes were phenomenal, actually, though my attempts at growing peppers and eggplant were a bust. I also spent some money on books— not a ton, but I wanted to support a local independent bookstore so I placed a couple of orders for things to read while the library was closed. Strangely, I haven’t had the concentration to get very far in reading these books. 

Since I haven’t been working, I at least haven’t had to worry about losing my job in the pandemic, as has happened to several people I know. If I’d stayed in my old job, it could well have happened to me, I suppose, though most of my former colleagues are still employed and adjusting fairly well to working remotely. I had been looking into possibilities for part-time work close to my new (not that new anymore) home, but these were all jobs at shops and cultural institutions that had to close down for a while. And now, with so many people out of work, I feel like I don’t want to take a job away from someone who might need it more. Because here’s the weird thing— or maybe not the “weird” thing, but the kind of disgusting thing: I have more money than I’ve ever had right now, over $1.65 million. When the stock market plunged on the initial coronavirus panic, my net worth dropped to a bit less than it was when I left my job. But since then, the market has recovered, and my net worth is currently more than 25% higher than it was when I stopped working. I’ve sold some mutual fund shares to replenish my cash savings, but my cost of living is so low, I can gain or lose more in market value in a week— or even a day— than I spend in a whole year. This may not be the case forever, of course. 

(And in fact, it's been a couple of weeks since I wrote everything above, and now my net worth is only about $1.63 million due to recent declines in the stock market!)

Right now the stock market seems pretty disengaged from broader economic conditions. It is hard to see how COVID-19’s massive impact on the travel, hospitality, restaurant and arts industries won’t have a devastating effect on our economy for years, especially in the NY area. Eventually that will affect the stock market too. But in the meantime, it really is a glaring example of the rich getting richer while the middle class and working class and poor struggle to keep their heads above water. “The rich” is not usually a group in which I’d include myself, but the reality is that only a very small percentage of US households have a net worth of more than $1 million. I’m probably in the top 10-15% for net worth on my own, even adjusting for my age group, and taking Sweetie into account, probably top 5%. (I haven’t found good recent statistics but there are calculators where you can see where you stand based on 2016 figures. The continued recovery of the stock market since then would I guess mean that I’m a bit lower percentile-wise. Using my 2016 net worth would put me around the 90th percentile.) 

Anyway, I'm hanging in here. How are all of you, dear loyal remaining readers who still check in? I hope you are healthy and doing well. Thanks for sticking with me!

Health Insurance

Another important point brought up by a commenter on a recent post— how am I going to get health insurance if I leave my job? The short answer is that I’m going to pay through the nose for it!

This really is the crappiest part of trying to contemplate a sabbatical, or early retirement. I currently get pretty good health insurance through my employer, including coverage for Sweetie. I pay about $260 a month to cover our dental and medical insurance. I can see from my paystub that the employer covered portion of our insurance costs is about $1000 additional. Going on COBRA will also add some sort of administrative fee, so I’m budgeting that it will cost us $1,400 a month to pay for our insurance.

COBRA only lasts up to 18 months, so after that, assuming we didn’t have jobs yet, we’d have to buy insurance in the marketplace. I went to the NY State website to see what the costs would be under Obamacare. It looks like we make too much money from interest and dividends alone to qualify for any subsidies, so our costs for a “bronze” medical and dental plan for 2 people would be around $800 a month. “Silver” would be about $950, and “gold” would be around $1,150. Given that we are both currently quite healthy and don’t have any prescriptions we take regularly, it probably makes sense for us to try a bronze plan— this would have a really high deductible, so we’d be mainly covering ourselves for something catastrophic, and we have the cash to pay a big out-of-pocket maximum if we get hit by a bus. But that could be over $14,000 worth of charges we’d have to pay before the insurance kicks in. So maybe it’s worth it to pay about $350 more per month for the lower copays and out of pocket caps that we’d get with a gold plan?

Who knows… either way the whole system sucks. I know so many people from other countries that have single-payer systems, and they are perfectly happy with them and think that what we have to pay here is insane. Every time I see a drug ad on TV, I feel outraged that millions of dollars are being spent on all this pointless marketing, though I know that’s not the only reason healthcare costs are high. And of course, my numbers here assume that the Affordable Care Act isn’t completely destroyed by the Republicans. If the protection for people with pre-existing conditions goes away, I’ll be screwed, as I do have one hereditary thing that doesn’t require active treatment now, but would be considered a pre-existing condition and could potentially cause me to be charged a lot more for insurance in the future, or denied coverage for certain things.

So will we really be paying an amount equivalent to the rent on a small outer-borough apartment just to get health insurance? I guess we will, at least for a while. I’ve been googling “part time jobs with benefits” as that would be an ideal scenario, but I’m not sure we’ll get that lucky…

A $10 Dose of Happy

At least I hope I'll get some happiness out of the $10 I just spent for a dose of Valium! Actually, I seem to have been given 5 doses, so I guess it's only $2 a dose.

Why have I suddenly turned into a pill popper? I'm getting my first crown at the dentist tomorrow, and after the last time I had a filling replaced, I decided I couldn't take it-- I've never been particularly afraid of pain, but the idea of my whole tooth being ground down is pretty disturbing. And what's worse is that my dentist has started using some weird contraption that holds your mouth open and that claustrophobic feeling of almost choking makes me panic a bit.
Part of me thinks I should just suck it up and deal with it... but another part of me is very happy to be cradled in the comforting arms of modern chemistry. Let's just hope it works.

I'm only supposed to take one of my pills before my appointment tomorrow, which leaves me thinking about the possibilities for the other 4... I may have to pop another one when I see the final bill for the crown: it's supposed to be about $2,500!

Palliative Care

There was an article in yesterday's New York Times that is long but well worth reading, about palliative care doctors and end-of-life treatment and counseling. Aside from one amusing quote about whether it's worth it to spend $400 on Victoria's Secret lingerie, the article itself is a little off-topic for this site, I guess, but in relation to my own life, it hit me hard today. I spoke to my mom last night and the latest info is a little vague but it is now sounding like my dad could be going downhill faster than we thought. And what I'm about to say will sound very callous in this context, but the only silver lining to this cloud is that it now seems very unlikely that we'll have to worry about paying for a nursing home for my dad, as he'll probably go into hospice care, which is covered by Medicare.

So now I just have to worry about other stuff for a while-- getting up there to see him, how long I'll stay, what exactly is happening, and how my mom and sister and I are going to deal with all of it.

Finances and the Family: The Earlier Generations

Thank you all for your advice and kind wishes after reading my last post. Obviously the family finance issue is on my mind a lot, and one of the aspects I was mulling over last night was how these things slide from one generation to the next: my mother's finances will affect mine, and mine could affect my niece and nephew. But what about the earlier generations? How did my grandparents' finances affect my mom and dad?

I've mentioned before that my mother grew up quite poor, with parents who divorced when she was a teenager. Her father was a barber-- he died a while back, and I never knew him well enough to know anything about how he spent what little money he made. Her mother is still alive, and seems to live very simply on a small income, I guess from Social Security, plus occasional checks sent by my mother and her 3 siblings. She is remarried, and lives in a small house that her husband bought. The mortgage is paid off. My step-grandfather supposedly has a few thousand dollars saved, but he won't tell anyone where it is-- as in, it's not in a bank, it's just in a coffee can buried in a closet or something. I don't think my mother's parents ever had much spare cash-- but nor did they have debts, as far as I know.

As for my father's parents, I don't think I've ever gotten around to writing much about them, and they are quite a different story.

My father's father was a lawyer. His parents were poor immigrants so he put himself through college and law school. He may have been the only one of their 9 children who got an advanced degree, though one of his older brothers was also successful and was actually in the House of Representatives for a term or two back in the 1930s. Probably because of this government connection, my grandfather ended up working for the Veteran's Administration. I don't know how much money he made-- a decent amount, I'm sure, but nothing like what we hear about corporate lawyers making today. My father has expressed some resentment about the fact that my grandfather volunteered for the Navy during World War II despite being well over the age where he'd have been drafted-- if he'd stayed home, his political connections might have led to an appointment as a judge, but by the time the war was over, his brother was out of office and had no strings to pull.
My father's mother also came from immigrant parents of what I guess you'd call a white-collar working class background (her father was a machinist but became some sort of supervisor). My grandmother graduated from high school but never attended college. She never worked until after my grandfather retired, when she did some part-time clerical work for her sister (who has an interesting story herself, which I'll have to tell later.)

But here's the kicker: my grandparents had 6 children, my dad and 5 sisters. They put them all through college and may have made some contribution to graduate school/law school costs for at least one or two of them. (3 of my father's sisters have advanced degrees.) Can you imagine paying for all that in today's world, on a middle-class government lawyer's salary? Education just cost less back then, and though all the kids went to Ivy League/Seven Sisters colleges, most of them were able to live at home while going to school, which must have been a big savings. And I suppose my grandfather would have paid for some weddings too, though I imagine they'd have been small.

How else did they make ends meet? My grandparents definitely had a depression mentality, and never threw out a scrap of food. But they weren't crazily frugal-- my grandfather gave my grandmother plenty of jewelry, and he played golf (though at a public course, not as a member of a private country club), and they had a comfortable house in an expensive area. They didn't really travel much, but I remember them taking a couple of winter vacations. I'm sure there were many years when money was tight, but by the time they were retired, they had a nice life.

My grandfather went into a nursing home and lived there for a few years til he died at the age of 90. My grandmother continued to live at home for about 13 more years, with part-time care from an aide for about 2 or 3 of those years. Then she went into a nursing home for about 9 months before dying at the age of 94. In the later years of her life, she gave each of the 6 children a few thousand dollars a year, and after she died, they each got a share of the proceeds from the house-- it sold for about $500,000 at the top of the real estate market, so each of the kids ended up getting over $80,000 in the end. (This inheritance makes up almost 1/3 of my father's current net worth.)

It just boggles my mind that they managed to raise so many kids and live so long and pay for nursing home care yet still not run out of money. My grandfather may have had a really good government pension. Maybe he invested well. He definitely left everything set up for my grandmother after he died, with some kind of annuity in her name. I would not say my grandparents were wealthy, but they were definitely prosperous.

The "American Dream" is for that kind of prosperity to increase in each succeeding generation, not evaporate. Yet that evaporation is what seems to be happening in my family. My parents have savings now, but they'll likely be gone well before they're even in their 80s, and then they'll have to tap the equity in the house. My sister and her husband are in their mid-30s with credit card debt and have probably barely made a dent in retirement savings or college funds for their kids. Our family's situation could be far worse-- some of stories told by commenters on this site make me feel like I have no right to complain. I guess it's just sad to look back at those early generations, on both sides of the family: their hard work after starting from nothing, their frugality, their willingness to live with less. They passed on an amazing gift to us, a gift that went well beyond money itself. I think they'd be sad to see that gift wasted.

Family Stress

I'm writing this after spending most of my weekend feeling some combination of angry and nauseous. My mother called to say that my dad, who'd been doing really well lately, was back in the hospital because he took a fall on the driveway and broke his shoulder. After my mother gave me the medical update we were just sort of catching up on other things. She told me they'd finally finished having the exterior of the house painted and mentioned that she also wanted to expand the downstairs bathroom to add a shower. Although this idea actually makes some sense, there are reasons it may not be possible and I also reminded my mother that we'd had this big discussion about the budget and that she really needed to hold off on any major projects for a while because they're running out of money too fast.

Well, I know it probably wasn't the best time to have mentioned it (though you'd think it was also probably not the best time for my mother to be regaling me with tales of home improvements), and sure enough, Mom kind of blew up at me, saying, more or less, that she didn't care about the money and was going to do these things no matter what I said... that they'd have to sell the house someday and it was important for it to have curb appeal... that she was stressed out from taking care of my dad and that decorating and renovating the house are her only pleasures in life... that somehow or other all the money stuff would work out because things just always do.
I started to remind her that things don't "just work out" and that she would be broke within a few years if she wasn't careful, but I realized I had to just shut my mouth and get off the phone or I'd say things I'd regret.

I was kicking myself afterwards and feeling guilty and doubtful. I felt like there was too much going on and I shouldn't have said anything about money until a calmer time. It's not like I want to harass my mother about her spending. I just want her to have a decent, comfortable life as best she can. And I began to wonder if maybe I was being too harsh. Maybe I'm too conservative, and was not taking into account that some of her expenses will lessen over time. Maybe things would work out.

I was mulling over all this until the next day when my sister ZZ and I were texting each other while she was at the hospital with my dad. I mentioned that our mother had an amazing ability to obsess about the house's curb appeal while her husband was in the hospital, and ZZ texted back:

F'ing serious?? Stupid driveway estimate why hes in hospital

Suddenly I didn't feel so guilty any more and was just angry. One of my mother's home beautification plans was to repave the driveway . Of all the items on her wish list, this was the craziest-- the driveway is fine except for a couple of minor cracks, and spending even a relatively low amount like $2,500 to repave a driveway is just stupid given that she is on track to potentially run out of savings and lose half her current income before she hits the age of 70. But despite telling me she'd hold off, she was apparently forging ahead, and I guess just shopping around for lower estimates. And I guess my Dad must have wanted to see what was going on and talk to the contractor and that's where he was when he fell. I guess my Mom felt guilty about it and wanted ZZ not to tell me how it happened.

I felt like I was in some kind of emotional butterchurn for the rest of the day, but in the end what upset me the most was that I felt my trust had been abused. My mother has had such a checkered history with money, but I used to think my dad was partially to blame for a lot of it. He treated her like a child; he was secretive about their finances, and never gave clear messages as to what they could afford and what they couldn't, other than to constantly complain that my mother spent too much. My mother became convinced that he was a rich miser who was witholding cash just to torture her.

So when my father got sick and I started organizing the family finances, I kept trying to clearly explain things to her. I walked her through all the bank accounts and bills. I drew up a budget and showed her exactly how much their income was vs. their expenses, and how the deficit was made up by drawing on their savings, and how many years those savings would last. And when I re-did the budget a couple of months ago, I sat her down again and showed her exactly what was going on. I didn't just tell her she was spending too much money. I didn't really tell her to do anything. I just explained to her that this was her current reality and that she needed to make some choices, and that if she could make some modest cutbacks now, it would save her from having to make devastating cutbacks later. I thought I could trust her to take this seriously if she felt like she was in control.
But now I feel like I've been lied to and that trust has been betrayed. I'm back to feeling like my mother is a drug addict or an alcoholic who swears they've cleaned up their act but keeps falling off the wagon.

Of course I keep telling myself that it's not MY money. But it's my father's money too, and he is too sick to control anything anymore, and I know that he would agree with me on all this if he had the mental energy to listen to any of it. And ultimately, if my mother really does burn through all her assets including any proceeds from selling the house, which I wouldn't put past her at all, then it will be my money that's at stake because I can't just let my parents starve. And then I see this chain reaction-- I'm trying to save all this money for my own retirement because I won't have anyone else to take care of me, and if that doesn't go according to plan because I'm supporting my parents, then will my niece and nephew be left holding the bag someday because they have to support me? I know that is getting a bit too gloom and doom and I can't imagine it would come to that, but it's hard not to feel angry about all the WASTE. My parents were never rich but they would have had enough money to have a perfectly comfortable retirement, and I don't understand why my mother prioritizes cosmetic enhancements to the house over things that would actually improve her life, like hiring someone to clean the house or help bathe my father.

I really don't know if I'll ever be able to get through to my mother. Part of me wants to just give up and let her suffer the consequences. Part of me wants to stick to my guns and tell her that she'd better not repave that driveway if she ever wants me to set foot on it. And then there are the crazy, desperate plans: could I send a letter to every contractor within a 20 mile radius of home and beg them not to return my mother's calls? Would it be worth the money to hire a lawyer to prove my mother is so insane as to be incompetent so I can take control of her bank accounts and somehow prevent her from doing all these crazy things to the house? But maybe other events will intervene: it's looking more and more like my dad could be in a nursing home soon, which means their money will evaporate a lot faster than even my mother can spend it. Will that be the thing that finally makes her wake up? Who knows... I just don't know how I'm going to deal with this.

Helping Out in a Health Crisis

Sometimes I look at the past year and wonder if all the good luck I've had in life is turning out to be a loan that's been called in by the bank. Nothing bad has happened to me personally other than losing some money in the stock market, but I feel like misfortune has been getting closer to me, in the form of bad things happening to my friends and family. In addition to my father's brain tumor and friends losing their jobs and getting divorced, I've had a cousin and a friend diagnosed with very serious cancers. Things were very scary for a while with both of them. Now, miraculously, things are looking pretty good. But none of this came without a cost, both emotional and financial.

Both my friend and my cousin have health insurance, one through an employer and one privately purchased as she is self-employed. But that didn't mean their treatments were affordable. In one case, there was chemo and radiation and major surgery. In the other, there were chemo treatments, a special diet, and a lot of long-distance drives to doctors. Both had to take time off work, unpaid in at least one case. Both of these people have spouses, but neither were making much money. Both couples also had another dependent, either a child or an aging parent. What all this comes down to was that even with insurance, the illness put them in debt.

But here's the upside to this depressing story: people helped. Both my cousin and my friend knew people who organized fund-raising events for them. They were each fortunate enough to have a lot of family and friends who could donate their talents or their services or their products or convince others to do so. In each case, a whole community came together and donated money and showed their support and love in a truly special way. They raised thousands of dollars, but it ended up being about more than just the money, somehow.

All this reminded me of an article I bookmarked months ago: Helping Out With Cash: A Delicate Art (which was an follow up to an earlier article Not Laid Off? How to Aid the Less Fortunate. Both of these articles give some excellent suggestions on how to handle the delicate issue of offering help to someone who may need it, but feel awkward about asking for it or accepting it. It's a more and more common issue these days. I just hope my usual sphere of good fortune will return and no one else I know will need this kind of assistance! How about you? Have you ever been involved in a situation where friends helped raise money for someone in need, or been the recipient of such aid?

Is Eye Candy Always Expensive?

This post from The World of Wealth reminded me of something I'd been trying to write about a few months ago. First, an excerpt from MEG's post:

It's been over a month since I joined my new upscale gym, and I have never looked back!

It costs over $130 a month (compared to the $44 a month I used to pay for a regular gym), but I have not had even a twinge of buyer's remorse.....

Going to the gym makes me feel strong, healthy, and energetic, but this one in particular - like any upscale spa or designer boutique - also makes me feel pampered, composed, and worthy.

Also, there is plenty of good eye-candy!

That last line was the kicker for me (emphasis mine). The post I'd been working on several months ago was inspired by two lunches I had at places near my office, one being a typical NYC pizza joint, and the other an upscale, expensive, gourmet Italian cafe. I never got very far writing it, but the tentative title was "Where Do the Beautiful People Eat Lunch," because it seemed to me that the more expensive the lunch spot, the more attractive the clientele was, which seems to have been MEG's observation about gyms as well. Are expensive places really frequented by cuter customers? How might that work in terms of cause and effect, or mere correlation?

There's some logic to thinking people are more likely to be attractive if they can afford upscale lunches and gyms-- money can't create good looks, but it can certainly help enhance an otherwise average appearance. People of a higher socio-economic status are also more likely to be healthier and less overweight, which can improve one's looks. And in the case of restaurants, people who eat pizza for lunch every day might indeed be less healthy than those consuming organic salads from the gourmet place.

Then there's the question of who can afford the more expensive places: I'm sure I've read of plenty of studies showing that attractive people are more likely to be hired for jobs, and paid better. I can't cite any of those studies now, but I think this is something most of us would instinctively believe is true, whether or not it should be!

And there are psychological reasons-- if people value the things that differentiate upscale places from their less expensive counterparts, they are also more likely to prioritize appearance and wear the sorts of clothes or jewelry that might be judged fashionable or attractive by others. And from the perspective of the beholder, perhaps we are predisposed to find people more attractive because we think they have money.

Of course, all of this is very subjective-- everyone has different definitions of what is attractive in the first place. If your aesthetic tends more towards artsy thrift-store skinny-hipster chic, you might not find much eye candy at any gym, at least not in the weight room!

Where do you find your eye candy? Does it have anything to do with money?

Obama Read That Health Care Article Too!

Apparently President Obama was just as struck as I was by Atul Gawande's New Yorker article about health care costs, which I posted about yesterday. According to today's New York Times:

President Obama recently summoned aides to the Oval Office to discuss a magazine article investigating why the border town of McAllen, Tex., was the country’s most expensive place for health care. The article became required reading in the White House, with Mr. Obama even citing it at a meeting last week with two dozen Democratic senators.

“He came into the meeting with that article having affected his thinking dramatically,” said Senator Ron Wyden, Democrat of Oregon. “He, in effect, took that article and put it in front of a big group of senators and said, ‘This is what we’ve got to fix.’ ”

Unfortunately, it sounds like everyone kind of missed the point! If I understand Gawande correctly, he sees the problem as arising from the culture of the doctors in certain areas, which has been influenced by the hospital administration and its compensation structure. Members of Congress are considering capping Medicare payments in high-spending areas, but with the current system in these areas, that would just lead these doctors to do even more unnecessary procedures so they can make up in volume what they're losing in margin.

So how do you solve this problem? Can government pass laws that would require all hospitals to emulate the culture and structure at the Mayo Clinic, where all the doctors and staff are paid from pooled revenues rather than per procedure performed, so decisions can be made on the sole basis of what is right for the patient? The Mayo Clinic is renowned for great care, and their staff physicians seem to make between $200-300,000 in salary, or more as those numbers were for the Minnesota and Wisconsin locations as of 9/06 to 6/08. (Their salaries are supposed to be in line with "marketplace salaries for physicians in comparable large group practices.") That may seem like less when you consider that a doctor may rack up $300,000 in educational loans, as a commenter pointed out on the last post, but it's still quite a lot of money. This comes back to the problem of culture. How many of these doctors are comparing themselves to lawyers and investment bankers who make millions a year-- or at least did until recently. Maybe if the good old days on Wall Street are over, doctors won't have to feel quite so much like they're missing out!

The other thing that has to change for this problem to be fixed is patient expectations. We are all told nowadays to take control of our own health care, to get second opinions and do our own research, to demand the treatments we feel we need, and to ask our doctors if Medicine XYZ we saw on TV is right for us. And that is a tough one. Who wants to be told they can't have something that might work if they've run out of other options, even when a study has shown that that treatment is 99% likely to fail? I mean, if my dad's doctors had said there was a very expensive brain tumor treatment available but that they weren't going to try it because people like him had a 99% chance of not being helped by it anyway, I'd have had a pretty hard time agreeing that it wasn't "worth it" and just letting him die. (He had an experimental treatment and is doing very well now, by the way.) But there are probably plenty of cases that aren't life and death, where doctors provide unnecessary treatment just to shut patients up!

Anyway, greater minds than mine will have to figure out the answers on this one! For more reading on this topic, here's a book that has been on my radar ever since it was called the "best economics book of the year" by David Leonhardt of the New York Times: Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer.

A Fascinating Look at Health Care Costs

I just read a great article in the June 1 issue of the New Yorker: The Cost Conundrum: What a Texas Town Can Teach Us About Health Care. Atul Gawande looks at health care costs by focusing on McAllen, Texas, a small border town which happens to have the highest health care costs in the country. The question is, why? How did this happen in this particular location?
Not to spoil the buildup, but here's the answer: it all comes down to the doctors themselves, and what sort of money culture exists among them:

One morning, I met with a hospital administrator who had extensive experience managing for-profit hospitals along the border. He offered a different possible explanation [for the difference in health care costs between McAllen and El Paso]: the culture of money.

“In El Paso, if you took a random doctor and looked at his tax returns eighty-five per cent of his income would come from the usual practice of medicine,” he said. But in McAllen, the administrator thought, that percentage would be a lot less.

He knew of doctors who owned strip malls, orange groves, apartment complexes—or imaging centers, surgery centers, or another part of the hospital they directed patients to. They had “entrepreneurial spirit,” he said. They were innovative and aggressive in finding ways to increase revenues from patient care. “There’s no lack of work ethic,” he said. But he had often seen financial considerations drive the decisions doctors made for patients—the tests they ordered, the doctors and hospitals they recommended—and it bothered him. Several doctors who were unhappy about the direction medicine had taken in McAllen told me the same thing. “It’s a machine, my friend,” one surgeon explained.

No one teaches you how to think about money in medical school or residency. Yet, from the moment you start practicing, you must think about it. You must consider what is covered for a patient and what is not. You must pay attention to insurance rejections and government-reimbursement rules. You must think about having enough money for the secretary and the nurse and the rent and the malpractice insurance.

Beyond the basics, however, many physicians are remarkably oblivious to the financial implications of their decisions. They see their patients. They make their recommendations. They send out the bills. And, as long as the numbers come out all right at the end of each month, they put the money out of their minds.

Others think of the money as a means of improving what they do. They think about how to use the insurance money to maybe install electronic health records with colleagues, or provide easier phone and e-mail access, or offer expanded hours. They hire an extra nurse to monitor diabetic patients more closely, and to make sure that patients don’t miss their mammograms and pap smears and colonoscopies.

Then there are the physicians who see their practice primarily as a revenue stream. They instruct their secretary to have patients who call with follow-up questions schedule an appointment, because insurers don’t pay for phone calls, only office visits. They consider providing Botox injections for cash. They take a Doppler ultrasound course, buy a machine, and start doing their patients’ scans themselves, so that the insurance payments go to them rather than to the hospital. They figure out ways to increase their high-margin work and decrease their low-margin work. This is a business, after all.

Fortunately, some areas have developed very different cultures. Gawande talks about the Mayo Clinic, which has some of the lowest health care costs in the country:

The core tenet of the Mayo Clinic is “The needs of the patient come first”—not the convenience of the doctors, not their revenues. The doctors and nurses, and even the janitors, sat in meetings almost weekly, working on ideas to make the service and the care better, not to get more money out of patients. I asked Cortese how the Mayo Clinic made this possible.

“It’s not easy,” he said. But decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focussed first on what was best for patients, and then on how to make this financially possible.

Most importantly, Gawande notes that this problem is not related to who actually pays the doctors' bills, whether it be the government, private insurers, or individuals out of pocket:

Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.

This last point is vital. Activists and policymakers spend an inordinate amount of time arguing about whether the solution to high medical costs is to have government or private insurance companies write the checks. Here’s how this whole debate goes. Advocates of a public option say government financing would save the most money by having leaner administrative costs and forcing doctors and hospitals to take lower payments than they get from private insurance. Opponents say doctors would skimp, quit, or game the system, and make us wait in line for our care; they maintain that private insurers are better at policing doctors. No, the skeptics say: all insurance companies do is reject applicants who need health care and stall on paying their bills. Then we have the economists who say that the people who should pay the doctors are the ones who use them. Have consumers pay with their own dollars, make sure that they have some “skin in the game,” and then they’ll get the care they deserve. These arguments miss the main issue. When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care.

I used to want to be a doctor myself, until I almost flunked chemistry freshman year of college. I was idealistic about helping people, fascinated by the science of medicine, and also knew that doctors made a good living. I suppose most people who become doctors are driven by similar factors, but I've always thought that the barriers to entry were so high that they'd weed out anyone who wasn't driven most by wanting to be a heroic lifesaver-- there are easier ways for smart, driven people to make a doctor's salary, after all. But I guess being heroic isn't enough for some doctors nowadays, at least not without a lot of reinforcement of that ethic from one's peers. Sad.

Going Dutch

I'm a little late to the party in commenting on it, but this article in last Sunday's New York Times Magazine is worth reading, for a fascinating and detailed look at what it's like to live in the Netherlands and participate in a high-tax, welfare state economy. The Dutch system is an interesting mix of public and private elements, and it has its good and bad points, but for many people, particularly families, it sounds like you get your money's worth! It's hard to sum up the article in a quick quote, as the whole point is that the usual stereotypes don't apply and the system is full of surprising contradictions:

American perceptions of European-style social welfare are seriously skewed. The system in which I have embedded myself has its faults, some of them lampoonable. But does the cartoon image of it — encapsulated in the dread slur “socialism,” which is being lobbed in American political circles like a bomb — match reality? Is there, maybe, a significant upside that is worth exploring?

Let's focus first on the slur. I spent my initial months in Amsterdam under the impression that I was living in a quasi-socialistic system, built upon ideas that originated in the brains of Marx and Engels. This was one of the puzzling features of the Netherlands. It is and has long been a highly capitalistic country — the Dutch pioneered the multinational corporation and advanced the concept of shares of stock, and last year the country was the third-largest investor in U.S. businesses — and yet it has what I had been led to believe was a vast, socialistic welfare state. How can these polar-opposite value systems coexist?

Read the rest of "Going Dutch" to find out!

Dieting For Dollars

Financial incentives may be an effective way to help people lose weight, according to this New York Times article: Dieting? Put Your Money Where Your Fat Is.

Most diet bettors agreed that while losing weight was the ultimate goal, winning the bet — and pocketing the winnings — soon became the main reason they stuck to their diets.

“I wanted to win, and I blew everyone away,” said Christopher Fallon, 36, a medical sales representative from West Orange, N.J. Mr. Fallon participated in a three-month diet bet with nine other colleagues, everyone contributing $100 to a winner-take-all pool. At a sales meeting a few weeks before the end of the bet, Mr. Fallon’s fellow bettors realized that he was way ahead.

“When I saw Chris at the gym at 6 a.m. looking skeletal, I knew it was over for me,” said one colleague, Carolyn Kramaritsch.

Mr. Fallon admitted that he enjoyed vanquishing his peers even more than losing the pounds. “I didn’t even need to lose much weight,” he said, “but when I saw everyone else, I thought, ‘I just won $900!’ ”

Sounds like a win-win situation... unless people start cheating with dangerous weight-loss drugs, just so they'll get the money!

But it seems to me that what would REALLY work well is exactly the opposite: let's say you could magically lose a pound for every $1,000 you put in a savings account. Something tells me a lot of Americans would suddenly have much bigger nest eggs!

Gift and Estate Taxes

In the post on my parents and Medicaid, I said that after my father's death, my mother might want to give my sister and me cash gifts up to the maximum allowed amount. Commenter Moom asked if we really needed to limit ourselves to that maximum because my parents' estate would be too small to be subject to the estate tax anyway. I thought the maximum annual amount still applied because my sister and I would have to pay taxes on it if it was over that amount-- but I just looked into that a bit more, and it seems I was wrong:

No tax payable by the person receiving your gift or
bequest. Generally, the person who receives your gift
or your bequest will not have to pay any federal gift tax or
estate tax because of it. Also, that person will not have to
pay income tax on the value of the gift or inheritance
received.

But in general, the person giving a gift does have to pay taxes on it unless it meets certain criteria:

Gift Tax
The gift tax applies to transfers by gift of property. You
make a gift if you give property (including money), or the
use of or income from property, without expecting to
receive something of at least equal value in return. If you
sell something at less than its full value or if you make an
interest-free or reduced-interest loan, you may be making
a gift.
The general rule is that any gift is a taxable gift.
However, there are many exceptions to this rule.
Generally, the following gifts are not taxable gifts:
• Gifts, excluding gifts of future interests, that are not
more than the annual exclusion for the calendar
year,
• Tuition or medical expenses you pay directly to a
medical or educational institution for someone,
• Gifts to your spouse,
• Gifts to a political organization for its use, and
• Gifts to charities.

The annual exclusion amount for 2008 was $12,000.

[IMPORTANT NOTE: coming back to Medicaid issues again for a minute, you have to remember that this gift limit only relates to taxation. For the purposes of Medicaid eligibility, you can't give away any money at all other than maybe a few hundred dollars here and there.]

I won't get into any details about the estate tax--for 2009, your estate has to be $3.5 million or more, so it is relevant to only a tiny percentage of people, and certainly not my parents, alas! But you can read more about gift and estate taxes in the IRS document linked below.

IRS publication 950, Introduction to Estate and Gift Taxes

My Parents' Medicaid Eligibility

Returning to the subject of Medicaid: after the previous post talking about general Medicare and Medicaid issues, here's more on the specific case of how my parents might pay for a nursing home... please, as you read this, remember that these are not the words of an expert. They are the words of someone who has tried to research the issues and who has spoken to a lawyer a few times, all while being stressed out and confused and grasping at anything she can do to feel like she's helping her parents deal with a terminal illness-- in other words, I may be wrong about a lot of things, but this is how I'm muddling through.

As discussed before, when it comes to nursing homes, Medicaid is for people who don't have the cash to pay for it themselves. But because the cost of nursing home care is so astronomical, you don't have to be "poor" to need Medicaid, especially if you're married-- Medicaid acknowledges that the spouse who's not in the nursing home still has to have money to live on.
In the example of my parents, who are married, they will have to spend quite a lot of their own money before they qualify for Medicaid, but not all of it. The spouse who goes into a nursing home can keep a small amount of money for him or herself-- about $2,000 plus about $60 a month in income in my parents' case, I think. (If you're not married, that is literally all you get to keep. Medicaid will put a lien on your estate for repayment from anything that is left from the sale of a house, etc.)
The other member of the couple, referred to as the "community spouse," can keep the couple's house (at least if it's worth under $500k) and car. The couple can also keep enough money to cover burial plots and funeral expenses. Beyond that, the community spouse can retain income and assets up to an amount determined by the state you live in-- this is referred to as the CSRA, Community Spouse Resource Allowance. Where my parents live, my mother can keep up to about $110,000 worth of cash assets-- that may sound like a lot, but not if she has to live on it for 20 years. She'd also get to keep some portion of my father's pension and Social Security income, up to another state-determined amount referred to as a MMMNA, minimum monthly maintenance needs allowance. I had a hard time getting straight answers on how much this would be-- apparently housing is expected to be about 30% of it, and in my parents' state, the maximum may be about $2,500 a month, but it wasn't totally clear.
My parents house is probably worth around $400,000 or maybe less, so they don't have to worry about that. The rest of their assets are around $350,000. Subtract the $110,000 my mother can keep, plus about $20,000 for their funerals & burial, plus maybe $25,000-30,000 for a new car bought with cash, once the current one's lease is over. There are also some repairs and renovations needed for their house, which can be an allowable way to spend down your money, though the lawyer said it would be better to do all that before my dad went into a nursing home. All in all, my parents are probably left with at least $150,000 they'd have to spend before qualifying for Medicare while both of them are alive. Given that a nursing home can cost about $90,000 a year, the money wouldn't last all that long.
One thing my mother can do is use that $150,000 to buy an annuity that is in her name only-- that would then be income that she'd be able to keep more of, as opposed to an existing asset that has to be spent up front. But otherwise, there is nothing she can legally do to keep that money from being required for a nursing home before Medicaid kicks in. Theoretically, she could give away some of that money, or put it in a trust, etc. But these are all considered non-qualifying transfers that are subject to a 5-year lookback. If my parents' records were reviewed and any non-qualifying transfers were found in the past 5 years, my father's Medicaid eligibilty would be delayed by a number of months equaling the total amount of those transfers divided by the monthly cost of his care. Given that my father's entire life expectancy is far less than 5 years at this point, it would be crazy to mess around with this, even if my sister and I just used any money we'd been given to make up the gap of paying for the nursing home. But also, with that life expectancy, he might not live in a nursing home long enough to even spend down $150,000 and have to apply for Medicaid.

What about after my father is gone? My mother is still only in her mid-60s, so hopefully she will have many years to live. It should also, hopefully, be more than 5 years before she needs a nursing home. If she wants to transfer money to my sister and me, she can start giving us the maximum annual gift allowance amount each year, and we could somehow put the house in our names so she'd be in a position to qualify for Medicaid sooner.

The other thing that the lawyer advised us to do was for my parents to put all their assets in my mother's name only, and create a will that leaves everything to my sister and me, bypassing my dad. This is completely opposite to what my dad originally thought of doing, because of my mother's money management problems. And it's a change from the trust the lawyer recommended at first. His thinking was that if in some freak accident my mother ended up dying before my father, then all the assets wouldn't be my father's, leaving them to potentially be spent down to almost zero on a nursing home. It puts my dad in a risky position, because he's left with nothing, and has to trust that my sister and I would use the money to look after him. And I do worry a bit about my mother having sole control of all that money. But we're all trying to tackle this together, and in the end, we all believe that we'll take care of each other.

So that is my somewhat scattershot explanation of our situation, as I understand it. I feel really lucky that my parents do have savings and that they want to leave some kind of inheritance to my sister, her kids, and me. It's not fun dealing with all this stuff, but it's far better than having no money and no options.

General Thoughts About Medicaid and Medicare

The posts about my parents' estate planning has brought up a lot of interesting questions and comments about Medicare and Medicaid that deserve to be addressed separately... so here goes!

Many people have pointed out that there is often confusion between these two government plans: Medicare is a federal government health insurance program that covers all people over age 65. It covers hospitals and doctors, etc, when you're ill, but it doesn't cover nursing home care. The exception to this is when the patient is in a hospice program: if your doctor says you have less than 6 months to live and you're just getting palliative care for a terminal illness (as opposed to treatment aimed at curing that illness) then Medicare covers at least part of the cost of a nursing home.

Medicaid is a health program for people with low income and resources, of any age. But because of the increase in health care costs, many people turn to this program to help pay for nursing home care. In the case of many middle-class families like mine, any savings and assets can be wiped out very quickly by self-paying the $90,000 or so a year a nursing home can cost, so people who would never have been considered "low-income" can end up qualifying for Medicaid. Also, many families may wish to leave their assets to their children or charities, rather than using all of them to pay for the costs of a nursing home. Any estate planning lawyer will discuss what you can and can't do to keep assets within your family and still qualify for Medicaid.

This is where people start to talk about whether this is cheating. A commenter mentioned the phrase "tragedy of the commons," which is absolutely appropriate here. The term is often illustrated by an example from from centuries ago, when there were common lands on which anyone could let their animals graze. All the farmers knew the grass on the common land wasn't enough to feed everyone's sheep, but instead of each farmer thinking "ok, it will be better for all of us if I only let a few of my sheep graze on that land," they each said "I'd better send all my sheep over there and let them pig out before all the other farmers cheat me out of my share!" And of course the result is that the common land becomes barren and everyone shares the pain.

In our country today, it's much the same: everyone is looking out for themselves and trying to benefit as much as they can from public resources, which ends up depleting those public resources and increasing the tax revenue needed to pay for them. But no one wants to be the chump who volunteers to renounce those benefits. I don't like our health care system, but until it changes, I want my family to get the same benefits out of it that everyone else takes. I want them to use whatever legal strategies are available. I don't think there is any great moral high ground to be gained by not doing so.

The reality is that one way or another, my parents will have to spend a lot of their own cash on nursing home care-- they can't escape it, and they probably wouldn't want to even if they could. As another few commenters mentioned, not all nursing homes accept Medicaid, and those that do aren't necessarily very nice. As I understand it, some nursing homes only accept Medicaid patients. Some nursing homes don't accept Medicaid at all. Then there are some who may not initially accept a patient who can't self-pay, but would accept Medicaid later if that patient runs out of money. This is what seems to be the case with the nursing homes in my parents' home town. They are nice nursing homes-- I used to volunteer in one of them, and I remember it being a clean, comfortable, cheerful place where the residents seemed well cared-for. My parents would have to self-pay for at least a couple months to get in, but then they could apply for Medicaid once their funds start running low. In the next post, I'll bring this topic back to the details of our personal situation and lay out a possible scenario of what they'd be expected to pay before qualifying for Medicaid.

Estate Planning Update

My parents and sister and I had another session with a lawyer to try to figure out how my parents should best prepare themselves for the future. As I wrote a couple months ago, my father had done no estate planning whatsoever and at the age of 74, was totally without a will or even a health proxy a few days before having to have surgery for a highly malignant brain tumor-- not good. I frantically tried to help him get his affairs in order. Because of my mother's debt troubles in the last few years, my father did not want her to be able to blow all their money. The lawyer we saw before his surgery didn't have time to set up any sort of trust, but to try to comply with my father's stated wishes, he ended up drawing up a will that basically disinherited my mother. In retrospect, this was a dumb idea, as you can't just disinherit a spouse without going through probate and if my dad had died with that will in effect, it probably would have led to exactly the sort of complications we were trying to avoid.

Also, it caused some stress with my mom. She was upset that we didn't trust her (though that lack of trust is arguably justified.) And it did look kind of bad-- we were rushing this through with my dad under a lot of stress, and it all happened before my mother could get home to be with us when he went in for surgery.
Recently, we went back to a different lawyer to revise the whole plan. Since my mom's been back and taking care of my dad, I guess she convinced him that his earlier impulses were wrong. The new lawyer seemed a bit suspicious that my sister and I had been trying to stiff her, which we weren't, but of course it is his job to think that way and advise both my parents as a couple as to what is best for them.
To make a long story somewhat less long, new plan is to set up a revocable trust, with both my parents as trustees/beneficiaries and my sister and I as successor trustees in the event that neither parent is competent. All their assets will be held in this trust-- it just simplifies matters if anything happens, without restricting how they can use the money.

Other options we discussed were some sort of irrevocable trust. At first I had thought that might be a way to protect some of their assets from being at risk if they needed a nursing home, and I thought it would just give my sister and me control of the money but let us spend it however necessary to ensure our parents' comfort. But it turns out we'd only be able to spend the income from that money, not the principal. My parents don't have that kind of money-- they'll need to spend down the principal towards the end of my mother's life most likely.
As for the whole Medicaid/nursing home issue, it's very complicated. And it's hard to know when the right time is to try to protect your assets. When I wrote about this previously, some commenters questioned the ethics of trying to shield assets and make Medicare [typo-- I meant to say Medicaid, as a commenter points out below] pay for a nursing home. As far as I am concerned, if the tax laws allow for legal ways to do this, I don't have a problem trying to take advantage of it. My parents aren't rolling in money and though they have enough now to live in reasonable comfort, their savings could be decimated if one of them was in a nursing home for a year or two. They've paid their share of taxes over the years

Right now, the person most at risk for that is my Dad. He's got very serious health problems and his treatments are making him weaker and weaker. I don't know how long my mother will be able to care for him at home even with help from visiting nurses. But Dad's life expectancy is pretty short-- it would be really good news if he lived more than another couple of years. If he needed a nursing home, the lawyer told us, the assets required to pay for it would not include the house, since my mom still would be living there, and she'd get to keep half of his income. But by his math, that left about $150,000 of savings that would have to be used to pay for nursing home expenses before Medicaid kicked in. That would cover maybe 2 years, as nursing homes can be over $80,000 a year. (My dad never had any long-term care insurance, and he'd certainly never be able to get any now!)

If my dad was expected to live longer, it might make sense for my parents to put some money in an irrevocable trust, or give some money to my sister and me in smaller increments, but with the 5-year lookback for Medicaid, it doesn't make sense right now. We just need to suck it up and pay the big bucks to a nursing home if it comes down to it. As for my mom, she's still in relatively good health, and she's 10 years younger than my dad. It's a bit early to think about nursing homes for her, but over the next few years, I'll be thinking about whether it would make sense for her to take any additional precautions to protect her assets.
Meanwhile, I have strongly cautioned her not to make any financial decisions without consulting me! She says she can be trusted and is an adult who can take care of things for herself: "I'm not stupid!" she protested, when she found out Dad had wanted my sister and me to control things. And she's not stupid, but she has no experience with these matters, and during the conversation with the lawyer, she was totally confused and kept getting things wrong after repeated explanations, and afterwards she herself said the experience made her "feel stupid." I can't help but worry that she would make the wrong decisions or be taken advantage of.

I do want to keep researching all these issues, and I will need to revise the budget I created for my parents with all this in mind. I wish I could be writing this post as someone who has all the answers and is offering a clear explanation to help others, but unfortunately I'm in no position to do that! Please remember that I'm not an expert-- I'm just telling my story as it happens, as I make mistakes and try to learn from them. Every situation is different so please make sure you get your own legal advice if you are facing these questions in your own life!

Wrap-Up on the Health Crisis Posts

I wanted to thank everyone again for all the supportive comments on this series. It's been hard dealing with what's happening to my Dad and what it means for our family, but it has helped to share it with all of you.
As you can all tell from reading the posts, this has been a whirlwind time full of more questions than answers, some of which include:

• What does Medicare cover?
• What does supplemental insurance cover?
• What kinds of things should you think about when making a will?
• How do you pay for a nursing home?
  
• When is it appropriate to set up a trust, or transfer assets to children?
• How do you budget to make sure your retirement savings last long enough?
• How do you cope with managing things for a parent who hasn't dealt with any of this stuff?
  

I have not yet been able to educate myself on all the issues enough to really be writing any how-to or advice posts, I'm just trying to show you what it's like to be caught in the midst of this, and hopefully encourage people to investigate these things for themselves in advance, well before it's ever needed. Believe me, once you are in the thick of it, you will feel so stressed out and emotionally drained that you won't really want to deal with it.

And the tough thing is that you never know how much time you'll have. My father's prognosis sounded quite positive at first, but further discussion with the doctors was very sobering: they removed most of a large glioblastoma (yep, just like Ted Kennedy), but even with the radiation and chemo treatments he'll soon be undergoing, the life expectancy with this kind of highly malignant tumor is often only a year or two.

So now, there's another thing to think about, as suggested by one of the oncologists: what has Dad always wanted to do? Should he spend a little mad money on a trip or some other treat for himself, to help him enjoy the time he has left? I think he's still a little too much in shock to think clearly about it, and I'm not sure he's in the frame of mind where having some kind of last fling would really help. I think we're all a bit in shock right now, somehow trying to be optimistic and resigned at the same time. It's tough.

Posts in this series:
Yikes, family health crisis!
More info on the crisis and what I needed to do
Organizing my father's finances
Attempts at estate planning
How Mom felt about all this
Details on Dad's Finances
What About Me?

Dad's Legal Matters

Once I'd brought up the idea of talking to a lawyer about a will and power of attorney (as discussed in the last post), it took a little while for things to gain momentum. I tried to be very reassuring with my dad, just saying it was something he should do anyway, so it wouldn't seem like I was pushing the issue because he was lying in a hospital bed with one foot in the grave. I reminded him that there were things that a lawyer could set up, such as some sort of trust which would provide income for him and my mother, with my sister and me as trustees. As much as my dad has been so angry at my mother for moving out and blowing almost $100,000 in two years of trying to live in her own apartment, he does seem to feel he has to provide for her, in a way that won't let her screw up.

So that conversation with him clarified his general intent. I was probably leading him a bit, but I don't think he minded, since I was clear to focus on setting things up in ways that protected him and my mother while they were still living, as opposed to it sounding like my sister and I just wanted an inheritance. But then there was the question of seeing an actual lawyer, which had to happen in a very tight window of time between him getting out of the hospital and having to go back in, with a holiday weekend taking up most of the space in between.

I knew my father had mentioned that a friend of his had once recommended a lawyer, so I tried to nudge him to call the friend, which he did not do. While I had my hands full with Dad, I asked my sister to try to call his friend. It's a small town, and I figured she could just look the guy up in the phone book, but the next day, it turned out she hadn't gotten around to calling. She then told me that her husband has an uncle who does family law, who might be willing to see us over the weekend if necessary. I suggested this to my dad, who at first pooh-poohed the idea. "Is this guy really any good, or is he just someone they all use because he's a relative," he said. He preferred seeing the person that his friend had recommended-- he can be very snobby about only wanting to deal with the best people. But after another day had gone by and he still hadn't made that call, I told my sister to contact the uncle. She called back and said he could see us later that afternoon, so I told my dad we really needed to just do something, anything, right away, and that he could always change it later.

In some ways, wills are very simple, especially for someone like my dad who has no assets other than a house, a 401k and a couple of bank accounts, but you can't count on being able to walk into an office and just get a will done at the drop of a hat! Since the lawyer was related to my sister, (and thereby potentially an interested party in it, if, say, he was the only survivor after someone dropped a bomb on some huge extended family picnic!) he needed to have someone else notarize the will, on top of just drafting the document properly and lining up some witnesses. He was also able to do the power of attorney and the health proxy, but as he kept warning us, this did not constitute a proper estate plan. He talked about some other options that would suit our purposes, including a testamentary agreement, a real estate trust, having my mother deed her share in the house to my father so it would pass through his will to my sister and me, or having both of them deed the house to my sister and me, etc. All this stuff will have to be resolved later, but what we were able to finalize within a couple of days around the holiday weekend was a will in which my father leaves all his personal property to my sister and me, which we then consider ourselves honor-bound, but not legally bound, to use to take care of our mother. As I understood it, since my mother jointly holds the house and bank accounts, she would get those if he died, and my sister and I would then need to get her to agree to some kind of trust for us managing her assets.

It's all quite complicated, and will only get more complicated when we go back to the lawyer later. I think what will end up happening is that my sister and I will become co-owners of my parents' house, while they have a life estate allowing them to live there as long as they want to. And after my dad's death, there will be some kind of trust providing for my mother, which my sister and I will control. I guess depending on how we do this, it will protect their house and assets from needing to be used to pay for a nursing home if they ever need one. There may also be some other transfers of what little cash they have to my sister and me, but as I told my sister, we can't think of this as an inheritance or a gift. We have to think of this as money that is being set aside to take care of our mother later. She's 10 years younger than our dad, so we have to make it last. If all goes well, we'll have the proceeds from selling a house someday, but even that might have to be borrowed against to make ends meet.

Aside from the will, the power of attorney gives my sister the ability to make legal decisions on my dad's behalf if he is unable to. He originally wanted me to have the power of attorney, but I thought it made more sense for it to be my sister, as she lives closer. She'll also be the health proxy. When we left the follow-up appointment with the lawyer, with all of these papers signed and official, I was very relieved. There are still some issues that could get sticky if my dad died anytime soon, but it's better than having nothing. Now we just need to tackle the more elaborate estate planning, which will require my mother's consent and cooperation. Speaking of which, are you wondering how she feels about arriving home in a hurry to take care of her sick husband and discovering that her children are being put in charge of the family finances? I'll get into her side of the story in the next post...

To be continued...

Taking Care of My Dad

When I was suddenly forced to deal with my dad's potential death or incapacitation, (see the last post) I knew I'd have to act fast. Fortunately, the topic had been broached before. A few years ago, he'd told me he wanted to create a power of attorney, so that my sister or I would take over decision-making for him if necessary. Normally, you'd think his wife would do such things, but my parents have had a lot of problems in their relationship, and basically, my dad doesn't trust my mom's judgment. Sadly, I don't trust her judgment either, so I told him the power of attorney was a good idea, but then we never got around to doing it. I reminded him about it about a year ago, and suggested he also make a will, but still he procrastinated.

Knowing that he was facing brain tumor surgery, my dad was more willing to confront these issues, though I could tell he still really didn't relish the idea of dealing with it. At a point when we were just killing time in the hospital, I reminded him that we'd discussed it and that now was the time to really take care of it. I said I'd try to get the name of a lawyer. I also gently brought up the subject of my dad's disorganization, sort of along these lines:

"You know, Dad, you're going to be walking with a cane when we get home, and with your balance and vision problems, we'll have to be sure the house is a bit less cluttered so you aren't tripping on things. I know you and mom fight about her moving your stuff and you don't want anybody to touch anything, but you've sort of joked about how disorganized you are, and I know a lot of this stuff has just piled up because you haven't had the energy to deal with it. How about if I tackle some of that for you? You know that I understand the kind of stuff that's important to you, and I'll check with you before I throw anything away. I can organize all your files and make sure all the important financial documents are together, so we'll know what bills need to be paid and how to take care of things if you're out of it for a while after this surgery. Is that ok?"

My dad agreed, and over the next couple of days, I went on a rampage. Well, a very judicious and considerate rampage! I ended up throwing out about 15 grocery bags full of paper: catalogs and magazines from the mid-90s, countless printouts of web pages from shopping sites, handwritten and typed lists of health info, financial info, and other weird compilations of data. I found all the financial papers, benefit info, car lease info, regular bill info, tax records, etc, purged the out of date stuff and filed what needed to be kept.
I probably inhaled a pound of dust while doing all this. It was also a fascinating glimpse into the way my dad's mind works. He saved everything, from the mundane to the sentimental to the just bizarre. He was also a great compiler of data-- I found his GRE scores from the 1950s, along with graph paper pages on which he had plotted the distribution of test scores and where his fell on the curve. He also had extensive lists of what food he'd eaten, daily blood sugar readings, medicines taken, money spent, books and CDs coveted, and random economic data and newspaper clippings. None of these were saved in any methodical way-- he'd get a system going for a while, but then he'd lose track of it, and you'd find the same data in a different folder later, and different kinds of info combined in one folder. It had definitely gotten out of hand, so as I talked my dad through what I was doing, he was actually very happy to see how I was organizing everything and was much more willing to dump all the old stuff than I'd thought he'd be.
Using all this info, I made a list of all his accounts. I also drew up a budget for fixed expenses, slotted in estimated amounts for variable expenses, and laid them out against his pension and social security income and withdrawals from savings, with scenarios for both parents living, and my mom alone after his death.
I was happy to discover that while he's not a rich man by any means, I think my father's income and savings should support his needs for at least another 20-25 years, or more if he makes some cutbacks in his lifestyle. My mother would only get half his pension if he dies, but I think there will still be enough money to support her for a long time if she makes smart choices. Of course, my mom has been known to make some very dumb choices when it comes to money. How could I protect her from doing that? And wait a minute, why was I puttering around in all these dusty papers and making budgets when what my father really needed was a will and a health proxy??

More on that in the next post...

Taking a Deep Breath.

I've just had the most stressful weeks of my life, I think. Sorry I had to disappear for a while, and many many thanks to those of you who sent your thoughts and prayers. The good news is that my dad is doing well-- he's out of any immediate danger, and I think he's recovering amazingly well.

To recap what happened while I was away, the short story is that I got a call from my mom saying my dad wasn't feeling well and my sister was taking him to the doctor. My dad has a lot of health issues, so callous as it may sound, I didn't take this as anything particularly alarming. But as I learned more, it began to sound like he might have had a minor stroke. Then late the next night, my sister called me from the hospital, sobbing, after she was told he actually had a brain tumor that seemed like it could be malignant and growing fast, in a location that could potentially affect his basic life functions. This was the kind of dire diagnosis that even if unconfirmed, I could not ignore. The next morning I was on a train.

Over the next couple of days, my sister and I slept at the hospital while waiting for more news. I booked my mother a plane ticket to come back-- she has been away for 6 months taking care of her own mother, who has Alzheimer's. My dad was put on medications that reduced the swelling in his brain and his symptoms-- balance problems, vision problems, lack of control on his left side-- were all greatly lessened. We took him home and took turns sleeping on the living room floor so we would be right there if he needed to get up and walk around. We took him back and forth for more tests, bought a pill box so we could keep track of all his medications, and waited for surgery to be scheduled.

Meanwhile, as soon as I knew what was going on, I was worried about his financial affairs. I knew my dad hadn't made a will or a health proxy. I had no idea what bank accounts or insurance policies he had. I had no idea what bills needed to be paid. His money matters were a complete mystery and what made things even worse was that he is a total pack rat. His desk was a shambles and the house was full of dusty piles of papers, magazines, catalogs and who knew what else. I dreaded what we'd have to do to untangle things if he died.

Some people might think I sound like my priorities are screwed up: "Your dad could be on his deathbed, and all you can think about is paying his bills?!" Well, his health was out of my control. He was in the hands of excellent doctors, and I was doing whatever I could to keep him comfortable and safe at home. But getting his affairs in order was something I could control, and it was something that I knew would benefit the whole family and make it easier for us to take care of my dad's needs no matter what happened. So I went to work...

To be continued...