Are You Prepared for a Major Medical Crisis? Here's How a Crisis Can Affect You Financially

My mom contracted pancreatic cancer when she was just 55 years old. Thankfully, eight years later, she still plays a mean game of pickleball — good luck if you get stuck on a court with her. 

Here's why we count ourselves so lucky she's still with us: Pancreatic cancer patients have a five-year survival rate of 10%, according to the Pancreatic Cancer Action Network. It's one of the deadliest cancers and IMHO, it doesn't get enough attention in this very pink-ribbon heavy month.

So, what would happen if you were diagnosed with an unthinkable, dreadful disease? Would you have made all the right moves? 

A total of 41% of working-age Americans have medical bill problems or have medical debt, a figure up from 34% in 2005, according to the Commonwealth Fund. Adding in the seven million elderly adults also dealing with these issues puts a total of 79 million Americans in the medical debt category.

Good news: You can prepare for the unthinkable, as difficult as that might seem. Check out the tips below.

Tip 1: Start planning now.

You don't want to wait until a terrible diagnosis or emergency to do something about your money, because by then, it might be too late. 

Find out about the nuances of your health plan and determine whether it will still fit your needs if you encounter a health situation. Review the nature of the plan, whether it's a high-deductible health plan, a health maintenance organization (HMO), a preferred provider organization (PPO) or another type of health plan.

What would you have to pay for a deductible before your insurance company would pick up the remaining costs?

Find out everything you can about what your health plan covers in advance. Let's take cancer, for instance. Some health insurance coverage doesn't cover unproven or experimental cancer therapies, herbal drugs, long-term care, private duty nursing, non-prescription drugs and more.

Tip 2: Consider supplemental coverage.

Explore the idea of purchasing supplemental coverage for a specific covered benefit. Note that you'll spend more money on these types of coverages beyond your regular insurance premium. Check out these examples:

• Lump sum heart attack or stroke insurance: If you suffer a heart attack or stroke, this type of insurance offers a cash benefit that you can use to spend how you wish.
• Lump sum cancer insurance: You can use this lump sum cash benefit if you become diagnosed with cancer. It can help pay for medical costs and everyday expenses.
• Cancer treatment insurance: You can get cash benefits for cancer treatments and other covered events throughout your illness.

Supplemental health insurance policies can help with certain out-of-pocket costs for deductibles and copays, out-of-network charges, travel and lodging for you and/or your caregivers, childcare, lost wages and other items that your health insurance doesn't cover.

Tip 3: Total up your income sources.

Pretend the unthinkable happened today. (I know, it's no fun to imagine, but it's a good exercise to help you determine your preparedness.)

Short-term disability policies replace a portion of your salary during the first few weeks of an illness. Long-term policies, on the other hand, might replace your income for up to several years. 

You may not keep your job if you end up with an extended long-term illness. What happens if you must quit or become terminated? (Once FMLA leave expires, your employer does not have to continue to hold your position for you and can terminate you if you cannot work.)

You may qualify for Social Security Disability Insurance (SSDI), which provides monthly payments as long as you've worked for a specific period of time, paid Social Security taxes and have been labeled "disabled" by Social Security. After two years, you can become eligible for Medicare. Find out whether you qualify for Supplemental Security Income (SSI), or monthly payments for disabled individuals with low income and asset levels.

What other income sources do you have? Maybe your spouse can help support you during this time. Maybe you want to consider accessing your 401(k) or another retirement fund. Or maybe you'll finally raid the emergency fund that you've been building for years.

No matter what, consider the implications of everything — particularly if you decide to access your 401(k) or retirement funds. You may regret doing so down the road.

Tip 4: Review your investments.

Let's say you got bad news today. How would you handle your investments? First of all, you wouldn't want to jump to conclusions about what will happen down the road. If you have a heart attack, you could be good as new in six months. You don't want to empty your entire nest egg for a short-term event. Keep your long-term savings and investments intact. 

If you were diagnosed with cancer, you'd reach toward your short-term savings: CDs, money market accounts or cash if you needed the money immediately. Review your investments for diversification and have provisions built in if the unthinkable happened.

Tip 5: Visit your lawyer's office.

It's a really, really, really good idea to set up your durable power of attorney, health care proxy and living will now. You want to get those unpleasant legal documents out of the way while you're healthy so you don't have to face financial implications later on. You don't want your financial assets to get stuck in probate because you didn't create a will.

Also, while you're healthy, shop for life insurance. Life insurance benefits can help your family pay for death taxes and bills, replacement income, a mortgage, college tuition for kids or grandkids and more. Make sure to weigh the pros and cons of term and whole life insurance before you make your choice.

Take Care of Your Finances Now Rather than Later

When you find yourself mired in a health crisis, you want to take care of yourself and your family — not worry about money. Increase savings, pay off debt and reduce interest rates now, just in case. Prepare for the unthinkable now whether it will actually come to fruition or not.