Why protecting wealth starts with planning for health care

Health care costs are an inevitable part of life in the United States, and as we age or face health challenges these expenses can escalate quickly. 

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What may come as a surprise is that many of these costs — which most people think are fixed — can often be managed, negotiated and planned for. 

With health care expenses often treated as an unfunded liability, it's essential that high net worth individuals incorporate a dedicated budget line not just for medical care, but for health advisory services. As the founder and CEO of such a firm, I've found that health care advisors who understand the intricacies of the health care system can negotiate rates, uncover more affordable alternatives — and even challenge high hospital bills.

For example, one of our clients received a $300,000 bill from a top-tier mental health facility that didn't accept any insurance. But we came up with a creative solution: We hired a billing agency that properly coded for the treatment provided, put it in a billing format that the health insurance company understood, and sent it to them for consideration. The client was fully reimbursed.

This kind of advocacy can lead to significant savings, especially in high-stakes situations where better care often comes at a high price. However, achieving these savings requires creativity and a deeper understanding of health care than most family offices or wealth advisors acting on their own can provide.

This approach also highlights the vital link between health care and financial management. A well-rounded strategy integrates health care into wealth management, ensuring that health needs and finances are aligned. This not only helps clients prepare for unexpected medical costs but also ensures that wealth is preserved without sacrificing quality care.

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Health = generational wealth

Health care advisory firms not only help clients plan for their own health care costs but also protect generational wealth. By reducing unnecessary spending, optimizing insurance coverage and finding cost-effective care options, advisors help safeguard family resources.

Better care at better prices isn't just about cutting corners, it's also about leveraging expert insight. I recall one instance in which a law firm was referring their clients to an agency that supplied registered nurses. The agency was charging $175 per hour for registered nurses, but we discovered that only nurse aides were needed, at the cost of just $35 per hour. Switching to the appropriate care level saved the client $1 million annually — and demonstrated how bespoke health care advisory services can lead to substantial financial benefits. 

READ MORE: Why my RIA brought health care planning services in-house

True costs

Advisors can play a key role in helping clients understand the true costs of treatment. Medical bills often contain confusing jargon, but an experienced advisor can break down the actual expenses, offering clarity. Advisors can also uncover hidden costs, such as follow-up appointments, rehabilitation or specialized care.

A strong understanding of health care systems is essential to ensure clients don't overpay or miss out on savings opportunities. For example, a client's son was prescribed medication costing $9,000 per month. But by switching the client to a different health insurance plan, the advisor was able to get the medication covered, saving the client $108,000 annually.

READ MORE: Inflation Reduction Act is causing 'dramatic' rise in Medicare premiums, experts say

Effective alternatives

An in-depth knowledge of the health care landscape allows advisors to offer cost-effective alternatives to expensive treatments or care options. For instance, rather than opting for a costly hospital stay (or emergency room visit), an advisor might suggest the client explore outpatient visit or procedures or recommend high-quality providers that offer more affordable rates.

In the case of long-term care, a client's family was concerned about their loved one who was at home alone, isolated, watching TV all day. They were considering an assisted living facility that would cost $300,000 a year. After evaluating alternatives, the advisor suggested home-based care services including a home companion to accompany him to activities that we recommended, a personal shopper to give him more confidence on how he looked and a concierge doctor. 

READ MORE: Ask an advisor: Will Medicaid cover my elderly mother's home care?

This significantly reduced costs and improved both his medical situation and his lifestyle. This example shows how better outcomes can be achieved when health care and financial expertise are aligned.

Health care as a budget line item

Just as retirement savings or education expenses require careful planning, health care also demands proactive budgeting. 

But it's not just about setting money aside for medical bills; it's about budgeting for health care advisory services. Wealth advisors should treat health care advisory as a distinct line item, ensuring clients have access to expert guidance for second opinions, insurance consultations, and strategic health care planning. This ensures that health care decisions are informed by both financial and medical insights, reducing unnecessary spending and preserving wealth over the long term.

In the end, smart health care planning doesn't just protect finances — it helps clients tackle medical challenges with confidence, making sure their health and wealth can thrive together.