A few years ago, Dave Caruso, a CFP licensee in Danvers, Mass., started to notice something quite strange. Clients who once peppered him with questions about their investments were starting to ask him about an entirely different topic—health care.

These were problems he didn’t know much about. How, his clients asked, would they finance their health-care costs in retirement? What health-care insurance should they buy if they left the workforce before becoming eligible for Medicare? When and how should they enroll in Medicare, especially if they were still working? Did they need both a Medicare Advantage plan and a Medigap plan? What about Medicare Part D plans and doughnut holes?

They also asked him about caregiving, nursing homes, assisted living facilities and reverse mortgages. All of these things would affect their financial plans. None of the questions were the sort Caruso had faced with younger clients in the accumulation phases of their lives.

Caruso, the chairman of Coastal Capital Group, faced an interesting dilemma: Should he and his firm learn to service this growing need of his clients, many of whom were aging baby boomers? Or should he outsource this service to those who knew more about Medicare, Medicaid and the like?

For a number of reasons, he decided to outsource. He’s not alone, and the need for such service has given birth to a new boutique industry of consultants, case managers and others who know the ins and outs of Medicare, retiree health benefits and long-term care.

One of the best-known people in this emerging profession is Dr. Katy Votava, the president and founder of GOODCARE.com in Rochester, N.Y. Dr. Katy, as she is known, is a registered professional nurse with a Ph.D. in health economics and nursing from the University of Rochester.

She says advisors first began asking her for advice and guidance about health-care-related issues in 1988. But it wasn’t until 13 years ago that she realized consulting to advisors was a viable business, and not until 2004 that she launched one in earnest, full time.

It is now booming, and she is busy handling speaking engagements and full-time employees. She even has a CRM system to keep track of it all. “We don’t want anything to fall through the cracks,” she says.

Her message is simple: Americans 65 and older spend on average 13% of their after-tax income on out-of-pocket health-care expenses, and more often than not, overpay for their health-care insurance and services, be it Medicare Part D plans, Medigap insurance, or some other health-care-related expense. “They don’t know how to pick a plan properly,” she says. “But that’s all fixable.”

Indeed, in some cases, Votava says she’s able to help an advisor’s client cut $5,000 to $9,000 per year in health-care-related costs by reviewing the client’s financial situation with a fine-tooth comb and shopping for better plans. In other cases, she’s had to correct huge billing errors that can be as much as $100,000.

Rick Miller, president and founder of Sensible Financial Planning in Waltham, Mass., also uses Votava’s services because, like Caruso, he is in no position to do that kind of work for his clients. “It’s not in their wheelhouse,” Votava says.
She says there are many reasons her business has blossomed over the past decade.

Need Growing
For one, the need for this kind of service is growing as the demographics of the U.S. change. Some 10,000 baby boomers will turn 65 (the age at which they become eligible for Medicare) each and every day over the next 20 or so years.

Still, it doesn’t make economic or legal sense for financial advisors to become health-care experts themselves. They might somehow work it into their fee, but many can’t justify the expense of hiring a full-time specialist for what represents a small part of their work.

Dana Anspach, a principal with Sensible Money LLC in Scottsdale, Ariz., and author of Control Your Retirement Destiny, says compensation is also an issue. “If an advisor spends an extra three to four hours a year [per client] assisting [them] with these types of decisions, how are they compensated for that time?” she asks.

Furthermore, some professional liability insurance policies (otherwise known as errors and omissions insurance) prohibit advisors from offering health-care-related advice and services, says Votava. Nor do advisors want to be responsible for certain types of health decisions.

“Many plan choices are dependent on someone’s drug use and medical needs,” Anspach says. “What if an advisor inadvertently recommends a plan that ends up not covering a needed drug?” And it’s almost impossible for advisors to stay current with the ever-changing health-care laws and products—things like the Affordable Care Act or the shifting premiums and products for such things as Medicare Advantage and Medicare Part D plans, which change every year from state to state.

Many advisors simply aren’t sure when or how to enroll their clients in Medicare, says Votava.

“There are a lot of complicated issues about getting into Medicare at the right time at the right place,” she says. “Because otherwise, there are quite large penalties that will follow people for the rest of their lives. And I have seen lots of people who have been ill-advised. Well intentioned, but ill-advised.”

Another consultant doing this work, Dianne Savastano, the president and founder of Healthassist in Manchester-by-the-Sea, Mass., says advisors also call her during open enrollment season for Medicare, asking which plan is best for their older clients.

“They are inundated with marketing materials,” Savastano says. “And it’s overwhelming and confusing.”

Votava and Savastano both offer advisors an annual review of their clients’ Medigap, Part D and Medicare Advantage plans. “We look at whether their status has changed, if they’ve had medical issues come up, or medications changed,” Savastano says. “We check if their plan has changed, what’s covered and what’s not. That’s especially important with Part D plans.”

The two consultants also both say that saving money on health care in retirement is partly a matter of selecting the plan appropriate for a client’s medical conditions and medications. The Medicare prescription drug plan (Part D) is a stand-alone plan that added prescription drug coverage to the original Medicare plan and some other Medicare options. For those clients who take a lot of expensive medications, choosing a Part D plan with a higher monthly premium might be less expensive overall. But those who don’t take many medications might be better off with a lower monthly premium and a higher deductible. What seems to be the less expensive plan might turn out to be the more expensive one.

It’s important to pick the right Medigap policy as well. Medigap plans, which come in many flavors and differ from state to state, are designed to cover the costs not covered by Medicare Part A and Part B. They can be changed, but only once a year.

Votava also has to deal with crisis situations. She says she sometimes gets calls from advisors when Medicare-related claims are rejected. “There are a lot of rules and a ton of errors,” she says. “Oftentimes, it’s an administrative issue that you have to work through, and it’s complicated. … We’ve seen people with $60,000 to $100,000 bills that we’ve been able to get worked out in their favor, where they didn’t need to pay them.”

Geriatric Care
Joe Elsasser, an advisor with Sequent Planning in Omaha, Neb., and the developer of software called “Social Security Timing,” needs the help of another kind of specialist: He often works with Suzanne Myers, a geriatric care manager from Encompass Senior Solutions, for care planning. His goal is to help his clients either stay at home or get placement assistance if staying at home is not possible.

“Suzanne was tremendously helpful in meeting with the six adult children of one of my clients who had early onset dementia and helping them sort through the options,” Elsasser says. “When you get into that area, there are a huge number of providers that an advisor simply can’t be familiar with, so I’ve been lucky to find her.”

Steven Schwartz of Wealth Design Services in Rochester, N.Y., is also developing a program in conjunction with a geriatric care manager from a local social service agency.

“Our reach into this area has two agendas,” Schwartz says. “We are developing a skill set to specifically assist ‘paying clients’ with specific decisions that they must make. The second agenda is marketing. Our knowledge and willingness to take time to explore these critical areas has been very successful in drawing attention to us.”

Savastano, who used to be a clinical director and registered nurse for hospitals and rehabilitation facilities, also helps her clients with geriatric care if they are having trouble paying unanticipated medical bills or finding alternative living arrangements.

Going It Alone
Not all advisors are seeking out third-party experts for their clients’ health-care issues. Some advisors, such as Schwartz, have priced the service into their fees.

Dave Anthony, of Anthony Capital LLC in Denver, formed a separate business entity to handle these issues. The business is a licensed life and health agency and Anthony has multiple independent marketing organization (IMO) affiliations. “This gives me the ability to get different perspectives from various providers on how to go about solving various long-term care and Medicare issues,” he says.

For Medicare, Anthony uses CSGactuarial.com for instant, side-by-side price comparisons that show all of the Medicare supplement, Select and Advantage plans in Colorado. It shows, for instance, the rate, the plan level and the rate increase history.

For long-term care, he uses StrateCision’s LTCA.com quote illustrator for comparisons.

Bank of America Merrill Lynch wants its 14,000-plus advisors to discuss health-care-related issues with clients using a high-tech solution. The firm has built and released a suite of iPad applications that its advisors can use to engage in discovery discussions with clients. One of the apps is focused on health-care costs before and during retirement.

Advisors can use the apps to explain basic health-care-related issues such as Medicare, Medicare Part B, Medicare Part D and Medigap insurance, for instance. Or they can estimate a client’s or prospect’s potential health-care costs in retirement, based not just on averages but on the client’s lifestyle and medical history.

The firm wants its advisors to address these problems with clients rather than refer the clients to third parties.

“If I just take somebody and fire them off to somebody else, where’s my value add?” asks David Tyrie, head of personal wealth and retirement for Bank of America Merrill Lynch. “What’s my relationship?

Those advisors who don’t address the health-care concerns risk losing their clients, according to a study by Nationwide, one of a few other big firms helping advisors talk about health care. Those clients in the study who expressed a desire to leave their advisors said they would stay if the advisor helped them understand what their health-care costs were going to be after they finished working, says John Carter, president of Nationwide Financial Distributors. “There’s an urgency for advisors to have these discussions with their clients,” he says.

Nationwide has rolled out a health-care cost calculator and assessment tools advisors can use to approach their clients and identify potential out-of-pocket health-care costs in retirement.

According to Nationwide’s survey, when pre-retirees are asked what health-care expenses will be in retirement, they are either grossly underestimating it or they are guessing, Carter says.

“According to the U.S. Department of Health, 70% of those over 65 will need long-term care in their lifetime,” he says. By 2030, the cost of a nursing home is expected to reach close to $265,000 per year. “So if we are spending a lot of time on what’s the balance in my retirement plan or the market or what’s inflation going to do to my bond portfolio, and we are not looking at horizon-type issues, the advisors who are starting to focus on this are finding this a big opportunity.”

Votava says that those advisors who want to handle these issues in-house and incorporate retiree health-care planning into their practices need to learn about retiree health-care costs, health insurance plans and Medicare rules. The reality is that clients are paying unnecessary costs.

“People are way overspending on health care, which is hard to believe. But they are.”

She says that clients who plan for routine and long-term health-care costs will likely be able to invest more with the advisors, and less of their nest eggs will have to be drawn down to pay for health plans that are too expensive.

Advisors should incorporate health-care issues into their annual reviews with clients, she says, especially those clients in their 50s and early 60s.
“Just start to bring it up,” she says. “Over time, they will learn things and become more comfortable with the subject.”

Still, she believes, obviously, that most advisors ought to use consultants like her.

“I think it’s close to impossible, unless you have a very large firm, to grow the expertise in health care in-house because it’s so intricate,” she says, noting such things as general and special enrollment periods for Medicare. “That’s pretty complicated stuff.”