How to budget for cancer

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How to budget for cancer

The 1.7 million people diagnosed with cancer each year in the U.S. face physical and emotional challenges as they try to beat their illnesses. But cancer also leads to toxic financial effects.

Adult cancer patients are 2.7 times more likely to file for bankruptcy than people of a similar age without cancer, research compiled by the Family Reach Foundation shows. The financial impact is two-fold: Treatments can be costly and people with cancer often can't work as much, if at all, which reduces their income.

What cancer does to your money

Only a third of cancer patients are able to work full-time after diagnosis, research shows. That comes with a significant loss of income, said Katie Hammer, director of development and communications for the Foundation for Financial Planning, a nonprofit that helps provide free financial planning. Hammer and the organization recently launched the Pro Bono for Cancer Campaign to provide financial planning to families with cancer.

People with cancer are also likely to cut back on necessary spending, even if they have insurance. Nearly half of respondents in a survey of 254 insured cancer patients reduced spending on food or clothing, according to Family Reach. Health and financial insecurity can form a vicious cycle: Patients who file for bankruptcy have a 79% higher chance of early death.

Finances often fall down the priority list after a cancer diagnosis, Hammer said. Families are — justifiably — willing to pay whatever they need to for treatments, sometimes falling into debt, without thinking of the financial consequences. Many families are surprised by the additional expenses outside of medicine they face. If you have to attend to one child in treatment, you may have to pay for childcare and transportation for their siblings. The stress of a diagnosis can lead people to let bills pile up at home.

"A lot of people think it's just medical expenses," Hammer said.

The added expenses, plus losing income, leads to many families slipping underwater financially.

Kayla Coleman's husband Brian just underwent surgery for stage three stomach cancer. The diagnosis has affected all aspects of the family's finances, Kayla said.

"It's affected everything," she said. "We can't afford very basic things right now and our families have been trying to help us as much as they can. Our families have become financially strained from this as well."

Insurance has covered most of Brian's treatments, but the Colemans still have out-of-pocket costs. They have yet to find a way to cover their last hospital stay ($1,500) and ambulance bill ($980). They've applied for financial assistance from the hospital, Kayla said.

Kayla has cut her hours at her job at Starbucks down to two days a week to be with Brian, who works at a call center. They're hoping to find another $7,000 to pay for a scan that can determine whether Brian's cancer has spread.

How to budget for cancer

It's OK if finances aren't top of mind after a cancer diagnosis. When Barbara O'Neill, a distinguished professor of financial resource management at Rutgers Cooperative Extension, was diagnosed with breast cancer in 1999, her first step was to educate herself on the disease. But knowing what to expect from your course of treatment can help you understand what costs you'll face.

Patients will have to cultivate a relationship with their hospital's billing department, O'Neill said. You may be able to negotiate prices for treatment and prescriptions directly with them and find out about any programs to help pay your bills. Groups like the American Cancer Society may also help with secondary costs like transportation to and from treatment. Check their website for free local resources.

If you haven't checked your health insurance policy in a while, a cancer diagnosis is a definitely the time, O'Neill said. Learn what out-of-pocket costs you may pay. Find out your job's policies on medical leave as well.

The Family and Medical Leave Act, which covers public agencies and large employers, allows workers to take up to 12 weeks of unpaid leave while maintaining group health benefits. It requires employers to allow workers to return to their same or an equivalent job after their leave. Some people may be able to work remotely or reduce their hours, but it's not out of the question that some employers may discriminate against or even fire a worker who reveals a cancer diagnosis, O'Neill said.

Either way, it's likely your earnings will suffer, she said.

"People might have to temporarily cut back some of their savings into a 401(k) if their earnings are going to drop to a point where they can't cover their bills," O'Neill said.

The Pro Bono for Cancer Campaign has so far matched about 30 families with financial planners, Hammer said. From those matches, planners have learned families affected by cancer need particular help with basic financial tasks like budgeting. When there's so much else on a family's plates, planners can help take the load off by, for example, negotiating payment plans with hospitals or interest rates with credit card companies, said Rachel Roth, director of grants and programs for the Foundation for Financial Planning.

Preparing now for cancer

It may be scary to think about, but you may want to prepare your budget ahead of time for a possible cancer diagnosis. The lifetime risk of developing some kind of cancer is 40% for men and 38% for women living in the U.S. on average, according to the National Cancer Institute. It's always helpful for families to budget for an emergency, whether it's cancer or something else, said Roth.

Anyone worried about a potential loss of income should consider disability insurance, which pays out if workers become unable to work due to illness or injury. This is the case for many cancer patients, whose symptoms and treatment could keep them from their jobs. For people who can't return to work or have to reduce their hours, a long-term disability benefit could cover expenses during treatment.

"Everybody's immediate concern is about paying the medical bills," said Tyler End, general manager of disability product for Policygenius. "But their blind spot is the long-term impact on their career earnings."

For business owners or freelancers whose income could drop if they have to take time away from work for treatment, a disability insurance policy could make up for that drop, End said.

Aside from an emergency fund, families with a high-deductible health insurance plan, which is increasingly common, should set up and use a health savings account, O'Neill said. Money in a health savings account is earmarked specifically for medical expenses. Here's how to set up an HSA.

Part of the goal of the Pro Bono for Cancer Campaign is to raise awareness about the financial effects of cancer, said Kurt Kaczor, pro bono director for the Financial Planning Association, a partner organization in the campaign. The campaign has raised $1.5 million so far and aims to keep going to match more families with planners.

"Things like cancer don't come up in the conversation as often as they maybe should, especially considering how prevalent cancer is," he said.

Image: Steve Debenport