Cancer changes the lives of millions of people. While those affected by cancer understand its impact, most people do not understand how significantly a cancer diagnosis can disrupt and, ultimately, take a person’s life. Cancer is “a group of diseases characterized by uncontrolled growth and spread of abnormal cells.”1 Cancer strikes across the population; it afflicts people of all ages, gender, race, ethnicity, religion, residence and socioeconomic status. It is estimated over 1.6 million new cancer cases were diagnosed in the United States 2012.2 Regardless of the specific type of cancer one has, a cancer diagnosis can be devastating to the patient, as well as their family and friends.
In addition to the obvious physical and emotional hardships, a cancer diagnosis can cause many to suffer financial hardship. Typically, those with more deadly forms of and late‐stage3 cancer suffer more substantially from the financial challenges that accompany a cancer diagnosis. In one study, researchers found 7.7% of those diagnosed with lung cancer (the deadliest form of cancer) filed for bankruptcy within five years of being diagnosed.4 These financial challenges arise from a number of different sources. First, the cost of treating the cancer5 can be overwhelming, notwithstanding the patient’s access to health insurance. A recent study from Duke University Medical Center and Dana‐Farber Cancer Institute found out‐of‐pocket cancer‐related costs averaged $712 per month, despite all but one survey participant having health insurance and 83% of survey participants having prescription drug coverage.6 Such costs can include insurance co‐pays and non‐covered treatments and medications.
Second, and perhaps more financially impactful, is the loss of income associated with the patient’s and potentially the caregiver’s inability to continue working full time. The physical strains on late‐stage cancer patients often prevent a patient from remaining employed and can even require the caregiver (often a spouse, sibling or adult child) to forego or limit employment, compounding the higher cost of living with cancer with a significant reduction in household income. Finally, late‐stage cancer patients often seek palliative care, whether in‐home or in a hospice, which can be costly if not covered by Medicare or other insurance carriers.
While there is an incredible amount of data, information and resources devoted to informing and assisting cancer patients, very little of it is designed to help late‐stage cancer patients meet their overwhelming financial needs. Instead, a great deal of what is available attempts to reduce the incidence of cancer by focusing on research, awareness, prevention and early detection of cancer. In
addition, resources for helping those diagnosed with cancer offer assistance with topics such as navigating the health care system, transportation, education and support groups. There are very few resources available to assist late‐stage cancer patients in meeting their growing financial needs and their options are not generally well known or understood.
The most likely place for late‐stage cancer patients to turn to meet financial needs is current assets. Obviously, patients have the most control and easiest access to their own assets. Unfortunately, given the American economy over the past four years, fewer people have meaningful “rainy day” funds to allow them to use current savings to fund cancer treatment and other daily living expenses. To the extent patients have savings available, often their savings is quickly depleted and is often difficult to replenish. Another asset that may be helpful can be a cancer patient’s home. For many homeowners, it can be a source of significant cash, but accessing this value can be time consuming and more difficult when a family’s income is reduced by the inability to continue earning at the same level as prior to the cancer diagnosis. Equity levels have dropped so precipitously with falling real estate prices and lending criteria have tightened so much, a home equity line or even a reverse mortgage7 is less viable as a source of funds for late‐stage cancer patients.
Government assistance for cancer patients is limited. While there do not appear to be government assistance programs specifically for cancer patients, there are a number of federal and state programs that provide financial benefits that cancer patients may access, including Social Security, Medicare and Medicaid, the Department of Health & Human Servicers and the U.S. Administration on Aging.8 These benefits are typically entitlements and, therefore, do not require patients to use up current assets or take on future obligations. These programs, however, are typically set up for low income households, the elderly and the disabled and many cancer patients may not qualify. Other government and nonprofit benefit programs have eligibility requirements that can limit a cancer patient’s access to potential benefits. Navigating the application and eligibility process for such assistance programs can be difficult, time consuming and frustrating, especially for those suffering physically from cancer. In addition, some individuals are unable to access these programs.
In addition, sources of financial aid such as non‐profit grants and charitable grants generally provide assistance for specific expenditures (e.g., patient care, co‐pay off‐sets and prescription costs). Other programs limit the aid to defray the costs of transportation or the costs of treatment outside the home. These resources and the government assistance programs generally do not provide discretionary funds to help with day‐to‐day living expenses, such as mortgage payments, child care and other necessary expenses not tied directly to the cost of treating cancer. Therefore, other financial solutions are necessary.
For those late‐stage cancer patients with a life insurance policy, there are a number of other potential options to help meet financial needs. Policy owners with built up cash value9 may take a loan or a withdrawal against that cash value from the insurer that issued the policy. Unfortunately, the vast majority of life insurance policy owners do not have significant, if any, cash value accumulated in their policies. Some insurance policies offer an Accelerated Death Benefit Rider (ADBR). The ADBR provides a benefit to the policy owner if the insured is diagnosed with a terminal illness resulting in a life expectancy of less than 24 months and sometimes as short as only 6 months. If available, the benefit is typically up to 50 percent of the policy’s death benefit and may only be available in monthly installments, as opposed to a lump‐sum payment. Of course, there is a cost to purchase this rider and few policy owners have policies with such a rider. Even those who do, however, cannot take advantage of the rider until their medical condition has become terminal. Therefore, the ADBR is rarely an option for late‐stage cancer patients.
Two other options exist for policy owners who cannot take advantage of the more traditional options discussed above. The first is to sell the life insurance policy for cash proceeds. Generally, this transaction is known as a life settlement,10 and involves the policy owner receiving a lump sum cash payment and forever giving up any rights to the policy, including receiving the payment of the death benefit upon the insured’s death. Policy owners submit their policy and medical information to a licensed provider,11 who solicits offers from multiple bidders to buy the life insurance policy. The life settlement buyer will keep the policy in force by making all the future premiums and receive 100 percent of the death benefit from the insurance company. Life settlements can be fairly complicated transactions and many insureds are uncomfortable with the notion that a third‐party investor will potentially profit from their death. Also, the life settlement market is relatively immature and no sizable market currently exists, making it uncertain a policy owner will actually qualify for a life settlement and receive fair value for selling their policy.
A second less traditional option for a policy owner to access value in their life insurance policy is a non‐recourse loan secured solely by the policy’s death benefit. Under this relatively new option12 for late‐stage cancer patients, qualifying insureds can obtain a loan for up to as much as 70 percent of the policy’s death benefit. As a non‐recourse loan, the borrower has no obligation to make any loan payments or premium payments during the insured’s lifetime and the loan is repaid by the insurance company out of the policy’s death benefit at the time of the insured’s death. Unlike other options discussed above, this product has been specifically designed to address the financial needs of late‐stage cancer patients. There are certain advantages to this product over other options discussed above, including (1) there is no need to exhaust current assets, (2) there is no restriction of the use of loan proceeds, (3) there are no credit‐based, needs‐based or age qualifications, (4) the loans are available for most insurance policies, (5) the policy beneficiary still receives the residual death benefit after the loan is repaid and (6) the transaction process is generally simpler and quicker. Yet, qualifying for such a loan and the amount of proceeds available will depend greatly on the insured’s medical condition and the size of the insurance policy. In addition, not every type of cancer will qualify.
To many, the financial challenges that accompany a late‐stage cancer diagnosis can be as crippling as the disease itself. Unfortunately, there is little focus in the cancer community on addressing these needs and there are few adequate solutions. The cancer community can be instrumental in helping cancer patients become better acquainted with and help identify solutions for the very real and debilitating financial challenges that often accompany a cancer diagnosis. This article discusses a number of options that do exist today, but they are generally limited and often inaccessible to the patients. For those who own a home or a life insurance policy, more options become available. The best solution may be different for each individual and will be a function of a number of factors, including an individual’s access to liquid assets, homeownership, ownership of a life insurance policy and medical condition. Cancer patients need access to and a better understanding of the financial options at their disposal to fund the fight of their life.
1 American Cancer Society, Cancer Facts & Figures 2012. Atlanta: American Cancer Society; 2012.
3 Staging describes the extent or spread of the cancer, ranging from State I (least) to Stage IV (most). For purposes of this article, we use the term “late‐stage” to refer to Stage III and Stage IV.
4 The Wall Street Journal, Health Blog, Study Illuminates Link Between Cancer, Bankruptcy, available at http://blogs.wsj.com/bankruptcy/2011/06/07/study‐illuminates‐link‐between‐cancerbankruptcy/?mod=google_news_blog (last visited December 4, 2012).
5 The National Institutes of Health estimates direct medical costs of cancer in 2007 were $103.8 billion and will reach $158 billion in 2020.
6 The Wall Street Journal, Health Blog, Out‐of‐Pocket Costs for Some Cancer Patients Top $700 Monthly, available at http://blogs.wsj.com/health/2011/06/06/out‐of‐pocket‐costs‐for‐some‐cancer‐patients‐top‐700‐monthly (last
visited December 4, 2012).
7 A reverse mortgage is a loan for a senior homeowner secured by the home’s equity. Unlike a home equity line, the reverse mortgage does not get repaid until the homeowner moves or passes away.
8 CancerCare, Sources of Financial Assistance, available at http://www.cancercare.org/publications/62‐sources_of_financial_assistance (last visited December 6, 2012).
9 The most common type of life insurance policy, a term insurance policy, has no cash value. Permanent insurance policies (such as whole life or universal life) may have cash value built up, but only if the policy owner has overfunded the policy.
10 Life settlement transactions are generally regulated transactions and, when involving an insured with a life expectancy of less than 24 months, are referred to as viaticals and subject to even further regulation. For more information about life settlements, see http://www.lisa.org.
11 There are many providers, subject to different regulations in each State in which a provider operates. The largest and most well‐known provider is Coventry (see http://www.coventry.com).
12 Currently, Fifth Season Financial Assistance LLC is a company offering this non‐recourse loan product. For more information about Fifth Season, see http://www.fifthseasonfinancial.com.
Author: Scott B. Rose
Note: All estimates adjusted for patient deductibles and coinsurance expenses
1. Phases of care: Initial year after diagnosis, Last year of life, and the period between (Continuing). Months of survival are first applied to last year of life, any
remaining to initial phase, then to continuing.