Filial responsibility — Who’s left holding the bag?

By Jeff Reed

Kestler Financial Group

There has been quite a bit of press lately around this issue of filial responsibility, including a real life cautionary tale of a particular court case. In the case, a son was forced to pay his mother's $93,000 bill for a stay at a nursing facility as she recovered from injuries sustained in a car accident. The mother was unable to pay and subsequently relocated to Greece, leaving the facility searching for alternative sources of payment.

Being a bit of a skeptic, I initially dismissed the entire thing as an isolated incident. While this does appear to be somewhat isolated, there is a mounting set of circumstances that may render this a part of a wave of similar stories.

The origins of this case are found back in 2005's Deficit Reduction Act. The bottom line is that it became harder to qualify for Medicaid. Perhaps an unintended consequence of this was making it more challenging for nursing facilities to collect their fees and ultimately led to the application of filial responsibility laws that date from the 1600s. The logical conclusion of that entire chain of events is the recent lawsuits and early case law they represent.

Of course, I am not an attorney, so that is about as far as I want to go into the legal side of this. I would rather turn my attention to the prevention of the circumstances that created the unfunded liability in the first place: lack of long-term-care planning. While I could argue that the mother's plan above worked fairly well from her perspective, the son is surely less than thrilled with the outcome. Given that one of the provisions of these filial responsibility laws is the child's ability to pay, perhaps he would have preferred paying with discounted dollars via a long-term care insurance policy if he knew that he would one day be left holding the bag. Easy to say in hindsight but perhaps a bit of a challenge in reality.

There are, however, more options for LTC funding today than ever before. I'm a big believer in the asset-based solutions like Lincoln National's MoneyGuard, which would have allowed the son in the case above to own and fund a contract to cover the bill. By now, you all probably know that he would ultimately collect a death benefit that could offset some or all of the premiums paid, depending on the policy funding and claims experience. There are quite a few other solutions out there currently, with traditional life insurance contracts now offering everything from simple death benefit acceleration to robust long-term care coverage. Even some term insurance policies now offer this type of feature, making it much more accessible than ever before.

Of course, not all of these solutions are created equal. In fact, I think some of them may even create a false sense of security for this type of claim. I'll revisit this topic again soon with an analysis of the options listed above, and if they would adequately insure against a risk similar to the one described in this case: a finite stay in a facility, followed by a full recovery and limited to no impact on mortality.

» 2005 Deficit Reduction Act
» PA Court Case