Help in getting a handle on medical expenses

Fear and outrage had a lot to do with the creation of Ron Mastrogiovanni’s latest venture, Health- View…

Fear and outrage had a lot to do with the creation of Ron Mastrogiovanni’s latest venture, Health- View Services.

He took care of his parents in retirement and was shocked by the unexpected out-of-pocket medical costs that they incurred while living with him. Mr. Mastrogiovanni recalled the $2,000 hearing aid for his father, his mother’s twice-weekly ambulance trips for dialysis and the $200-per-visit quarterly teeth cleanings that the dentist recommended, instead of the annual procedure that Medicare covers.

The experience stirred the entrepreneur in Mr. Mastrogiovanni, the co-founder of FundQuest Inc., which managed $12 billion in assets and had more than 80,000 accounts when he and his partners sold it to BNP Paribas in 2005.

Sensing that other financial professionals were as unaware of health care costs as he had been, he saw a need for a tool that would help them more accurately estimate clients’ out-of-pocket health care expenses.

“When we retire, we can certainly buy a less expensive automobile, we can live in a less expensive house, but what we can’t do is fail to buy the medications or health services we need, Mr. Mastrogiovanni said. “We can’t cut back on that — that really boils down to the definition of quality of life.”

To build the financial-planning/health-risk assessment tool recently introduced and referred to for the moment as the Healthcare Cost Analyzer (HealthView hasn’t settled on a final name yet), his firm contracted with the actuarial company Milliman Inc. to provide cost data associated with a wide range of diseases and conditions.

HealthView’s own engineering staff built the algorithms and modeling software that carry out the calculations.

To use the tool, advisers input several key factors about their client and his or her spouse, including their expected retirement ages and their estimated life expectancy.

Although this is a touchy subject, HealthView can help the adviser address it by working with his or her clients to fill out the some simple worksheets.

There are a number of “yes or no” questions, including whether the client smokes or has been diagnosed with cancer, cardiovascular disease, Type 2 diabetes, high blood pressure or high cholesterol.

Financial data, including rates of inflation and other known costs, can be adjusted.

For adviser reaction, I asked H. Jude Boudreaux to chime in. The former director of financial planning at Bellingrath Wealth Management recently started his own planning firm, Upperline Financial Planning.

Mr. Boudreaux is familiar with several popular planning applications from his own, use and from his work in organizing and participating in “shootouts” of rival planning software at several Financial Planning Association conferences.

“Most people underestimate health care expenditures, and financial planning software programs aren’t sophisticated at all in modeling those possible expenses,” he wrote in an e-mail. “None that I have seen go into nearly as much detail as this company is trying to do.”

Mr. Boudreaux is skeptical, however, about whether an adviser’s investment of time in analyzing health care costs will pay off.

Analyst Sophie Schmitt of the independent research firm Aite Group LLC agrees that Health-View’s offering appears to be unique, at least among planning software vendors. She is the author of a 90-page report, “Evaluating Wealth Management Platforms: Financial Planning at the Core” which Aite published last year.

Most financial planning software doesn’t get into life expectancy calculations, although specialized modules likely are in the offing, Ms. Schmitt said. She noted that Health-View isn’t unique among financial services firms in having access to health cost data; insurance companies use such data regularly.

Robert Curtis, chief executive of PIE Technologies Inc., which produces MoneyGuidePro, and Linda Strachan, senior vice president of product marketing at Emerging Information Systems Inc., maker of NaviPlan and Profiles, said that HealthView’s tools are interesting, but might amount to overkill for most advisers.

They said that their companies’ respective software could accommodate as many health care expenditures as an adviser might want to enter, but acknowledged that they didn’t do future-cost calculations.

Ms. Schmitt said the WealthCare Portal from Fidelity National Information Services Inc., a major health care payments processor, tracks and centralizes historical health expenses and records, which can help advisers make more-accurate forecasts, “another important component of planning.”

All of these tools should serve as a wake-up call for advisers, especially those who deal with clients for whom health care is not an insignificant expense. And that means just about everyone.
Visit the home page of HealthView Services for more on the company and specifically the section for Financial Services Professionals to see more information on the analysis tool, request a demo and download a sample report.