The growing need for resources to help older adults manage their financial and healthcare choices

Financial literacy has been defined with validated measures in the scientific literature, with several variations: the ability to understand financial information to make informed decisions [13]; to perform simple calculations and know basic fundamental financial concepts needed to make effective financial decisions [14]; to manage money and finances in ways consistent with one’s self-interest [15, 16]; and to understand and act on information from diverse sources for optimal financial functioning [5]. Specific financial decisions include savings calculation, retirement planning, Social Security benefit choices, end-of-life financial planning, living arrangements, wealth distribution, and life insurance. Financial expertise tends to focus on financial planning prior to and during retirement but not specifically on managing healthcare decisions and expenditure ramifications later in life. Research indicates that older adults may lack basic financial knowledge [13] to manage their money successfully while living on fixed incomes. In research studies with older adults (age 50 and older), the reported prevalence of adequate financial literacy based on existing measurement scales ranges from about 18% [10] to about 57% [14, 17]. Financial literacy appears to decrease with increasing age [16].

Health literacy has been defined with validated measures as the capacity to obtain, communicate, process, and understand basic health information and services to make appropriate health decisions [17‐19]. Health literacy generally focuses on managing health needs rather than how to coordinate those needs with healthcare treatment and payment options, including both medical and drug plans. As with financial literacy, older age and lower education and income have been associated with low health literacy. Research indicates that among all American adults (age 16 and older), 36% are considered to have low (“basic” or “below basic”) health literacy [4, 5, 23, 24]. The US Department of Education’s National Assessment of Adult Literacy (NAAL) found that low health literacy is especially prevalent among the elderly: 59% of adults age 65 years and older scored in the lowest two ranges of health literacy (“basic” and “below basic”) [23, 24]. In addition, according to the National Network of Libraries of Medicine (NNLM), 68% of older adults have difficulty understanding numbers and calculations; 71% have difficulty using print materials; and 80% have difficulty using health-related forms, charts, and other documents [9, 12].

Compared to financial and health literacy, health insurance literacy is an emerging area of focus, with fewer measurement scales in use or research studies published [21, 22]. In fact, among over 200 general health literacy studies in the literature, none have specifically examined the ability to use health insurance plans [9, 22].Health insurance literacy is defined as, “the degree to which individuals have the knowledge, ability, and confidence to find and evaluate information about health plans, select the best plan for their own (or family’s) financial and health circumstances, and use the plan once enrolled” [21, 22]. Research suggests many Americans have low health insurance literacy: for example, 88% of US adults cannot calculate their share of health insurance costs [9, 22]. Despite some overlap with aspects of health insurance literacy, FHL would be a unique area of need encompassing broader financial considerations and conceptual skills other than those related specifically to insurance plan selection. The additional suggested domains and conceptual skills of FHL are show in Table 1.

Research indicates that financial, health, and health insurance literacy are closely intertwined and especially impactful in terms of later-life decision-making [5, 25]. Among older adults, low financial and health literacy are correlated; both are associated with similar characteristics and outcomes [5, 26]. However, this intersection labeled FHL has yet to be recognized as a standalone area of need or to have defined resources that might support older adult health and financial decision-making. We would propose to define FHL more specifically as the capacity to understand and apply financial information and available financial resources to make sound healthcare and treatment choices while also managing other household expenses effectively. FHL, as we envision this overlap, would encompass four key domains: 1) the ability to manage healthcare expenses; 2) pay medical bills; 3) determine health needs and understand treatment options; and 4) make sound healthcare decisions with the financial resources available (Table 1 and Figure 1). We derived these proposed key domains based on similar skills that would be required for proficiency in the established overlapping constructs of financial literacy and health literacy as described extensively in the literature [9, 12‐19]. Defining and establishing FHL as a separate area of need with these key domains would be a necessary first step in developing a scale to determine its impact among older adults and subsequent supporting resources.

Currently, there is no single screening question to measure basic financial literacy, but longer validated measures exist. Several commonly used surveys, primarily the University of Michigan Health and Retirement Study (HRS) [27] and the RAND American Life Panel (ALP) [28], have incorporated three items developed specifically to address financial literacy [9, 16]. These items are based on the four key components of financial capability, including short-term money management, future planning, managing financial products/services, and numeracy [9, 16, 26‐28], all of which have been established as important skills for older adults’ financial stability. However, the actual questions included in these surveys tend to focus more on very specific financial calculations or complex investing strategies rather than general concepts older adults need to understand in order to manage finances. To be relevant, these concepts should focus more specifically on, for instance, saving enough money for retirement and potential medical expenditures, planning for other unforeseen expenses or emergency savings, budgeting on a fixed income, and balancing living expenses including medical and drug insurance premiums. In addition, the items do not specifically address the key concerns of older adults when trying to manage their finances and pay for later-life expenses. For example, the first item of those used in the HRS and ALP, with five answer choices provided, reads: “Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?” The second item, also with five responses, reads: “Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?” Finally, the third item is as follows: “Please tell me whether this statement is true or false. Buying a single company’s stock usually provides a safer return than a stock mutual fund.” Among Americans over age 50, only half answered the first two items correctly; only one-third answered all three items correctly [9, 16]. In fact, only 44% of those with a college degree could answer all three items correctly.

Other measures of financial literacy include the Financial Industry Regulatory Authority (FINRA) National Financial Capability Survey [7], which links indicators of financial capability to demographic and other characteristics. FINRA’s Susceptibility to Scams Scale assesses financial decision-making skills and susceptibility to financial victimization [29]. Another measure, the Lichtenberg Financial Decision-Making Rating Scale (LFDRS), uses 77 questions designed to assess financial situation awareness, decision-making ability, and exploitation vulnerability; it has been validated with older adults [15, 30, 31]. Elsewhere, the Independent Living Scales and Managing Money Subscale (ILS) consists of 68 items designed to evaluate functional ability among adults age 65 and older [32]. The ILS primarily measures memory, orientation, and the ability to manage home matters and finances [31, 32]. Generally, however, these measures focus on cost of living expenses rather than medical expenses, and do not include all of the conceptual skills important for FHL.

The common chosen resource for financial literacy would most likely be a financial planner specializing in later-life financial planning and retirement needs. Existing money management resources designed for older adults tend to focus on basic financial concepts, such as investment planning to cover living arrangements and expenses in retirement as well as Social Security options. Websites designed for this purpose often feature financial tools related to economic security, debt management, scams, and tips for aging workers [33]. Larger financial institutions also offer financial planning assistance, such as USAA’s online Financial Readiness Score tool (www.​usaa.​com) that allows members to assess their preparedness for retirement and offers access to financial advisors by phone [34]. As another example, AARP’s website (www.​aarp.​org) features several financial offerings including free tax preparation, fraud and scam alerts, and other tools [35]. These resources, however, focus on general finances and savings prior to and during retirement rather than the complex issues related to planning for health plan premiums, healthcare expenses, and the large savings needed specifically for late-life expenditures. In addition, locating disparate financial and healthcare planning resources may be as time-consuming and difficult for older adults as understanding and utilizing the information to meet their individual needs.

Compared with financial literacy, health literacy research has been developed more extensively. Notably, in our review of the literature on these topics, a search for financial literacy returned approximately 1700 results while health literacy returned over 10,000 results, indicating a greater research base. Furthermore, measurement of health literacy across various settings and populations is commonly based on one widely used and accepted validated screening item: “How confident are you filling out medical forms by yourself?” [36, 37]. Using this screening item, researchers have reported a high prevalence of both limited and marginal health literacy among adults, including seniors [37]. While this single item is not truly considered a “gold standard,” it does allow for identifying individuals who may be at risk for low health literacy, much like the purpose a screener for FHL could serve.

Research on literacy assessment suggests the importance of measuring the impact of both objective (actual) and subjective (perceived) knowledge in an individual’s decision-making process [38]. The single screening question commonly used to assess basic health literacy, as described previously, is essentially subjective, yet various longer validated measures do include objective measurement items. One example is the Consumer Assessment of Healthcare Providers and Systems (CAHPS) [39] Clinician and Group Surveys: Supplemental Items for Adult Survey 2.0 [41], which includes 31 items on health literacy. Another measure, the Rapid Estimate of Adult Literacy in Medicine, Revised (REALM-R), helps medical professionals identify patients with low health literacy by assessing their ability to read and understand common medical terms [40]. Elsewhere, the University of Michigan’s HRS includes nine questions specific to health literacy [27]. However, as with the financial literacy scales, some items used in these health literacy measures are not easily adaptable to all general older populations as they incorporate concepts that may be unfamiliar to some older individuals. For example, Michigan’s HRS asks, “How many years is it recommended that the average person who has had a normal colonoscopy should wait before having another colonoscopy?” Although an objective question, this item may not reflect common knowledge, as the frequency of recommended colonoscopies varies depending on test results. Furthermore, another item in this section of the HRS appears to be more opinion-based, and thus responses may be an inaccurate representation of health literacy: “Do you think regular colon cancer screening for people over age 50 does or does not reduce the risk of dying from colon cancer?”

Various health-related resources provide general information about common concerns and condition management. For older adults, a general practitioner or other physician is likely to be a common chosen source of information. Older adults may trust their physicians to provide the best advice on their health needs, although physicians may not address medical costs or insurance billing with their patients. Multiple websites, such as those of the Centers for Disease Control and Prevention (CDC), Mayo Clinic, and WebMD, do provide guidance on medical conditions; some offer an online symptom checker or search feature to match symptoms with certain conditions. For older adults seeking in-person assistance, local health fairs or senior centers may provide access to nurses or other providers to discuss health concerns. Free healthcare services such as weight measurement and blood pressure, cholesterol, and diabetes testing are often available as well. Other personalized resources include pharmacists at retail pharmacy or drugstore outlets. Many older adults who take prescription medications likely know where to go for this advice, such as a neighborhood pharmacy, and may even have a pharmacist they personally know and trust. Finally, mainstream media publications targeting older audiences often feature articles on health care, common conditions, healthy lifestyle strategies, and treatment/medication options. Compared to some of the financial resources, these health-related options may be more commonly known or easier to access. However, they tend to focus strictly on health issues rather than the expenses associated with managing health later in life.

While health insurance literacy has been defined, this area of literacy has not been measured extensively, and no widely used assessment scale exists [21, 22]. Health insurance literacy is described as a “subset” of health literacy, but existing health literacy measures do not effectively measure the skills and behaviors involved [22]. Among existing measures of health insurance literacy, none have been tested for both reliability and validity or were developed specifically to assess insurance purchasing behaviors [21]. Recently, the Health Insurance Literacy Measure (HILM) was developed as a self-assessment of individuals’ ability to select and use health insurance plans [21], but it has not been extensively used.

For health insurance literacy, a commonly used resource would likely be a representative with a specific insurance plan or an independent broker to assist with health plan choices. These individuals can help consumers to select healthcare plans or medical care options and provide information on healthcare expenses. Other existing resources geared toward evaluating insurance options and planning for healthcare expenses could serve as examples to inform further development of specific tools to support the additional domains of FHL. For instance, online resources have emerged as a common service offered by various entities. AARP’s Benefits Quick Link, for one, helps members determine whether they qualify to save money on health care, and an online long-term care calculator provides guidance in planning for long-term care expenses, which would be an important component of FHL [41]. Elsewhere, government websites and larger retail pharmacy/drugstore chains offer interactive drug plan comparison tools and/or access to health plan advisors [41].

As an alternative to online resources, older adults may seek assistance on their own from well-known brands, such as AARP or BlueCross BlueShield (BCBS), as they have highly visible products and readily available contact information. These resources could potentially assist those who need help using their limited finances most effectively. However, additional, easily accessible options in this area are still needed to improve and support FHL among older adults.

Currently, no measurement scales exist to assess the conceptual skills involved in FHL. An initial screening question for FHL, similar to that for health literacy, could be useful; for instance: “How confident are you with managing healthcare expenses independently, including paying bills?” Further development of a longer measure would also be instrumental in establishing FHL and identifying those at risk for low FHL. The key overarching domains should first be established (Table 1), each encompassing several conceptual skills to consider in developing a measure. As Table 1 illustrates, FHL would incorporate health insurance literacy; however, FHL would also include three additional domains.

For FHL, further development of needed resources in this area could include a centralized website combining links to various tools and information targeting older adults, which could be simple to find and explore. A website could also include contact information or phone/email access to personal financial health advisors who specialize in the intersection of financial management, healthcare treatment choices, living expenses, and insurance issues. If marketed and advertised effectively, these resources could provide one source of guidance for older adults in planning their expenses and finances without the need to search in different places for information across all of these critical areas. Even those with limited internet experience could likely search and explore links presented in one space. In addition, many websites designed to provide this type of information also offer assistance by phone, such as www.​usaa.​com, which includes a toll-free phone number for access to financial advisors available for advice and questions on overlapping financial and health issues. Other existing websites designed to assist older adults include the AARP member website, available at http://​member.​aarp.​org. This website provides various health, financial, fraud protection, and safety-related resources for older adults and those involved with their decision-making or care.

Another option with potential promise may be services and advisors providing unbiased assistance with managing healthcare expenses and/or making medical plan and treatment choices. This type of offering could be comparable to resources available through the National Association of Area Agencies on Aging, which provides educational programs in local areas throughout the US as well as online (http://​www.​n4a.​org/​), or through other organizations such as local United Way offices. Resources would need to be user friendly, accommodate all reading levels, and include enough detail to be useful in planning. In addition, those without regular computer access or computer literacy would likely need alternative options, such as services accessible over the phone or in person, brochures, handouts, or other written materials, or individual sessions and classes covering aspects of FHL. For instance, local senior centers could potentially serve an important role in this area by providing accessible, useful, and cost-free offerings, and these centers would likely be well known to seniors and their families. Senior centers could also offer free or low-cost access to professionals specializing in these areas who would provide individualized advice or assistance in managing overlapping late-life expenses. In addition, organizations such as USAA (http://​www.​usaa.​com) offer retirement planning and financial advice, often along with healthcare planning resources.

Finally, those seeking help, including not only older adults but also their family members, adult children, and caregivers who help to make decisions, would need to know how to find these resources in order to take advantage of them. Thus future directions in this area would ideally include an aspect of communication or targeted marketing to promote resources for older adults and those who have a role in influencing their decision-making process. This responsibility could, in part, fall to healthcare providers or others within the finance and healthcare industries who interact with older individuals.