Plan Finances for a Special-Needs Child

Physician's Money Digest, October15 2004, Volume 11, Issue 19

What does it mean to have achild with special needs?The Maternal ChildHealth Bureau defineschildren with special health care needs asthose who have, or are at an increasedrisk for having, a chronic physical, developmental,behavioral, or emotional condition.These children require health andrelated services of a type or amountbeyond those required by most children.

Guidelines for classifying a child ashaving special needs vary by state.However, common conditions anddiagnoses include attachment disorder,autism, attention deficit hyperactivitydisorder (ADHD), oppositional defiantdisorder, and other learning problemssuch as dyslexia.

Growing Family Concern


Unfortunately, more of America'sparents are learning about the emotionaland financial challenges of raising achild with special needs. According tothe US Education Department, approximately6.5 million children aged 3 to 21have been diagnosed with special needs.That figure is up almost 40% over thepast 8 years, due in large part toimproved screening techniques. In total,more than 10% of US households havechildren with special needs, according toa recent report.

Journal of the

American Academy of Child &

Adolescent Psychiatry

Society's cost to treat and educate special-needs children can run into the billions.The cost is no less daunting for theparents of a special-needs child. Accordingto the article, one New Jersey family witha 7-year-old autistic son has incurred out-of-pocket costs of nearly $150,000 sincethe boy was diagnosed at age 2. There arealso indirect costs due to lost productivityfrom workers who must tend to the needsof their children. The notes that totaldirect and indirect costs to a family withan ADHD child are 90% more than forthose families with unaffected children.

Intensive Special Therapy

Therapies are extensive and costly,and health insurance pays very little. Forthe above-mentioned New Jersey family,that meant using most of their savings,charging credit cards, foregoing retirementplanning, and borrowing $100,000from relatives. It also meant turning toapplied behavioral analysis (ABA).


According to the article,ABA is "an intensive and costlyone-on-one therapy administered up to5 hours a day, 7 days a week at home."A therapist will select eight to 10 simpletasks each day (eg, "look at me" or "sitdown, hands quiet"). The child repeatseach task up to 10 times per session.When the child masters the task—90%of the time over 3 to 5 days—a newtask is introduced.

For this New Jersey family, ABA hashad a positive impact, enabling thechild to attend regular school classesand participate in Little League games.It's hard to put a price tag on that levelof improvement, but for autistic children,special schooling and therapieslike ABA can cost $60,000 a year.

The bad news is that employer healthinsurance options for families of childrenwith special needs do little to helpstem the cost. You should, of course,maintain a separate file of the medicalexpenses you incur on behalf of yourchild. If these expenses exceed 7.5% ofyour adjusted gross income, you mightwant to deduct them from your federalincome taxes. In addition, there are governmentprograms and other services andresources that parents can turn to.

Shoulder to Lean on


The article suggestsapplying for the Medicaid WaiverProgram. This program is available forchildren with disabilities, even if theirparents have too much money to normallyqualify for Medicaid.

Next, seek out a Catastrophic Illnessin Children Relief Fund. At the presenttime, only New Jersey and Massachusettshave enacted such programs, but otherstates are considering or planning forthem. These funds allow any family toqualify for help if a child's unreimbursedmedical and related expenses exceed 10%of a family's gross annual income up to$100,000, plus 15% of any portion over$100,000. For additional information,visit

You should also become familiarwith the Individuals with DisabilitiesEducation Act. This act mandates thateach child receive an appropriate education.Additional information on the actcan be found at either

As for health insurance, you mightwant to consider making use of plansthat allow you to put aside pretax dollarsto cover medical expenses. Rememberthat medical, health savings,and flexible spending accounts all fallinto this category.