Your money ... or your life.

They're living longer; but many people with AIDS are strapped for cash--and taking drastic steps to get it

Scott Page knows the devastation AIDS can bring: Four years ago he lost a lover to the disease. So when he heard about protease inhibitors, the new drugs that are helping many people with AIDS live longer, he was delighted.

Then he started to hear a new breed of horror story. As president of a viatical-settlement firm, which provides terminally ill people with cash by purchasing their life insurance policies, Page became aware of more and more people who were living longer but having an increasingly harder time finding the money to get by.

One potential client who was on protease inhibitors stopped taking the drugs because he thought he would get more money with a less flattering medical profile. "But if you stop taking the drugs, you build a resistance to them, and when you start again they're not as effective," says Page. "It's Russian roulette with an AIDS bullet."

Ironically, protease inhibitors could be the motivation behind such risky behavior. In the past viatical settlements have been a godsend for many people with AIDS, enabling them to live out their final days in comfort and dignity. But with life expectancies increasing, cash settlements for people with AIDS are decreasing: Whereas settlements of 80% to 90% of the value of a life insurance policy were common two or three years ago, today the average figure is closer to 50% or 60%.

Yet longer life expectancy doesn't necessarily mean these clients have less need of cash. And some of them are resorting to desperate measures to get it.

Stephen Terrell, Page's business and life partner, tells a story about a man who offered to fly a very ill friend 400 miles so the friend could take a blood test in his place. The idea was to submit medical records that would suggest a short life expectancy, thereby justifying a higher viatical settlement.

"We're doing very thorough reviews now to make sure those types of things don't happen," Terrell says. "But it's scary how far people will go for a bigger piece of the pie."

Often they're willing to "play games with their health just to get a larger payout," says Paul Crockett, an attorney in Miami Beach, Fla., who specializes in viatical settlements. "There are these rumors that circulate around the AIDS community of ways to bring down your T cells--drink lots of vodka, stay up all night. T cells do fluctuate wildly from day to day, and probably a good hangover could have an effect on your T-cell count. But the problem is not getting your T cells down; it's getting them back up. That's the gamble."

And in any case, while it may once have been true that a single test showing a lowered T-cell count could result in a large viatical settlement, that's not the case today. Partly because of the changed landscape wrought by protease inhibitors, viatical-settlement companies are being careful to examine a client's entire medical history. "We go back and complete a medical background from the start of the HIV infection to the point of viatical application," says Page, whose eight-year-old firm, Page & Associates, based in Fort Lauderdale, Fla., earns 80% of its revenues from HIV-related settlements.

Indeed, the ten-year-old viatical industry--worth $400 million to $450 million--is still reeling from the effects of protease inhibitors, the benefits of which were trumpeted at last summer's 11th International Conference on AIDS, held in Vancouver, Canada. The following week one viatical company, San Francisco-based Dignity Partners, announced that it would stop buying policies from people with AIDS. While dire predictions of a wholesale abandonment of the market were not realized, viatical companies--which bank on the short life expectancy of patients whose policies they purchase--found themselves in a predicament when the death rate slowed.

Take the case of John Michaels, a Miami Beach resident who has AIDS. He sold his policy for 82 % of its value a year and a half ago, netting him more than $150,000. At the time, he was given a life expectancy of six months. But after nearly ten months of being on protease inhibitors, he has seen his T-cell count increase from 60 to 200. His viatical buyer, who paid the cash settlement anticipating a profit of more than $25,000 in six to 12 months, not only hasn't seen payday but is still paying interest on the loan he took out to buy the policy.

"The dilemma from all of this is that people with AIDS are having a bitch of a time selling their policies," says Crockett. "It's been more than a setback for the industry; it's been a setback for people with HIV. There is a drying up of what was an incredible resource, and we don't know where it's heading."

The number of companies offering viatical services has diminished dramatically. Membership in the Viatical Association of America has dropped from 28 companies last October to 18 as of mid April. Counting companies that are not members of the VAA, industry observers say that about 60 viatical firms are surviving today but that most of these are now concentrating on other illnesses, such as cancer, Alzheimer's, and heart disease.

The smaller number of firms has a direct effect on the amount of settlements, Crockett says. "The one thing that a person who is selling his or her policy can do to get more money is to get companies to bid against one another," he says. "That's what drives the settlement up. In the old days you could easily get no less than five bids. Now you're lucky to get two companies to bid. And that has a direct effect on the client."

Settlements are lower, says Crockett, even for those who aren't doing as well on protease inhibitors. Crockett has one client in the hospital with pneumocystis pneumonia and other AIDS-related infections who is negotiating for a settlement that will give him 46% of the value of his life insurance policy. "That's dramatically lower than where it should be," says Crockett. "A year ago he would have gotten in the upper-70% range. The stock value in people with TV has fallen."

Per Larson, a New York City-based financial consultant for people living with HIV and AIDS, reports that one of his clients, who has a T-cell count in the single digits, just got bids from two viatical firms. One was for 52%. The other was for 77%. "That tells me that estimating the life expectancy of someone is still a very inaccurate science," says Larson. "It also tells me that one of the two firms is shying away from HIV patients. And this is becoming more prevalent."

Some people with AIDS go so far as to say the effect of protease inhibitors on the viatical industry has made them a mixed blessing. Matthew Kertzner, a New Yorker who has AIDS, at one point hoped to cash in his $200,000 life insurance policy for 85% to 90% of its value. With a T-cell count of about 20 and the likelihood of returning to his computer-programming job little to none, he figured the time was right for such a move. About the same time, however, he started taking protease inhibitors. By the time he took the blood test for his viatical application, his T-cell count had improved to more than 150; his settlement offer came in at 68% of the value of his policy.

"Sure, I'm healthier by medical standards, but I'm no better off than I was before I started taking the drugs," Kertzner says. "I'm not back at work. I'm not any less certain that I'll die soon. My daily living is the same as it was 130 T cells ago. If I thought I could stop taking the pills and get more money, I might. I don't know if gaining an extra few months was worth losing the money."

Protease inhibitors aren't the only factor that has tended to depress settlement amounts. Another is the Health Insurance Portability and Accountability Act of 1996--which, ironically, was intended to enhance the value of viatical settlements by making them tax-exempt. The exemption is granted, however, only when a physician has certified that the seller has 24 months or less to live and when the settlement has been issued by a licensed viatical firm. Since there are fewer licensed firms, people who want the tax exemption have less competition for their business.

Twelve states, including California, New York, and Florida, now require viatical firms to be licensed, but because the act did not remove unlicensed companies from the picture, the result is uneven and sometimes confusing competition between licensed and unlicensed firms. "I might be able to get one offer of 50% from a licensed company and another of 62% from an unlicensed firm," says Crockett. "But if you figure in the taxes, you get a much lower rate from the unlicensed firm."

Despite the uncertainty surrounding the viatical industry, Page says he feels confident it will not turn its back on people with AIDS. Selling your insurance policy "should be used as a planning tool," he says. "And it needs to be used as a last resort. [People who are HIV-positive] need to accept that they might be too healthy to get a viatical settlement today. That should be their reward. But when they are eligible, we'll be here to help them."