There are several types of long-term care arrangements for seniors, but the most intensive is a nursing home. This type of facility has a full-time nurse on-site at all times and staff members provide the highest level of medical and personal care. Unfortunately, this level of care is expensive, and many seniors and their family members worry about how they will pay for a nursing home if the need arises.
Many people assume that Medicare will cover their long-term care needs, but unfortunately, the federal health insurance program for citizens aged 65 and older only covers preventive and acute care. While it may cover some supplemental services, Medicare does not pay for a nursing homestay. When planning how to pay for senior nursing care, whether that’s home care or a stay in somewhere like this assisted senior living facility, the following are six options to consider.
1. Medicaid
While Medicare only covers a temporary stay, the Medicaid program will pay for ongoing long-term care in a skilled nursing care facility. Medicaid is a federal assistance program designed to cover the medical costs of individuals in financial need. To qualify for Medicaid, a patient will typically need to have less than $2000 in assets and an income that falls below his or her state’s income requirement for eligibility.
It’s important to bear in mind that each state sets its own requirements for Medicaid eligibility and may place limits on what services Medicaid can cover. In most states, residents can earn up to three times the Social Security income limit and still qualify for Medicaid. In some states, Medicaid can pay for assisted living or in-home care, while other states limit Medicaid-covered long-term care to nursing homes.
Often, people find that they need to spend down their assets in order to qualify for Medicaid. Because there is a five-year look-back period, it can be helpful to begin preparing before the need arises. Fortunately, most states have laws in place that protect spouses from losing their homes, vehicles, and a certain amount of shared assets.
2. Long-Term Care Insurance
Some nursing home patients are able to pay for their care with long-term care insurance benefits. An individual can purchase a long-term care policy and pay monthly premiums until a need for care arises. Once he or she has met the criteria for long-term care, the premiums will cease and the benefit payments will be made directly to the facility.
One of the benefits of having a long-term care policy is that it can be used for any form of care deemed medically necessary. Thus, a policyholder can start using the benefits for in-home care and delay the need to move into a residential facility. Financial planners generally recommend purchasing long-term care insurance between the ages of 50 and 60.
3. A Life Insurance Policy
Unfortunately, the cost of long-term care policies has gone up in recent years, and it is becoming increasingly hard for people to qualify. For example, some insurance companies will reject applicants with pre-existing conditions like diabetes, heart disease, or dementia.
A more cost-effective solution for some is to add a rider to an existing life insurance policy, also known as advanced death benefits. A rider allows the policyholder to begin using a percentage of his or her death benefits to pay for long-term care. Most companies offer this option, and it usually increases the cost of the premiums by a small percentage.
A life insurance policy can be used to help pay for long-term care in other ways as well. For example, you can sell a policy for cash or use an accumulated cash value from a universal life plan to pay for care. When you sell a policy for the purpose of funding long-term care, you will not be subject to federal income taxes on the gain.
4. Veterans’ Benefits
It is a little-known fact that veterans are eligible for the Veterans’ Age & Attendance Pension Benefit. In fact, only a small percentage of these funds are ever applied for and paid out. Both U.S. military veterans and their spouses are eligible for this benefit, which is meant to aid individuals who are disabled and in need of personal care. There are some restrictions on who can receive this benefit, and the application process can take several months, but for those who qualify, the funds can significantly mitigate the cost of a nursing home stay.
5. Private Pay With Income And Savings
Some nursing home patients are able to use a combination of their investment dividends, savings, and pension income to pay for their care. One way to save money for later health care needs is to set up a health savings account (HSA) or a flexible spending account (FSA) and contribute pre-tax dollars. Putting extra money into an IRA is another way to save money and get a tax break. In some cases, adult children and other family members are also able to pool their savings to help cover the cost of a loved one’s care.
6. A Reverse Mortgage
Some people supplement their savings by taking out a reverse mortgage on their home. This is a type of loan that is based on the value of the borrower’s home, and it is paid out in a lump sum. The individual is free to use the money to cover long-term care expenses, and the loan only comes due after he or she passes away, at which time the home is sold to repay the loan. With this type of loan, the borrower never owes more than the value of the home. A reverse mortgage can be a useful option to pay for long-term care, especially when the home’s original mortgage is paid off and the home itself has a high resale value.
The cost of long-term care is undeniably steep, but those who prepare in advance stand a better chance of affording a high quality of care when they need it. The sooner you and your family start planning, the more options you will have.
Finally, private pay may be an option. Some nursing home patients are able to use their investments, savings, and pension income to pay for their care. In some cases, adult children and other family members are also able to pool their resources to cover the cost of care.
Some people also supplement their savings by taking out a reverse mortgage on their home. This is a type of loan that is based on the value of the borrower’s home. The individual is free to use the money to cover care expenses, and the loan only comes due after he or she passes away, at which time the home is sold to repay the loan. A reverse mortgage can be a useful option especially when the home’s mortgage is paid off and the home itself has a high resale value.
The cost of long-term care is undeniably steep, but those who prepare in advance stand a better chance of affording a high quality of care when they need it. The sooner you and your family start planning, the more options you will have.
