Paying for Long Term Care
Long term care services such as medical and non-medical in-home care, adult day programs, assisted living, and skilled nursing facilities can be expensive, especially if someone requires daily or 24-hour care. No single source pays for long term care - it depends on the person’s financial situation and medical needs, and often personal funds and savings are used.
According to the 2021 Genworth Cost of Care Survey, the median annual cost of 40 hours of in-home care per week is upwards of $56,000, assisted living is $54,000, and a private room in a skilled nursing facility is $108,000. Costs will increase if your loved one lives in a more expensive market - for example, 40 hours of home care can easily cost nearly $94,000 in some urban areas.
Many people believe that Medicare, private health insurance, or Social Security will pay for long term care services. However this is not the case.
Social Security provides retirement income. It is based on work history and can be additional income for very low-income individuals. The amount does not increase if someone needs additional care.
Medicare and most private health insurances pay for medical care such as doctors’ visits, medical and surgical procedures, hospitalization, hospice, 100 days of care in a rehabilitation or skilled nursing facility, and intermittent in-home medical care such as physical therapy and nursing services. It does not pay for assisted living, long-term stays in skilled nursing, or non-medical in-home care (although some Medicare Advantage plans may have an in-home care option).
What can help with paying for long term care services?
Medicaid is government health insurance for individuals of all ages who have limited resources. Although the federal government sets guidelines for the program, each state has the flexibility to structure the program as they determine, so eligibility varies by state. Some states have a separate Medicaid program for people who require placement in a skilled nursing facility with eligibility based on medical need and not solely on financial status.
Veterans Benefits under the U.S. Department of Veterans Affairs (VA) offers several programs to support the long term care needs of veterans over 65. Eligibility for these programs is based on medical needs, but not all programs are offered in all locations.
Long Term Care Insurance, as the name implies, pays for long term care services; however, policies vary in coverage and limits. People usually purchase policies when they are between the ages of 50 and 65, and people in poor health or already receiving long term care services may not qualify for long term care insurance.
Life Insurance that is a hybrid or linked-benefit policy combines a long term care benefit with life insurance or, less often, an annuity to pay for care. Most life insurance hybrids provide long term care coverage when needed and reduce or eliminate the life insurance payout to offset the payments.
Reverse mortgages are a special type of home equity loan for those aged 62 and older that allows the homeowner to receive cash against the home's value without selling it. The amount owed based on loan payouts and interest, becomes due when the last borrower dies, sells, or permanently moves out of the home. A reverse mortgage may be an option for seniors who encounter significant costs late in life, have depleted most of their savings, have considerable equity in their primary residences, and do not have heirs who wish to inherit the home. A reverse mortgage is not a good option if the senior cannot find a trustworthy lender or reputable loan program, have other savings that can be used, or have other family members living in the home who will need to stay there after the term of the reverse mortgage.
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