My Future - August 2010
The Paying-For-Elder-Care Puzzle
Know Your Options and How to Use Them Together
When thinking about paying for elder care, it can be overwhelming just to consider the many different financial and care options, their eligibility requirements, benefits limits and durations. Yet another major consideration is the interplay between the options, or to put it another way, how pursuing one option might disqualify you for another. Grouping the resource options into categories can help facilitate the consideration process.
Short Term Resources
Long-term elder care often begins by using short-term resources. Medicare, Medigap, private health insurance and similar programs for military retirees and veterans, such as TRICARE and CHAMPVA, all provide limited time benefits for long-term care. These programs' benefits are designed for seniors recovering from surgeries or accidents and are not meant as long-term care solutions. However, they will pay a high percentage of the cost of nursing home care for up to 100 days.
Resources for ongoing elder care costs can be grouped into five categories:
- Pensions and Retirement Resources - The first resources most families tap for the cost of eldercare are recurring pensions and retirement savings. These include social security benefits and veteran's pensions, such as the Aid and Attendance benefit, and a family's own savings. The costs and types of long-term care have changed dramatically in recent years and, unfortunately, many of those who require care today did not retire with the recurring monthly income to cover those costs.
- Home Equity - With inadequate recurring monthly income to pay for long-term care, many families use the equity of their homes as a financial resource. Reverse mortgages and, to a lesser extent, home equity loans can provide a significant amount of monthly income. There are several new financial programs that allow seniors to tap their home equity as an alternative to reverse mortgages. However, these are available only in some states, and their value is somewhat diminished due to the drop in home prices in recent years.
- Insurance: Long-term Care and Life - Most families do not have long-term care insurance, but those that do receive direct payments to help them with the cost of care. Life insurance is more common, and there are multiple options for exchanging it for cash. For seniors in poor health, viatical settlements and accelerated death benefits allow them to receive a lump sum payout. Life settlements and death benefits loans are two other options for healthier seniors with life insurance.
- Programs for the Financially Challenged - There are a variety of programs provided by federal, state and non-profit organizations for the financially needy. Chief among them is Medicaid in its various forms. Qualified seniors can receive Medicaid benefits in various ways, such as direct care or waivers to receive home care, and family caregivers even can receive payment for the care they provide, in some cases. Many government housing programs include assisted living services, and local non-profits and area agencies on aging provide respite care. Supplemental Security Income can provide a boost to Social Security checks. Finally, caregivers can receive tax breaks. Many of these programs can be combined to effectively reduce the cost of care.
- Eldercare Loans - In the last few years, a new class of loan has emerged, specifically targeted at helping families pay for assisted living. The loans have rapid approval processes and are structured to allow multiple family members or friends to share the cost of paying for an elderly individual's care. These are a good option for families in crisis situations.
The staff of Boomerang thanks PayingForSeniorCare.com for contributing this article. Their Web site offers a deeper investigation of the pros and cons of each of these options and others, as well as a free Eldercare Financial Resource Locator Tool that helps families find all the various options for which they are qualified.