The Paying for Eldercare Puzzle

By Alex Guerrero

When thinking about paying for eldercare, it can be overwhelming to consider the many different financial and care options.Differing eligibility requirements and different types of benefits can further the confusion. By grouping options into categories, we can help families better understand programs available to them.

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 a long term care solution. However, they will pay a high percentage of the cost of nursing home care for up to 100 days.

Long Term Resources

Resources for ongoing elder care costs can be grouped into 5 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 only available 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 a policy 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 seniors with life insurance that require care but are not terminally ill.

Programs for the Financially Challenged

There are a variety of programs provided by federal, state and non-profits organizations for the financially needy. Chief among them is Medicaid in its various forms. Qualified seniors can receive Medicaid benefits in various ways; direct care, waivers to receive home care, and family caregivers can even receive payment for the care they provide. Supplemental Security Income can provide a boost to Social Security checks. Some cities offer government housing with assisted living services.

Eldercare Loans

In the last few years, there has emerged a new class of loan specifically targeted at helping families pay for assisted living. The loans have rapid approval processes and are structured to allow multiple family member or friends to share the cost of paying for an elderly individual’s care. These are a good option for families in shorter term, crisis situations.

Reducing the Cost of Care

Another way to think about paying for long term care is to think about how one might reduce the cost of care. This is especially valid for families that care for their loved ones at home. Some respite care programs offered by non-profits and Area Agencies on Aging offer as much as 30 hours / month of care for free or for very reasonable fees. This can offset the need for full-time home care services. There are also federal and state tax credits and deductions for caregivers. The cost of medications can be reduced by purchasing prescriptions online in bulk or from Canadian pharmacies. By combining many of these ideas, families can reduce their cost of care by hundreds or even thousands of dollars per month.

The website, PayingForSeniorCare.com, offers a deeper investigation of the Pros and Cons of each of these financial and care resources. Their Eldercare Financial Resource Locator Tool helps families find which options are relevant to them to help pay for home care, assisted living and long term care. Alex Guerrero serves as the Director of Operations for the organization.