Researching this topic brought me back to the day we found out my mom was to be discharged from a rehab facility after a debilitating stroke. She would be in a wheelchair, and the house she lived in with my father had entryway stairs, no downstairs bedroom, and an inaccessible first-floor bathroom with a mint green bathtub.
We had very little warning of the discharge. The social worker initially gave the proclamation three days before we were to bring my mother home (I negotiated that up to ten.) I didn’t have the first clue how to make arrangements or who would pay for any of it. (Hint: not Medicare.) The stress was mindblowing.
Of course, we figured it out. We hired contractors, acquired equipment, found caregivers, and threw a party to welcome my mom home after 3 months in hospitals and rehab facilities. And I didn’t harm my father in the process (even though he sent me to Home Depot five times in one day to get supplies for the rushed rehab project.)
My family isn’t special. Millions of people each year encounter a need for long-term care suddenly, not gradually. Many of us are surprised to find out that we don’t qualify for any help at home even though it might be dangerous or infeasible to stay there by ourselves without assistance. How do people pay for long-term “non-medical” care?!
If you’re “middle income”, I’m going to tell it straight (because nobody did me that kindness when I was asking): the options are limited if you haven’t planned ahead.
That’s a tough pill to swallow, I know.
You may need to pull together the money from multiple sources, as we did.
Here is a shortlist of the most commonly cited sources of long-term care funding, including some you’ve surely thought of already and some that have only recently become available.
Sometimes changing your living arrangements by selling or renting your home can generate funds that can be used for in-home or other community-based care.
A reverse mortgage is a loan made against the value of a home, allowing you to get cash (access the home’s equity) without selling the home.
Self-Finance from Savings
It’s likely that you and your family will use a combination of sources to pay for long-term care services over time…including your hard-earned cash, retirement savings, social security, pension, or other sources of income.
The cost of long-term care is prohibitive for the vast majority of Americans, and few have saved enough to pay for years of care. Many rely on family to fill the gaps or cover the costs. (Pro tip: talk about your plans with the important people in your life — whether that’s family, friends, or an advocate you hire to manage your care.)
Health Savings Accounts
Health Savings Accounts do not expire and can be used to pay for qualified long-term care services.
If you purchase an annuity, the insurer will send you a series of regular payments over a defined period of time (in exchange for a single one-time payment.)
Life Settlement (Life Insurance Resale)
Did you know there is a secondary market for life insurance? A life settlement is the sale of a life insurance policy for more than the policy’s cash surrender value (but less than its face value, or death benefit.) You get cash; the buyer takes the policy, makes all future payments, and gets the death benefit when you die.
Long Term Care Insurance
After a waiting period, long-term care insurance covers long-term care services, generally up to a daily or monthly limit.
Combination Long Term Care Insurance
Some newer life insurance policies offer a “linked-benefit” product with an accelerated death benefit rider (sometimes marketed as a hybrid long-term care policy.) This allows the insured person to receive a portion of their policy’s death benefit while they are still living to pay for long-term care.
Starting in 2019, the Centers for Medicare & Medicaid Services (CMS) announced that non-skilled in-home care would be allowed as a Medicare Advantage benefit. Since most plans were already defined by the time of the announcement very few plans offered the benefit in 2019. Look for more plans to offer this benefit when 2020 plans are advertised.
Medicaid is a joint federal and state program that covers health care and long-term care expenses for qualified individuals. Eligibility requirements differ by state. In Illinois, for example, the income eligibility limit is 138% of the federal poverty level. In 2019, the federal poverty level for an individual is $12,490, so to qualify in Illinois you’d need to have less than $17,236 in annual income. (This is just the income requirement; I haven’t investigated other eligibility requirements…though I’m sure there are some!)
Anyone who served in the active military, naval, or air service and who was discharged or released under conditions other than dishonorable may qualify for VA benefits. If your spouse was a veteran, you may also qualify for some supports. Search the Veterans Administration website for Aid and Attendance Benefits.
This month, Washington became the first state in the nation to offer a social insurance program for long-term care. In 2017, Hawaii created the Kupuna Care Act to provide long-term care services and supports to seniors and their working family caregivers. Expect to see more experimentation at the state and federal level as healthcare costs continue to preoccupy us all.
Disclaimer: Information is not advice. What I share here is by no means to be considered a substitute for the advice, decisions, or judgment of the reader’s legal, financial, medical, or other professional advisors.
For most families, paying long-term care isn’t a simple equation with a single answer. It’s a complex decision-making process that spools out over time. Whether you can take advantage of any of these options depends on so many things: personal details like age, gender, health history, unique eligibility requirements, your risk tolerance, your time horizon, the state you live in, etc.