A Complete Guide to Paying for Long-Term Care

For seniors with long-term care needs, the cost of care can be a source of stress and worry. What type of care is needed and the cost associated with it will vary from person to person.

There are many options you can use to help you cover the cost of this care, depending on where you live, your income level, and other factors. Learning about these options can help you get the care you need.

In this guide, we’ll look at several approaches to paying for care, and then share resources you can use to help you find out more information about these options.

What kind of costs can I expect?

According to Genworth Financial, an insurance company specializing in the financial challenges of aging, these were the median annual expenses related to senior care in 2021: 1

In-home care: $61,776
Nursing home (private room): $108,405
Assisted living facility: $54,000

It’s projected that 52% of seniors 65 and older will need long-term care services for 2 years or less, and 1 in 7 may need care for more than 5 years. 2 It’s easy to see how these costs can quickly add up.

Financing care on your own: paying for expenses out of pocket

If you’ve saved toward your long-term care expenses as a senior, this may be the first option you reach for, especially if you encounter barriers to long-term care insurance coverage. It is estimated that 1 in 6 seniors will pay $100,000 out of pocket towards long-term care costs. 3

To offset this, many seniors will rely on close friends and family to meet care needs. Each year, 53 million unpaid caregivers provide care to family or friends, 17% of which care for an adult 50 years of age or older. 4

Care needs can often increase with time, however, and some form of paid caregiving often has to be added to meet that demand. Adult day care centers, in-home care providers, and assisted living facilities are some options used in these situations.

Private financing options to cover gaps

If existing savings aren’t enough to cover the cost of care, there are a few options seniors can use to privately finance these expenses. As with any financial decision, it’s always best to consult with a financial advisor before choosing one of these options.

1. Long-term care insurance

It’s best to put this choice in place before chronic or serious health problems develop. It can be purchased individually or as part of group long-term care insurance, such as through an employer.

When a person has a long-term care policy, it can be accessed to pay for care when it is needed. If you already have health concerns and need long-term care insurance, it’s unlikely you will be approved for a policy.

2. Life insurance

As an alternative to long-term care insurance, a life insurance policy can be used to pay for long-term care. There are a couple of ways to do this. One option is to purchase a life insurance policy with a long-term care rider, also called hybrid life insurance. This may be easier to qualify for than long-term care insurance if you have a chronic health condition and may cover some of the cost of long-term care.

Another option is to cash out your current life insurance policy. This can involve taking an advance against the final payout your beneficiaries would receive at the time of your death (meaning their payout would be reduced). Or you can also consider selling it for its current value, especially if you are age 70 or above. 5 This is called a long-term care life settlement.

3. Reverse mortgages

This type of mortgage is designed to help older adults use the value of their home to finance whatever needs they may have, without repayment until they leave the home (or pass away). This can have fees and high costs tied to it. Because reverse mortgages can be complicated, you should always discuss this decision with a financial advisor.

4. Certain types of trusts

Personal assets can be placed in a trust, allowing a person to pass them to a beneficiary at the time of death. There are different legal ways to set these up, typically with assistance from an attorney. A Medicaid disability trust or a charitable remainder trust are two types of trusts that use assets to pay for long-term care.

5. Annuities

This is a type of investment that pays a set income on a regular schedule, based on the original amount invested. Special annuities for long-term care or with long-term care riders offer extra benefits to help pay for care.

6. Short-term care insurance

An option to potentially offset costs for a short time, usually a year or less. While this doesn’t offer the same degree of benefits as a long-term care policy, it may be better than no policy at all.

Alternatives to paying out of pocket

Along with paying long-term care costs from personal savings or through financing, there are several government options available to help cover the total cost. Most seniors find that they need some combination of these. It’s not unusual even after careful planning for someone to find they have underestimated their potential need for care, or how expensive it can be.

Let’s take a closer look at the available options:

Medicare

Because Medicare is insurance coverage for medical care for adults age 65 and older, it does not cover long-term care costs. It does cover short-term nursing home stays related to medical conditions, in-home healthcare (which does not include assistance with activities of daily living from a paid caregiver), and hospice care if a doctor has certified that a person likely has 6 months or less to live.

Medicaid

For people who fall below a certain income level, Medicaid is a state and federal program to help cover healthcare costs. It also may cover long-term care in certain situations. This coverage depends on the state in which you live.

Veterans Affairs benefits

If you are eligible for veteran’s benefits, the Department of Veterans Affairs offers coverage for long-term care including adult day care services, respite care, skilled home health care, home health aide services, and a geriatric evaluation to assess needs and develop a care plan. 6

Social Security programs

These programs can offer financial assistance to people with medical disabilities. Social Security Disability Insurance (SSDI) is for people aged 65 and under, and Social Security Income (SSI) applies to those above the age of 65. Although getting approval for these benefits can take several months, there are some conditions like Alzheimer’s disease that qualify for Compassionate Allowances, which speed up the approval process.

Program of All-inclusive Care for the Elderly (PACE)

Although this program is not available in every state, if you’re in an area that participates it can help cover expenses for care at home. The program was designed to help seniors stay in their own homes as long as possible.

PACE provides assistance with both medical care and home care services. This includes skilled nursing, personal care, chore services, meal preparation, and more. 7 To qualify, you must: 8

Be 55 or older
Live in an area serviced by a PACE organization
Need a nursing home-level of care (as certified by your state)
Be able to live safely in the community with PACE assistance

Resources you can use to find aid

As you can see, there are many ways to fund the cost of long-term care. Some of these may be a good fit for your situation, and others may not. To further sort out eligibility and which approaches can help you move forward with your care needs, there are several resources you can use:

1. The National Council on Aging (NCOA)

This private organization has a free service called BenefitsCheckup that can help you find federal and state programs that you may be eligible for. The various programs offer assistance with challenges like housing costs, medications, heating bills, meal programs, and more.

To learn more, you can go to the BenefitsCheckup website, or call 1-571-527-3900.

2. Government benefits programs

To find out more about the various programs offered at federal, state, and local levels, you can contact any one of these resources:

The Benefits.gov website, or call 1-800-FED-INFO (1-800-333-4636)
Medicare benefits: through the Medicare website or call 1-800-633-4227
Medicaid benefits: through the Medicaid website or call 1-877-267-2323
The State Health Insurance Assistance Program (SHIP), offers both counseling and assistance to those on Medicare and Medicaid programs: through the SHIP website or at 1-877-839-2675
The US Department of Veterans Affairs (VA): through their website, or at 1-877-222-8387. You can also read more on their Veterans Affairs Caregiver Support page.
Social Security Administration Programs: online here, or call 1-800-772-1213
PACE benefits: information is available at the PACE website, the Medicare PACE info page, or you can call 1-877-267-2323.

Planning for long-term care is important

Even if you don’t need long-term care now, it’s important to plan for the possibility. The more you know about the options discussed above and how you can use them, the better prepared you can be.

Most seniors- as many as 90% surveyed- would prefer to stay in their own homes as they age. 9 As previously mentioned, in-home care is a more affordable option than a private room in a nursing home. But to allow for this, saving ahead if possible and enrolling in long-term care insurance now (if you meet the criteria to do so) can help you to be able to choose in-home care when the need arises.

If you’re deciding now on in-home care services, the above programs can help you with affordability, so you can get the support you need. In-home professional care can also supplement unpaid caregiving provided by friends and family so that caregivers avoid burnout. It’s a win-win situation for many seniors and their families.

If you’re interested in learning more about this type of care and how it could work for you with the resources provided above, the team at Caresify is happy to assist with the best possible personalized care. You can read more here, or call 888-799-5007.

Providing personalized in-home care to seniors