Ways to Pay for In-Home Care
Many older adults have indicated they would prefer to remain in their homes for as long as possible during their later years. If this is the case for you or your loved one, considering sources available that can be used to pay for home care services is an important part of the planning process. The goal of this resource is to review common sources used to pay for home care services.
The good news is that when it comes to paying for home care services, you may have more options available to you than you first thought. Options include reverse mortgages, annuities, Medicare, collective sibling agreements, private insurance such as life insurance and long term care insurance, and public programs such as Medicaid and Veterans benefits.
Collective Sibling Agreements
If you’re worried about Mom or Dad living alone, other family members may be worried, too. Working together, families can come up with a plan in which those who can’t help out because of geography or work demands pay siblings who do have that availability and flexibility to be with their parents on a daily basis.
Alternatively, siblings who have available funds can pay for home care services now with the understanding that they’ll be paid back for their contribution from the siblings’ collective inheritance or the eventual proceeds of the parents’ house when it is no longer needed.
Either of these agreements needs to be spelled out very clearly to avoid tension, resentment, or dissension down the line. If a sibling acts as caregiver, she should have a set hourly wage and should keep close track of hours and any expenses incurred, such as gas or groceries, just as an employee would do. If a sibling pays for in-home care with the expectation of reimbursement, she should keep clear records in the form of invoices and receipts or canceled checks. It’s also a good idea to have something in writing to show the executor of the will, or even to put a clause in the will explaining the plan.
Reverse mortgages were developed by the government specifically for the purpose of helping seniors (originally widows) stay in their homes until the end of their lives.
With a reverse mortgage, seniors can use the value of the equity in their home to get cash now, either all at once or in monthly payments. But instead of borrowing a set sum, the loan balance increases over time. A reverse mortgage allows your loved one to stay in the home until she dies, even if by that time the loan balance exceeds the home’s worth. But at that point, the home must be sold to repay the loan balance.
Reverse mortgages do have limitations: Your loved one has to be 62 or older, and she has to own her home, either outright or with little debt left on the original loan. (The bank that holds the original loan must be paid back before payments are made on the reverse mortgage.) The bank decides on a value based on the home’s worth and also based on your loved one’s age, since that affects the length of time the payouts must cover.
While a reverse mortgage may be the perfect solution to your in-home care dilemma, it also comes with strict rules regarding homeowners’ insurance, mortgage insurance, and home maintenance, making it easy to default. Choose a reputable mortgage broker or bank and read the entire contract carefully. (According to the Consumer Financial Protection Bureau, reverse mortgage scams and foreclosures are on the rise, often because of high fees or clauses that make it easy to lose the home.)
It’s not easy to get Medicare coverage for in-home care, and when you do it’s strictly limited. That said, it can be a godsend when you’re faced with a sudden medical crisis or downturn in your loved one’s condition. Medicare coverage is most common when your loved one is being discharged from the hospital or a rehabilitation facility. You’ll contract through a Medicare-certified agency for a period of skilled nursing care and therapy that’s tied to a certain period of expected recovery.
Look in our directory of government insurance counselors to find a counselor in your area who can help you with Medicare eligibility.
Long-term care insurance
If your loved one has a long-term care (LTC) insurance policy, it may cover some costs of in-home care. Some LTC policies only pay home care benefits to a licensed home care agency or other licensed provider; others pay a set daily amount to the insured person who qualifies for the benefits (which means your loved one can spend that money on any caregiver he or she chooses, including family members).
Read through the LTC policy itself to see if there’s coverage for in-home care and what the payment terms are: when someone qualifies, for how much, and how the benefits are to be paid.
Life insurance for cash
If your loved one has a life insurance policy, you may want to look into whether it could provide money now to help pay for care instead of going to family members later. Cashing in a life insurance policy can sometimes provide a substantial amount of money to pay for in-home care.
Certain life insurance policies can be cashed in with the insurance company itself for 50 to 75 percent of the policy’s face value, though some policies permit these “accelerated benefits” or “living benefits,” as they’re called, only if the policyholder is terminally ill.
If these accelerated insurance benefits aren’t available, you can investigate whether a “life settlement” (also called a “senior settlement”) may be possible. This involves selling the policy to a life settlement company (different from the insurance company that issued the policy) for a lump sum.
The exact amount of the payment — 50 to 75 percent of the policy’s face value — depends on the policy benefit amounts, the policy’s monthly premiums, and your loved one’s age and health. After buying the policy, the settlement company keeps paying the premiums until your loved one dies; then the life insurance benefits are paid to the settlement company rather than to a family member or whoever was the policy’s original beneficiaries.
Using Medicaid Toward In-Home Care
The fact that your aging parent may have very little income doesn’t rule out in-home care. Check out following benefit programs to see if they will pay even a limited amount for providing in-home care.
Medicaid covers short-term in-home care for acute conditions, usually following a stay in a hospital or rehabilitation or skilled nursing facility. Also, some (but not all) state Medicaid programs cover a limited amount of long-term in-home care for those who qualify.
However, even in those states that provide long-term home care coverage, Medicaid rules often limit it to people whose physical or mental condition is severe enough that it would qualify them for Medicaid nursing home coverage. Also, Medicaid will only pay for in-home care if provided by a Medicaid-certified home care agency, not by an independent paid caregiver or family member (but learn about Cash and Counseling, below, regarding whether you or other family members might get paid).
To find out about Medicaid eligibility and coverage for in-home care in your state, contact the state’s Medicaid agency by going to the online directory for state Medicaid agencies or to your local Area Agency on Aging.
Note: Neither traditional Medicare nor Medicare Advantage plans cover long-term in-home care, but both do cover short-term in-home care for acute conditions, usually following a stay in a hospital or rehabilitation or skilled nursing facility.
Unlike Medicare coverage of home care or regular Medicaid home care coverage, these programs aren’t limited to medical care and their coverage doesn’t run out when a person’s medical condition stabilizes. (The purpose of these waiver programs is to keep people out of nursing homes for as long as possible.)
The relatively new Program of All-Inclusive Care for the Elderly (PACE) provides comprehensive home and community care for frail elders who would otherwise require nursing home care. PACE is only available in certain areas of some states, and eligibility is restricted to low-income seniors, usually those eligible for both Medicare and Medicaid. To see if there’s a PACE program operating where you live, and, if so, how to contact the program, see the National PACE Association’s online list of PACE programs.
If your senior loved one was a veteran, you may be in luck when it comes to financial assistance — but you’ll have to be assertive and persistent to get it. Veterans who served more than 90 days of active duty, with at least one day during a wartime period, with an honorable discharge, may be eligible for the Veterans Pension. Veterans who need long-term help with the activities of daily living — or whose spouses need such help — may be entitled to monthly disability payments known as “aid and attendance” by the VA.
This type of veterans benefit requires documentation from a doctor and is calculated using a complex rating system based on how disabled your loved one is. Many people become daunted by the complexity of the qualification process, but once veterans benefits are established they can be extensive and continue until the end of life. According to the Senior Veterans Service Alliance, only 5.4 percent of veterans who are eligible for these benefits actually receive them, because so few veterans know about the benefits and how to qualify.
Help is available from Veterans Service Organizations (VSOs), a list of which is available in a PDF that can be downloaded from the Department of Veterans Affairs website. Legally, VSOs are not allowed to charge for help with veterans benefits applications. If a service requests payment for this help, look for another organization. If you’re having trouble finding a VSO, there are financial concierge services that can help. Elderlife Financial is one such service with a network of VSOs.
Cash and Counseling (payment to family members)
If your family is like most, it’s you and other family members who provide most of your loved one’s in-home care. But what if you or other family caregivers have to give up paid work in order to provide that care? The Cash and Counseling program may be able to help.
In some states, Medicaid or another state agency runs a program that pays elders directly to cover at least part of their in-home care. (Note that some states run similar programs under different names.) The amount the program pays depends on the program’s assessment of the person’s care needs. If your loved one qualifies for the program (the standards, in some states, are slightly easier to meet than for regular Medicaid coverage), he or she can then use the cash benefits to pay you or other family members, or independent home care workers, to provide care.
To find out about a Cash and Counseling or similar program in your state, contact the state Medicaid agency online or contact your local Area Agency on Aging.