Overview of Senior Care Payment Types

Written by Julia on November 2, 2015

Senior care payment types are abundant especially since the need for senior care is becoming more prevalent as millions of Baby Boomers are approaching retirement. Many, however, are just now realizing that they are less than prepared for the costs to come.

Depending on health status, expenses may be even higher than first anticipated. For those in good health with pensions, private insurance, or Medicare eligibility, the prospects for comfortably paying for senior care are good. For others, options are available, but cost is a limiting factor.

Choices range from in-home care with the support of a caregiver to assisted living or nursing facilities with skilled medical care. All have varying degrees of cost, but many options are not covered by general medical insurance. Determine your current financial status and figure out the best possible scenario for your needs.

Long-term Care Insurance

Private insurance is one way to pay for senior living care. Long-term Care Insurance can be purchased through an employer or individually. Personal funds are used to pay for premiums and costs vary depending on risk factors and current age.

This type of insurance covers the costs of most senior living situations. It includes a home health aide, assisted living and nursing homes. However, total costs are generally not covered and out-of-pocket expenses should be expected.

Key point

Insurance premiums may be cost prohibitive. Shop around. Seek assistance from a financial planner to determine if long-term care insurance is affordable for your situation.

Medicare Benefits

Many believe that Medicare will cover elder care expenses, but this is not true. Those who qualify for Medicare will find that long-term care is not part of the package.

Specifically, Medicare pays for doctor’s visits, emergency care and prescription medicines. It also covers short-term nursing care, typically for rehabilitation after an illness or medical procedure. Costs for extended senior care are not covered.

Key point

Don’t look to Medicare contributions towards long-term care. You will need personal funds or long-term care insurance. Fortunately, resources are available to help you figure out how to pay for senior care.

Medicaid

Those who qualify for Medicaid fare a little better. Medicaid is a joint federal and state program for those who typically have health issues and finances below the poverty level. Those who qualify cannot afford medical care otherwise.

Medicaid pays for several long-term options, including home health care or nursing home care. Before you can qualify, you must exhaust all of your own financial resources.

Key point

To assess Medicaid eligibility, contact your state or federal government Medicaid department. Just remember that Medicaid rules vary by state.

Veterans Aid and Attendance Benefits

For veterans, government funds may be available for senior care. If you have a service-related disability, you may be eligible for long-term care and home health care services via the Attendance Allowance Program.

Veterans without a service-related disability can still get help. This program may provide cash supplements. It also may include pension benefits to enable the purchase of community services or a home care aide.

Key point

Veterans with or without service-related disabilities may receive government support if they are not able to pay for care. However, co-payments may be assessed according to income level for those without service-related disabilities.

Reverse Mortgages

For seniors capable of remaining at home, in-home care is an option. To cover this cost and other expenses, a reverse mortgage may be the perfect solution. A reverse mortgage is a loan against home equity. Instead of making monthly loan payments, the senior receives advances from a lender against the future sale of the home.

There are some qualifying terms for these loans, including homeowner age and primary residence stipulations. However, this is one of the easiest loans to get as there are usually no income or credit requirements. The loan amount is due when either the senior no longer lives in the home as the primary residence or passes away.

Key point

If going this route, understand payback terms. For example, if the senior has to move to an assisted living or nursing home facility, the residence is then sold with the full loan amount going to the lender.

Family Assistance

Some seniors may find that living alone is not feasible and have to depend on a family member as caregiver. In this case, they might sell estate property to help ease the financial burden. However, there may not be enough property of value and family assistance may become the primary means for covering care expenses. Some states allow family members to receive Medicare payments for taking care of loved one.

Key point

Before exhausting all family income, determine if estate property can be sold or if Medicaid can contribute to care expenses.

Conclusion

Means to pay for senior care depend on specific circumstances and needs. Medicaid may help cover the cost for qualified individuals, but most likely you will need a combination of personal funds (retirement, social security, reverse mortgages, annuities) and long-term insurance to cover the cost of care. The personal choice you make should be based on a thorough financial assessment.