Three Ways to Pay for Long-term Care

If you or someone you love needs long term care, one of the first concerns that probably comes to mind is the cost.

After all, home health aides, assisted living or residential care facilities and nursing homes can be a major expense.

According to the 2020 Genworth Cost of Care Survey, the national median monthly cost of nursing home care costs about $7,800 for a semi-private room, and $8,821 for a private room, while homemaker services cost roughly $4,481 per month.

To help pay for the care they need, many rely on five main sources of support: family, personal savings, government health programs, private insurance and, where possible, a reverse mortgage.

“It’s really about trying to piece it all together in the most cost effective way possible and to balance that cost with the kind of care you want for yourself or your loved one,” said Amy Goyer, a family and caregiver expert for the AARP.

The do-it-yourself route

In some cases, family members and friends may be able to help with some of the care you need — preparing meals, providing transportation, helping to keep track of medications, doing housework and other tasks – which can help keep costs to a minimum.

Loved ones, however, may not be positioned (or even qualified) to provide full-time, or specialized care as your health begins to decline. Some, too, may simply decide they’ve had enough after a period of time. Burnout is common among sandwich generation caregivers who are juggling their own work and family responsibilities at the same time.

“The stress associated with caregiving is cumulative,” said Goyer, who has been the designated caregiver for her grandparents and both parents. “It becomes more stressful the longer you do it and the more intensive the caregiving becomes.”

Using your savings

When professional long-term care is a necessity, you may be able to pay out of pocket with your own resources — your savings, work income (if you have any) and guaranteed sources of income such as annuities and Social Security payments.

But nursing home and assisted living costs can quickly eclipse the average retirees’ income if they require care for longer than expected or the level of care becomes more intense.

In many cases, those requiring specialized long-term care deplete the funds they were hoping to pass along to their children.

Help From government programs

Many assume that long term care is covered by Medicare, the federal health insurance program for seniors and those with a qualifying disability, or Medicaid, the federal-state health plan for low income Americans.

That’s not necessarily true. Medicare, for example, does not cover long-term care services and support for your personal care needs (also called custodial care) if that’s the only care you need. Generally, nursing home care is considered custodial care.

Medicaid, by contrast, does cover long term care services in specific settings under certain conditions and for limited periods of time, including rehabilitative care provided in a long-term care hospital, skilled nursing care in a skilled nursing facility, eligible home health services (such as physical therapy and speech-language pathology services) and hospice or respite care. Medical equipment such as wheelchairs or oxygen may also be covered in certain situations.

However, Medicaid only pays after you meet eligibility requirements, which include significant restrictions on income and assets. Generally, you must spend down your assets before you become Medicaid eligible, said Goyer.

“Some states have waivers that pay for home health aides on an ongoing basis, but that’s not available in every state,” she said, noting some state Medicaid plans also cover skilled nursing services only in a skilled nursing facility, which can be a source of frustration for family caregivers who are struggling to keep their loved ones at home.