The national average rate for assisted living is $3,628 per month, according to Genworth’s 2016 Cost of Care Survey. No matter what your socio-economic status, make sure you are taking advantage of all means available that can help pay for assisted living.
Most families pay for assisted living out of their own pockets using a combination of Social Security, pensions, Veterans benefits, home equity, and savings.
Below are ways to pay for assisted living, including some options that most people know about and others that are less well known.
Long-Term Care Insurance
Long-term care insurance is a policy that is purchased through a private insurance company. Similar to health insurance policies, the price varies greatly depending on factors such as the person’s health, age, and amount of coverage. Coverage could be denied for people with pre-existing conditions such as Alzheimer’s disease, multiple sclerosis, a stroke, or Parkinson’s disease. However, insurers vary widely in their criteria. If one company denies an applicant, another company might accept that person.
Medicare
Medicare does not pay for the cost of living, room and board, or personal care in an assisted living facility. Medicare might pay for short-term stays in an ALF or rehabilitation center while someone recovers from an illness, injury, or surgery. Assistance from Medicare is very limited.
Medicaid
Medicaid is a joint federal government program for older people with low incomes and limited assets. However, administration of the program falls to the individual states, according to the Centers for Medicare and Medicaid Services (CMS), which says “each state sets its own guidelines regarding eligibility and services.” The number of state Medicaid programs paying for assisted living is increasing, and many states also offer home and community-based services to help delay an elder’s placement in a long-term care facility.
Aid and Attendance Veterans Benefit
The Veterans Administration’s Aid and Attendance is part of an “improved pension” benefit that is largely unknown. Living in an Assisted Living facility qualifies. Aid and Attendance is an enhancement to a veteran’s regular VA pension. As of 2017, an eligible veteran may receive up to $1,794 monthly, a surviving spouse is eligible for up to $1,153 monthly, and a veteran with a spouse is eligible for up to $2,127 monthly. For more information on what VA Benefits see (article).
Investment-based options to pay for assisted living
The following ways to pay for assisted living are riskier, because they are financial transactions rather than government money. They should be considered only after other options have been exhausted.
Life Settlements
A life settlement, or life insurance settlement, converts life insurance into money that can be used to pay for long-term care. The company that issued the policy buys it back for 50 to 75 percent of its face value. The settlement company pays the premiums until the policyholder dies, at which point the company, not the policy’s original beneficiaries, receives the money.
Reverse Mortgage
Elders who own their home outright or have only a small mortgage can trade in their equity for a loan. A home equity loan is known as a reverse mortgage. It allows people to trade in ownership without making immediate payments on the loan. Payments don’t start until the home is no longer the primary living space.
Annuities
An annuity is a contract between a person and an insurance company that is designed to meet retirement and other long-range goals. You make a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date.
Bridge Loan
Bridge Loans are a risky option that should be used with caution. A bridge loan is a short-term, temporary loan. For example, some elders are trying to sell their house to move to assisted living. But suddenly their care needs become too urgent to wait until the house sells before moving to assisted living. For people affected by conditions out of their control, a bridge loan, typically for 6 to 12 months, may be a viable option. The homeowner is assuming that the existing house is going to sell within the length of time specified in the contract.
Paying for assisted living doesn’t have to come from one source. There are options available, and seniors and their families should consider those that apply to their situation. And remember, before taking risks with investments and assets, or making a major financial decision, speak with a financial advisor.
The many options for paying for long-term care have to be weighed carefully. Each option may come with long term consequences that impact the ability to pay for more intensive care in the future. Seeking the guidance of a professional is always advisable.
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