As an increasing number of Americans require nursing home care, their families are scrambling to find ways to pay for, or at least reduce, the enormous cost of care. According to a Genworth Financial Inc survey, the average cost of a private room in 2020 will be more than $105,000 per year, with a semi-private room costing $93,000 per year. Paying for a loved one’s nursing home care is an almost insurmountable financial challenge for most people. There are, however, ways to finance and reduce the cost of a nursing home so that a loved one can receive the long-term care that they require.
Method 1 Reducing Costs and Using Personal Assets
1. Take into account in-home care. Long-term nursing home care costs between $6,000 and $9,000 per month, and many people are unable to afford it. You may want to consider in-home care to save money, which costs about $21 per hour for a care assistant. This option is not only less expensive, but it also allows your elderly or disabled family member to stay in their home for as long as possible.
2. Negotiate the cost of long-term care. If you are paying for long-term nursing care out of pocket, you should negotiate the overall cost with the nursing home. While some nursing homes may refuse to bargain, others would rather accept a lower private care rate because it still pays more than state-sponsored Medicaid programmes.
3. Move your loved one. The cost of nursing home care varies greatly from state to state and even from neighbourhood to neighbourhood. If your loved one has family members in different states, you should find out which state has the lowest nursing home care costs. Nursing home care in Texas, Utah, and Alabama can be less than half the price of nursing home care in the Northeast.
4. You may be eligible for a Reverse Mortgage. A reverse mortgage is a loan obtained from a bank against the value of a homeowner’s home. The loan converts the equity in the home into cash, and the homeowner receives either a lump sum, regular payments, or a line of credit equal to the home’s equity. Following the death of the owner, the bank may foreclose on the home (gaining ownership without further liability to the home owner) or members of the estate may sell the home and pay off the loan.
Each homeowner must be at least 62 years old and live in the home where the reverse mortgage was taken out in order to qualify for a reverse mortgage.
If you are in good health, a reverse mortgage may be a good option. You can use the reverse mortgage proceeds to pay for long-term care insurance or to make your home more accessible so that you can stay in it as long as possible.
If you require care but do not require nursing home care, a reverse mortgage can be used to pay for in-home caregiver services. This allows seniors to stay in their homes for a fraction of the cost of a nursing home.
If you are a married couple and one of you requires nursing home care, a reverse mortgage can cover the cost of nursing home care while allowing the healthy spouse to remain in the family home. If the spouse who requires care passes away, the surviving spouse may remain in the home as long as they continue to pay property taxes and insurance.
Method 2 Qualifying for Medicaid
1. Determine whether you are eligible for Medicaid. Medicaid is a state and federal government programme that helps low-income people pay for medical care, including nursing home care. You can only be eligible for Medicaid if your monthly income and assets are below the limits set by your state.
You can find out if you are eligible for Medicaid in your state by visiting https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/.
If you are eligible for Medicaid, you can apply online at https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/ or go to your state Medicaid office and apply in person.
2. You are eligible for Medicaid. If your assets are currently too large to qualify for Medicaid and you want to protect your personal assets from nursing home expenses, you can legally reduce your assets to qualify for Medicaid.
You should consult with an elder law attorney before attempting to reduce or transfer your assets. Medicaid has very strict rules regarding what assets can be transferred and what purchases can be made to reduce your income. If you improperly reduce your assets, Medicaid can penalise you for months or years and prevent you from being eligible for the programme.
The National Association of Elder Law Attorneys’ website, https://www.naela.org, contains information about elder law specialists. The American Bar Association also has information on attorney referrals at https://www.americanbar.org/groups/legal services/flh-home/.
3. Reduce your holdings. You can qualify for Medicaid by reducing your assets by:
Debt repayment, such as a mortgage, student loans, or credit card debt;
Providing in-home medical care;
Paying for home repairs, such as a new roof or furnace;
Transfer money to your spouse for his or her use; or
Set up a trust or transfer funds for your blind or disabled child or a disabled person under the age of 65.
4. Establish a Medicaid Asset Trust. A Medicaid Asset Trust involves transferring all of your assets into a trust and relinquishing control over those assets. Any funds placed in the trust are exempt from the Medicaid asset limits. If you transfer funds into the trust within five years of applying for Medicaid, you may be subject to Medicaid’s “lookback provision.” Under this provision, Medicaid may penalise anyone who it determines engaged in a non-exempt transfer in violation of the Medicaid regulations. If you are penalised, you may be unable to obtain Medicaid for months, if not years.
Method 3 Using Insurance Options
1. Get long-term health insurance. Long-term health insurance, as opposed to regular health insurance, is intended to pay for long-term care, which may include nursing home care, in-home care, or medical equipment. When comparing long-term health insurance policies, choose one that covers nursing home care if you have a reasonable belief that you will not have someone to care for you at home if you become ill and unable to care for yourself.
When you are younger and in better health, it is best to purchase long-term health insurance. Long-term health insurance becomes much more expensive as you get older, and many seniors are either unable to afford or qualify for a policy.
2. You can cash in your life insurance policy. Another option is to cash in your whole life insurance policy to pay for nursing home care. Certain policies allow policyholders to cash in their insurance policy for 50 to 75 percent of the policy’s face value.
Remember that this is only available for whole life policies, not term life policies with no cash value.
You can cash out your life insurance policy in two ways, depending on your individual policy: accelerated benefit or life settlement.
If you qualify for an accelerated benefit, the insurance company will pay between 60% and 80% of the policy’s face value. To qualify for an accelerated benefit under certain policies, you may need to be suffering from a terminal illness.
A life settlement is a policy payout negotiated with a third party rather than the insurance company that issued the policy. These settlement companies will pay you between 40 and 75 percent of the face value of your policy based on the value of your policy, your age, and your health. It may be possible to sell some term policies depending on an individual’s health and age.
Before negotiating a life settlement, you should consult with an elder law attorney because receiving the proceeds of the policy through a settlement company may have tax and Medicaid implications.
3. Examine your Medicare benefits. While Medicare does not cover the cost of long-term nursing home care, if you were transferred to a nursing home within several days of a hospital stay and require skilled nursing or rehabilitative care, you may be eligible for a portion of the stay. Your stay in a Medicare-approved facility may be covered for up to 100 days.
Medicare will also pay for in-home care for a limited time. This coverage may be beneficial if you are attempting to reduce your assets or do not require full nursing-home care.
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