Funding Long-Term Care for the Elderly

Long-term care is expensive. According to the National Clearinghouse for Long-Term Care Information, the average cost for a semi-private nursing home room was $198 in 2009. Home health care averaged $18 to $21 per hour. Assisted Living averaged $3,131 per month. Funding long-term care for the elderly can be daunting, but there are numerous options that can help.

Long-Term Care Insurance

• Long-term care insurance pays a set benefit amount over a period of time to cover long-term care costs. Policies generally cover nursing home care, assisted living and at-home care. Long-term care insurance requires underwriting, which is when an insurance company reviews your information to determine if you're an acceptable risk. For long-term care insurance, companies look at your health history, so if you aren't in fairly good health, you may have a difficult time qualifying for a policy. If you do qualify, though, and have assets you want to protect and the means to pay for a policy, long-term care insurance is a proven way to fund long-term care.

Self-Funding

• Many of us end up self-funding long-term care. For some, it's a deliberate, planned-out choice. For others, it's more of a default. If you are going to self-fund, it's critical that you set aside money for that purpose. Savings accounts and certificates of deposit are good vehicles for this, as you may need access to the money quickly and unexpectedly. There are also annuities specifically designed for long-term care. Some count on selling their home to pay for long-term care, but this can take a long time. Self-funding can deplete your assets very quickly, leaving you impoverished, at which point Medicaid may take over.

Reverse Mortgages

• For some, reverse mortgages can be an ideal solution for funding long-term care. Reverse mortgages are only available to those 62 or older, and pays you a sum of money against the value of the house. The loan doesn't need to be repaid until you die or move out of the home. The funds from a reverse mortgage aren't taxable, but there are closing costs, and if you're in a facility and not in your home for more than a year, the loan needs to be repaid.

Medicaid

• Medicaid is a health insurance for the very low income, and it covers nursing home care and some home health care. If you've depleted your assets, or didn't have any to start with, Medicaid may be an option for you. Each state has its own qualifications for Medicaid. Not every nursing home accepts Medicaid patients, though some will keep you as a patient if you start out paying out-of-pocket or through insurance and then go on Medicaid.