Financing Options for Long-Term Care

Among the many financial considerations related to retirement, seniors need to be sure they have adequate health insurance for both acute care and long-term care. Long-term care covers medical assistance in your home, a nursing home, or an assisted living facility.

A recent SmartMoney.com article on long-term care reported that when seniors require such care, they need it for an average of three years. Medicare does not cover much of ongoing treatment for patients--the program primarily pays for acute care such as lifesaving procedures and treatment while in a hospital. Medicaid does cover long-term care, but the eligibility requirements of this program mean that in most states, seniors must have $2,000 or less in assets. In addition, Medicaid usually will not cover in-home care, which can be so vital for some seniors.

Long-term care insurance is likely your best option to ensure that you have access to this sort of health care. But for some individuals, perhaps because they have pre-existing health problems or are elderly, the cost of insurance is prohibitively high. The SmartMoney.com article suggests a few alternatives to expensive long-term care insurance.

Alternatives to Long-Term Care Insurance

• Partnership policies. In most states, seniors can protect their assets in proportion to the amount of long-term care benefits they receive from Medicaid payouts. Such a provision allows you to better gauge how much insurance coverage you may need to purchase. To participate, seniors must buy a long-term care policy approved by their state Medicaid agency.
• Long-term care riders. Some life insurance companies will allow you to add a provision to your policy that will pay long-term care benefits in exchange for reduced death benefits. Adding a rider to your policy typically reqires an additional fee.
• Reverse mortgages. Seniors should compare quotes from reverse mortgage lenders to see if this type of financing works for them. A reverse mortgage allows you to use some of the equity in your home to pay recurring bills, such as those incurred in long-term care. Reverse mortgages can even be used to purchase a new home for seniors interested in moving--whether to downsize a home or to be closer to family members.
• Aid for veterans. The US Veterans Administration provides up to $1,950 per month for a veteran with a spouse to cover long-term care needs, even if the need is unrelated to military service.

Some of these alternatives can be used in combination or to supplement long-term care insurance. The important thing is to have a financial plan in place for long-term care before you discover you need it.