It's no fun to lie awake worrying. But if you have elderly parents or other family members living alone, that's often what you do, especially as time goes on and you know they aren't fully able to take care of themselves anymore. Your first thought may be of a nursing home or assisted living, but many seniors feel strongly about staying in their homes and aging in place. If that's the case, your next call is to an in-home care agency -- but first you probably want to figure out how to pay for it.
How Much Does In-Home Care Cost?
That depends on where you live. In general, pay rates in urban areas are higher than in rural communities, and still higher on the east and west coasts than in the central United States. Costs also depend on whether you're looking for homemaker services -- defined as "hands-off" care, such as cooking, cleaning, running errands, and general companionship -- or home health aide services, which include personal care, such as bathing and dressing.
An annual study of senior care rates in the U.S. conducted in 2016 by Genworth Financial found that average hourly rates for in-home care aides ranged from $16 to $28 across the country. It's important to note, though, that these are only averages, and in some cases the hourly rate may be considerably higher.
According to Genworth's analysis, in-home care rates appear to be increasing slowly over time. The study showed that the national median rate for in-home care of $125 per day is rising by about 2 percent every five years.
These costs add up, particularly since most people eventually need care and companionship for at least a few days a week, if not full-time. But before you panic, consider that many, many families across the country are finding a way to do this. And they're not just rich families, but also those who are struggling to make ends meet.
1. A Reverse Mortgage
Reverse mortgages were developed by the government specifically for the purpose of helping seniors (originally widows) stay in their homes until the end of their lives.
With a reverse mortgage, seniors can use the value of the equity in their home to get cash now, either all at once or in monthly payments. But instead of borrowing a set sum, the loan balance increases over time. A reverse mortgage allows your loved one to stay in the home until she dies, even if by that time the loan balance exceeds the home's worth. But at that point, the home must be sold to repay the loan balance.
Reverse mortgages do have limitations: Your loved one has to be 62 or older, and she has to own her home, either outright or with little debt left on the original loan. (The bank that holds the original loan must be paid back before payments are made on the reverse mortgage.) The bank decides on a value based on the home's worth and also based on your loved one's age, since that affects the length of time the payouts must cover.
While a reverse mortgage may be the perfect solution to your in-home care dilemma, it also comes with strict rules regarding homeowners' insurance, mortgage insurance, and home maintenance, making it easy to default. Choose a reputable mortgage broker or bank and read the entire contract carefully. (According to the Consumer Financial Protection Bureau, reverse mortgage scams and foreclosures are on the rise, often because of high fees or clauses that make it easy to lose the home.)
2. Veterans Benefits
If your senior loved one was a veteran, you may be in luck when it comes to financial assistance -- but you'll have to be assertive and persistent to get it. Veterans who served more than 90 days of active duty, with at least one day during a wartime period, with an honorable discharge, may be eligible for the Veterans Pension. Veterans who need long-term help with the activities of daily living -- or whose spouses need such help -- may be entitled to monthly disability payments known as "aid and attendance" by the VA.
This type of veterans benefit requires documentation from a doctor and is calculated using a complex rating system based on how disabled your loved one is. Many people become daunted by the complexity of the qualification process, but once veterans benefits are established they can be extensive and continue until the end of life. According to the Senior Veterans Service Alliance, only 5.4 percent of veterans who are eligible for these benefits actually receive them, because so few veterans know about the benefits and how to qualify. Help is available from Veterans Service Organizations (VSOs), a list of which is available in a PDF that can be downloaded from the Department of Veterans Affairs website. Legally, VSOs are not allowed to charge for help with veterans benefits applications. If a service requests payment for this help, look for another organization. If you're having trouble finding a VSO, there are financial concierge services that can help. Elderlife Financial is one such service with a network of VSOs.
3. Life Insurance
If your loved one has a life insurance policy that's no longer needed to provide for others, you family may want to tap into that money now, using accelerated or living benefits. The way this works is that your loved one sells the policy back to the issuing agency for 50 to 75 percent of its face value, an amount determined based on the amount of the policy, the monthly premiums, and the policy holder's age and health.
There may be restrictions; some policies can only be cashed in if the policyholder is terminally ill. But many are quite flexible. And if yours isn't, there are settlement companies that will buy the policy -- also at 50 to 75 percent of face value -- then pay the premiums until the policyholder's death, when the company will collect the benefits.
If the company that issued the policy won't cash it in, don't worry. Your loved one may be able to sell the policy for a "life settlement" or "senior settlement." In this case the settlement company pays the premiums until the policyholder dies, then receives the benefits that would originally have gone to the policy's original beneficiaries.
4. Long-Term Care Insurance
This seems like a no-brainer, but unfortunately it's not. Some long-term care insurance policies pay for in-home care, but many cover only nursing home care. And some policies that do cover in-home care require that the home health care agency be certified and that your loved one's health needs be serious enough to require a nurse practitioner or home nursing aide.
If your loved one is lucky and her policy is one of the more flexible ones, then it should designate a certain amount per day for home care to be spent on the type of aide you choose.
One more thing: It may be too late for your aging loved ones to purchase a long-term care insurance policy, but you might want to consider this option for yourself.
5. An Annuity
Annuities are designed to help seniors turn retirement savings or a pension into a steady, guaranteed income stream that pays out until death or for a set number of years. The money can be used to pay for in-home care or, eventually, for assisted living if necessary. An annuity is like a cross between an investment fund and an insurance policy; the money is invested at a fixed or variable interest rate, and then, after an agreed-upon maturation date, you can begin making withdrawals.
Annuities have become controversial because of unscrupulous representatives who take advantage of vulnerable seniors. So help your loved one find a reputable financial institution and representative to consult regarding an annuity purchase.
Another benefit of an annuity is that the sum invested isn't considered an asset when applying for Medicaid. The government counts the income paid out from the annuity, but not the amount originally invested.
It's not easy to get Medicare coverage for in-home care, and when you do it's strictly limited. That said, it can be a godsend when you're faced with a sudden medical crisis or downturn in your loved one's condition. Medicare coverage is most common when your loved one is being discharged from the hospital or a rehabilitation facility. You'll contract through a Medicare-certified agency for a period of skilled nursing care and therapy that's tied to a certain period of expected recovery.
The good news is that Medicare coverage is easier to get than it used to be, and sometime in 2013 it should become easier still. Thanks to the settlement of a lawsuit, Medicare coverage for skilled nursing care and occupational and rehabilitative therapy -- either at home or in a nursing home -- can't be limited by whether or not the patient's condition is improving. Prior to the lawsuit, Medicare criteria would cover treatment only if the patient's condition showed improvement, which meant that people with chronic conditions like COPD, heart failure, Parkinson's, and Alzheimer's lost coverage after a certain period of time.
Look in our directory of government insurance counselors to find a counselor in your area who can help you with Medicare eligibility.
If your loved one's income is low and she has very little in the way of savings or other financial resources, she may qualify for Medicaid-covered in-home care, at least on a limited basis. Medicaid rules vary by state, but all programs cover short-term in-home care for acute conditions.
It’s important to note that even in those states that provide long-term home care coverage, Medicaid rules often limit it to people whose physical or mental condition is severe enough that it would qualify them for Medicaid nursing home coverage. Also, Medicaid will only pay for in-home care if provided by a Medicaid-certified home care agency, not by an independent paid caregiver or loved one.
Longer-term care for chronic conditions is covered for those who are ill or incapacitated enough that they would otherwise require nursing home care. These programs are known as Home and Community-Based Services (HCBS) "waiver" programs, because they're funded by Medicaid through waivers of normal Medicaid rules. For help finding out more about government assistance, call your local Area Agency on Aging.
Warning : It would be a mistake to try to qualify for Medicaid by hiding money and other assets by "gifting" them to adult children or other family members. The government is extremely strict about Medicaid qualification and will do a "look-back," examining your financial transactions over the past five years. Any gifts of money or assets made during this time are counted as assets, and the penalties if you're caught are very steep.
8. A Collective Sibling Agreement
If you're worried about Mom or Dad living alone, other family members may be worried, too. Working together, families can come up with a plan in which those who can't help out because of geography or work demands pay siblings who do have that availability and flexibility to be with their parents on a daily basis.
In another strategy, siblings who have available funds can pay in-home caregivers or senior home care agencies now with the understanding that they'll be paid back for their contribution from the siblings' collective inheritance or the proceeds of the house after the parents' death.
Either of these agreements needs to be spelled out very clearly to avoid tension, resentment, or dissension down the line. If a sibling acts as caregiver, she should have a set hourly wage and should keep close track of hours and any expenses incurred, such as gas or groceries, just as an employee would do. If a sibling pays for in-home care with the expectation of reimbursement, she should keep clear records in the form of invoices and receipts or canceled checks. It's also a good idea to have something in writing to show the executor of the will, or even to put a clause in the will explaining the plan.