5 Ways to Pay for Long-Term Care (Without Selling Your Home)

May 17, 2023 amie-clark

Author: Amie Clark | May 17, 2023

Share: copied!

Long-Term Care Insurance Life Insurance Riders Health Savings Accounts Medicaid Veterans’ Benefits

Long-term care encompasses a wide range of services, from home caregivers to assisted living. A majority of adults will need long-term care at some point in their lives, but these services are increasingly expensive. In 2022, assisted living costs reached an average of $4,635 per month, and nursing homes were nearly double that amount. Making matters worse, Medicare coverage for long-term care is very limited, leaving it up to individuals to figure out a way to foot these increasingly expensive bills.

For many people, it means selling their homes or taking out a reverse mortgage. If you wish to hold onto your property, however, you may consider these alternative sources of funding.

Pro Tip: If you’re planning care for yourself or a loved one, check out our care planning quiz to help you get started.

Long-Term Care Insurance

As the name suggests, long-term care insurance consists of policies that can be used to cover the costs of long-term care. The specific coverage amounts will vary, but these policies require a monthly premium and pay for services such as assisted living, home care, adult day care, and nursing homes.

In most cases, these policies begin to cover services once a medical professional certifies that the policy-holder needs assistance with activities of daily living.

Pros

Many long-term care insurance policies allow you to use your monthly benefits however you see fit.
Depending on your policy, long-term care insurance can cover the entirety of your long-term care costs.

Cons

Many plans won’t offer a payout if a policy-holder never needs long-term care.
Long-term care insurance costs can exceed $300 per month.

To learn more about long-term care insurance, read our guide to this year’s best long-term care insurance.

Life Insurance Riders

With most life insurance policies, you’ll have the option of adding “riders” that provide additional coverage and benefits. For example, many insurers offer accidental death riders (which double the death benefit in case of accidental death) or waiver of premium riders (which waive future premiums if the insured becomes permanently disabled).

Long-term care riders allow life insurance coverage to be used on long-term care services. These riders come with additional costs to your monthly premium, but they’re an effective fallback plan in the event that long-term care is needed.

Pros

Life insurance riders provide the potential coverage for long-term care without having to purchase a stand-alone policy.
If you never need long-term care, you won’t have spent as much money as with a stand-alone policy.

Cons

Long-term care riders can add significant costs to your monthly premiums.
Any money taken out of your death benefit for care will decrease the amount ultimately distributed.

To learn more about long-term care riders, take a look at our guide to this year’s best life insurance and most affordable life insurance for seniors.

Health Savings Accounts

Health savings accounts (HSAs) let you set aside untaxed funds for qualified medical expenses such as deductibles, copays, and coinsurance. Contributions are not taxed, and they can be used to pay for long-term needs such as assisted living. They cannot, however, be used for premiums, and they can be paid into only if you have a high-deductible health plan.

Pros

HSAs allow you to save money with pretax status and dip into it for medical emergencies.
HSA funds roll over year to year, even if you do not use them.

Cons

HSAs can be paid into only if you have a high-deductible health plan. The minimum deductible for these plans in 2022 is $1,400 for an individual and $2,800 for a family.
Withdrawals from your HSA are subject to income tax plus a 20 percent penalty if used for nonqualified expenses before you turn 65.

Medicaid

Medicare coverage of long-term care is limited, but Medicaid covers long-term care for seniors and disabled people who meet their state’s eligibility requirements. The program is needs-based and can be used for a range of services, but it’s only for people whose income and assets fall under a specific level and the requirements vary by state.

Pros

Medicaid covers most long-term care as long as you are 65 or older, live in the state you’re applying for benefits in, and have a need for long-term care.
Medicaid can cover everything from assisted living to memory care.

Cons

In many cases, people are required to deplete their money before being eligible for Medicaid coverage for long-term care.
All applicants are subject to a “look-back period” scrutinizing the past 60 months of financial transactions to discourage selling or giving away assets in order to become eligible.

To learn more about Medicaid coverage of care, read our guide to Medicaid and Medicare coverage of long-term care.

Veterans’ Benefits

Home and community care are included in the standard VA benefits package, which includes evaluations for geriatric and assisted care, adult day care, respite care, and skilled home health care. Benefits are subject to state requirements, the terms of your service, and the level of disability or injury.

Pros

Provides veterans with coverage for most geriatric care and community nursing homes and programs.
Depending on your service-connected disability and income, you may not even be charged for copays.

Cons

VA benefits will not cover the cost of a private nursing home in any case.
To stay enrolled in VA benefits, you must receive care at a VA facility on a regular basis.

Bottom Line

For most people, there is no single way to pay for long-term care, especially given peoples’ evolving needs. That makes it essential to plan ahead for your possible needs and their costs. This knowledge can subsequently allow you to bypass confusing red tape and not worry in the future. Smart saving and taking advantage of the varied paths of assistance can only help.

Written By

Amie Clark

Amie has been writing about senior care products and services for the last decade. She is particularly passionate about new technologies that help improve the quality of life for seniors and their families. Seeing her parents and grandparents age made Amie ask herself, “Would this be good enough for my loved ones?” In her spare time, Amie enjoys outdoor adventures and spontaneous road trips. Learn more about Amie here