When chronic health conditions, recovery from an illness, dementia, or even the normal aging process make it difficult for a senior to live at home safely, in-home care can provide the assistance needed to age in place and carry on daily routines. When considering this option, many families are concerned about the cost and their payment options.
In determining how to pay for home care, it is important to clarify the type of care needed. Medically necessary home health care is likely to be covered by a combination of payment options, whereas non-medical home care provided by unskilled caregivers is typically paid for out of pocket. Use this guide to identify the combination of options that will work for your family.
Paying for In-Home Care with Insurance
Medicare Coverage for Home Care
Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people with end-stage renal disease.
In most cases, when ordered by a physician, Medicare will pay for short-term medically necessary services provided in a home setting. A senior who requires only non-medical care, will NOT qualify for Medicare coverage of these services.
Medicare-certified home health care agencies are companies contracted by Medicare to provide a host of covered home health services. Medicare only pays for services provided by an agency that meets its quality standards. A senior who is part of a Medicare Advantage plan may be required to contract for home care services with only the certified agencies that participate in their plan network.
Using Traditional Health Insurance Plans to Pay for Home Care
Private health insurance plans may pay for selected elder care services, but coverage varies from plan to plan. Most forms of private insurance will not pay for non-medical home care services, and in-home skilled care is rarely covered at 100 percent. Research prospective policies for the best coverage options.
Covering Home Care Costs Using Medigap
Also known as Medicare Supplement Insurance, Medigap is additional policy coverage that works alongside original Medicare benefits (Parts A and B). The supplemental policy is purchased from a private company to pay for the “gaps” in costs not covered by Medicare, such as copays and deductibles. Neither Medicare nor Medigap policies are designed to pay for long-term care, so their coverage for in-home services is typically limited to medically necessary care over the short term.
Long-Term Care Insurance for Home Care Coverage
Long-term care insurance is a type of insurance purchased from private insurance companies specifically to cover the costs of nursing homes, assisted living, and home health care. Benefits vary depending on the plan, so it is important to clarify the services covered by the policy at the time of purchase. Assistance with the cost of personal home care may only be provided if the plan has an allowance for non-medical services. Plan ahead when it comes to purchasing a long-term care policy. Premiums are lowest for healthy individuals in their fifties or sixties. Seniors over age 84 and those who have a chronic illness or serious medical condition are unlikely to qualify for coverage.
Using Life Insurance to Pay for Home Care
Seniors who have life insurance policies have a few options in using them to pay for home care. Options for using your life insurance policy to fund home care include taking a loan from the policy’s cash value or surrendering the policy entirely in exchange for the cash value.
Some policies may feature an “Accelerated Death Benefit” rider, which is a cash advance that is subtracted from the amount the beneficiary receives upon the death of the policy holder. The owner of the policy must be terminally ill with a limited life expectancy (usually under 24 months), or be deemed unable to perform basic daily activities. The policy is not surrendered at the time of the cash advance, so the policy holder must continue to pay the premiums in order to guarantee the beneficiary receives what remains of the original death benefit. The insurance company will require physicians’ statements and medical records attesting to the illness before they will pay out any early benefits.
Relatively new to the field, the life settlement industry is emerging as an option to access a higher cash value of existing life insurance policies. The owner of a life insurance policy may “convert” the policy into a “long-term care” or “life care” benefit account. This account is used to directly pay for the provision of services like home care, while the existing life insurance policy is sold to a third party who assumes payments of the monthly fees and subsequently collects the death benefit when the policyholder dies.
Benefits that Cover In-Home Care
Using Veterans Benefits to Pay for Home Care
For short term care, The VA Standard Medical Benefits Package may be used to provide homemaker or home health aide services as a part of an alternative to nursing home care, and as a way to get respite care at home for Veterans and their family caregiver. The VA’s Skilled Home Health Care Services (SHHC) and Homemaker and Home Health Aide Services (H/HHA) are available to all veterans who meet eligibility requirements for standard benefits.
When long-term care is necessary, VA pensions are a source of funding that can help cover the costs of home care for veterans and their surviving spouses. In addition to the traditional Veterans Pension, “improved” pensions (categorized as Aid & Attendance or Homebound) increase the monetary benefits available to a veteran or surviving spouse who needs reach a level of care that “requires the attendance of another person.”
Eligibility for VA Pensions can be complex, but the basic requirements include 90 days of active duty service (including at least one day during a recognized wartime period), and any character of discharge other than dishonorable. Since pensions are need-based, the veteran must meet certain income requirements as well.
Contact the Veterans Service Officer in your county for more information regarding eligibility and for assistance with the application process.
Self-Pay Options for In-Home Care
Using Savings to Pay for Home Care
Often families pay for home care by turning to savings. If your parent has an individual retirement account (IRA), funds from that account may be used for home care payments. A Health Savings Account (HSA) may have been established in conjunction with a high deductible health insurance plan. HSA funds may roll over from year to year and can be utilized if medical care is needed. Although seniors may be hesitant to use their hard-earned savings, it is important to consider that properly “spending down” almost all assets is required to qualify for Medicaid.
Using a Reverse Mortgage to Pay for Home Care
A reverse mortgage uses home equity as a financial resource. The proceeds can be used to pay for home care, assisted living, nursing home care, home modifications to allow aging in place, and even to purchase long-term care insurance. A very general rule of thumb is that seniors can borrow a maximum of approximately 70% of their home's value. Reverse mortgages become due when the borrower sells the home, moves from the home or passes away.
Public Assistance for Home Care Coverage
Medicaid Coverage for Home Care
Medicaid is a joint state and federal program that provides health coverage to individuals with low income. Benefits are administered on a state level, so eligibility requirements and covered services can differ greatly.
Depending on where a senior lives, the fundamental Medicaid State Plan may cover both home health care and personal care services. Some states have expanded their Medicaid coverage through the use of waivers to provide services for populations that might not be eligible otherwise. Home & Community Based Service Waivers (HCBS) can be used to pay for in-home health and personal non-medical home care services. In many states, family care providers are eligible for payment for the services they perform as caregivers.
Check your state regulations for specific eligibility guidelines and services that are covered.
Supportive Services Through the Older Americans Act
The Older Americans Act provides federal funding for a range of home and community based services throughout the country. Although not intended to directly provide funds to seniors, the services provided can be a welcome time and cost savings to supplement the expense of providing in-home care. Contact your local Area Agency on Aging for a list of supportive services offered in your community.
Find your local Area Agency on Aging
Planning to Pay for Home Care
Fortunately, there are many resources available to help families with financial planning for home care. Elder law attorneys specialize in topics related to aging, such as preparing for retirement and long-term care. They write wills, draw up power of attorney documents, answer tax questions, and help seniors with Social Security, Veterans Benefits, Medicaid, and Medicare issues. If you are in need of assistance, locate an elder law specialist in your community to facilitate the process.