When a chronic health condition, recovery from an illness, dementia, or even the normal aging process makes it difficult for a senior to live at home safely, in-home care can provide the supervision and assistance they need to age in place. However, families are often concerned about how much home care services cost and what their financial options are for payment.
Seniors and their families may have several choices when it comes to paying for home care. Finding the right options to pay for your loved one’s care starts with determining the type of care they need. Medically necessary home health care, provided by trained medical professionals like registered nurses and therapists, is the most expensive level of care. Home health care is likely to be covered by a combination of payment options, which may include Medicare, Medicaid, veterans benefits, and other alternatives. Nonmedical home care provides companionship and assistance with daily activities and is typically paid for out of pocket. A comprehensive needs assessment is usually conducted to determine the type and amount of services a senior requires to meet their unique needs.
How much do home care services cost?
In-home care costs vary by location and by service level. The national median cost of personal care services provided by a home health aide is $27 per hour according to Genworth's most recent Cost of Care Survey. The median hourly cost of nonmedical home care, such as homemaker services, is $26 per hour.
What insurance covers in-home care?
Medicare in-home care benefits
Medicare is the federal health insurance program for people age 65 or older, younger people with certain disabilities, and people with end-stage renal disease, or amyotrophic lateral sclerosis (ALS).
In most cases, when ordered by a physician, Medicare Parts A and/or B will pay for medically necessary services provided in a home setting over the short term. However, a senior who requires only nonmedical care (e.g., meal preparation, bathing assistance, housekeeping), won't 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's part of a Medicare Advantage plan may have to use a certified home health care agency that participates in their plan’s network.
Another option for qualified seniors is the Program of All-Inclusive Care for the Elderly (PACE). PACE is a Medicare program that's also available to Medicaid recipients in over 30 states. Most PACE participants are jointly eligible for both Medicare and Medicaid. Medicare beneficiaries who aren’t eligible for Medicaid typically pay monthly premiums but don’t pay deductibles or coinsurance.
PACE is designed to help frail seniors remain in their community rather than moving to a nursing home. A PACE participant receives coordinated care that's provided where the senior lives by a team of interdisciplinary health professionals. An advantage of PACE is that it encompasses all Medicare and Medicaid services but it may also cover other services as recommended by one's PACE team.
Medigap coverage of home care services
Also known as Medicare supplemental 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. If a senior doesn't meet Medicare’s requirements for home health care coverage, then a Medigap plan won't minimize out-of-pocket costs for these services.
Using traditional health insurance plans to pay for home care
Most forms of private health insurance won't pay for nonmedical home care services, and in-home skilled care is rarely covered at 100% of the cost. Check with your loved one’s health insurance provider as coverage varies from plan to plan, and research prospective policies for the best coverage options.
Long-term care insurance benefits cover in-home care
Long-term care insurance is a type of insurance purchased from private companies to cover the costs of nursing home care, assisted living, and home health care. Benefits vary depending on the plan, so it’s important to clarify the services covered by the policy at the time of purchase. Keep in mind that assistance with the costs of personal home care services may only be provided if the plan includes an allowance for nonmedical services.
Plan ahead when it comes to building and purchasing a long-term care insurance policy. Premiums are usually lowest for healthy individuals in their 50s or 60s. Older seniors and those with chronic illnesses or serious medical conditions are unlikely to qualify for coverage. According to the American Association for Long-Term Care Insurance, more than half (53.6%) of individual applicants age 75 and older were declined for traditional long-term care insurance policies in 2019.
Using life insurance to pay for home care
Seniors who have life insurance policies can use them to pay for home care in a few ways. Options 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's subtracted from the death benefit amount the beneficiary receives upon the death of the policyholder. 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 activities of daily living (ADLs). The policy isn’t surrendered at the time of the cash advance, so the policyholder must continue paying the premiums 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 or loss of function before they'll pay out any early benefits.
The life settlement industry is emerging as a popular option for seniors to receive cash payments through the sale of existing life insurance policies to third parties, who assume future premium payments and collect the death benefits upon maturity. Elders can then use this lump sum however they choose — often to cover long-term care costs. According to the Life Insurance Settlement Association, “candidates for life settlements are typically age 65 or older and own a life insurance policy with a face value amount in excess of $100,000.” Viatical settlements are similar except that the original policyholder is usually terminally ill and has a defined life expectancy of less than two years.
Another relatively new option is life care funding or life insurance conversion. Instead of receiving a lump sum from the sale of a life insurance policy, the original owner receives a specific dollar amount worth of elder care services in the form of a “long-term care” or “life care” benefit account. This account must be used to pay for the provision of services like home care directly. Again, the third party who buys the life insurance policy assumes the premium payments and subsequently collects the death benefit when the original policyholder dies. Unlike settlements, life care funding shouldn't affect a senior’s Medicaid eligibility if done properly.
Veterans benefits that cover in-home care
Using VA health benefits to pay for home care
The Veterans Health Administration's standard health benefits package may be used to provide various levels of home and community based services as an alternative to nursing home care and as a way of delivering respite care for veterans and their family caregivers. The Skilled Home Health Care Services (SHHC), Homemaker and Home Health Aide Services (H/HHA), and Home-Based Primary Care programs are available to all veterans who meet eligibility requirements for standard benefits, although some additional conditions may apply.
VA pension benefits can offset home care costs
Veterans 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 basic veterans pension, “improved” pensions (categorized as aid & attendance or housebound) increase the monetary benefits available to veterans and surviving spouses whose needs require a higher level of care.
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, applicants must meet certain income and asset limits as well.
Private pay home care
Using income and savings to pay for home care
Many families pay out of pocket for in-home care services. Possible sources used to cover private pay home care expenses might include individual retirement accounts (IRAs), health savings accounts (HSAs), pensions, investments, annuities, real estate, and Social Security benefits.
Although seniors may be hesitant to use their hard-earned savings or liquidate assets, it’s important to consider that properly “spending down” almost all assets is required to qualify for Medicaid. By and large, an elder’s care needs will grow over time and higher levels of long-term care are increasingly expensive. Unless an aging loved one has amassed significant savings, it's important to consider the possibility that they may outlive their funds and need to apply for Medicaid when creating a long-term financial plan.
Using a reverse mortgage to pay for home care
A reverse mortgage loan allows senior homeowners with substantial home equity to receive cash by borrowing against the value of their homes. The proceeds can be used to pay for home care, fund home modifications for aging in place, and even purchase long-term care insurance. Reverse mortgages become due when the borrower sells the home, moves from the home, or passes away.
Public home care financial assistance programs
In-home care assistance through Medicaid
Medicaid is a joint state and federal program that provides health coverage to seniors with low income and limited assets. Benefits are administered on a state level, so eligibility requirements and covered services can differ greatly.
Depending on where a senior lives, the state Medicaid plan may cover 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 and Community-Based Services (HCBS) waivers can be used to pay for in-home health care and nonmedical home care services. In many states, family caregivers can get paid for the care they provide through Medicaid’s “Cash and Counseling” programs.
Supportive services through the Older Americans Act
The Older Americans Act (OAA) provides federal funding for a range of home- and community-based services throughout the country. Although they aren't intended to provide funds to seniors directly, these services and resources can save time while also helping to supplement the expense of providing in-home care.
The OAA established a nationwide network of Area Agencies on Aging (AAAs) — public or private nonprofit agencies designated to address the needs and concerns of all older persons at regional and local levels. Contact your local Area Agency on Aging for a list of supportive senior services offered in your community.
Affordable home care
With several options to help pay for home care, some families may still need assistance fitting senior care into their budget. AgingCare’s Care Advisors can help connect you with local home care agencies that fit your loved one’s needs and budget.
Leaning on community care services and cost-saving programs may also help your family create an affordable home care plan.
- Free respite care is sometimes offered through community organizations and nonprofits. It may also be covered by Medicaid in some states. Free respite care offers family caregivers a break, and it may also reduce the amount of time a loved one requires the services of a paid caregiver.
- Meal services like Meals on Wheels provide food to seniors who live at home and may struggle to prepare meals on their own. The free service can help a senior remain safely at home and may even free up funds for other care services.
- Adult day centers offer senior care services such as meals, supervision, and social activities for seniors of all abilities. With a median daily cost of $78, according to Genworth’s Cost of Care Survey, adult day centers are an affordable care option for caregivers whose family members are aging in place. Some state Medicaid programs may cover the costs of adult day centers.
- Low Income Home Energy Assistance Program (LIHEAP) provides financial assistance with home energy bills, which may help families budget for home care services.
Planning to pay for home care
Fortunately, there are many resources available to help families with planning for in-home care and related expenses. Elder law attorneys specialize in topics related to aging, such as preparing for retirement, funding long-term care, and estate planning. They help seniors understand Social Security benefits, veterans benefits, Medicaid applications, and more. They can also provide referrals to other professionals like financial advisors, tax specialists, geriatric care managers, and elder care providers.
Other resources to help families plan for the costs of in-home care include the following:
- Medicare brokers are advisors who represent multiple insurance companies. They can help you evaluate the various plan options available to you and assist with the enrollment process.
- State Health Insurance Assistance Program (SHIP) counselors offer free, unbiased Medicare assistance. They can help you navigate the complexities of Medicare, but they aren’t allowed to help you to enroll.
- Geriatric care managers are typically licensed nurses or social workers offering several services to help families plan and manage care options. They can provide support such as doing in-home evaluations and coordinating medical services.
- Area Agencies on Aging coordinate local services to help seniors age at home safely. They may connect seniors with services like home-delivered meals, adult day care, housekeeping help, and financial assistance for elderly home care.
If you or a loved one needs help navigating in-home care options, our Care Advisors can help simplify your search. Or connect with other family caregivers on the AgingCare Forum for answers, support, and advice on senior care.
Reviewed by Certified Elder Law Attorney Letha McDowell.
Cost of Care Survey (https://pro.genworth.com/riiproweb/productinfo/pdf/131168.pdf)
What's Medicare? (https://www.medicare.gov/what-medicare-covers/your-medicare-coverage-choices/whats-medicare)
Home health services (https://www.medicare.gov/coverage/home-health-services)
Who Pays for Home Care? (https://www.cancer.org/treatment/treatments-and-side-effects/choosing-your-treatment-team/home-care-agencies/who-pays.html)
What's Medicare Supplement Insurance (Medigap)? (https://www.medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap)
Using Life Insurance to Pay for Long-term Care (https://acl.gov/ltc/costs-and-who-pays/who-pays-long-term-care/using-life-insurance-to-pay-for-long-term-care)
VA Aid and Attendance benefits and Housebound allowance (https://www.va.gov/pension/aid-attendance-housebound/)
Program of All-Inclusive Care for the Elderly (https://www.medicaid.gov/medicaid/long-term-services-supports/program-all-inclusive-care-elderly/index.html)
Low Income Home Energy Assistance Program (LIHEAP) (https://www.acf.hhs.gov/ocs/low-income-home-energy-assistance-program-liheap)
What Is a Medicare Broker and Why Should You Consider Talking to One? (https://www.ncoa.org/article/what-is-a-medicare-broker-and-why-should-you-consider-talking-to-one)
What Is a SHIP and How Can It Help Me? (https://www.ncoa.org/article/what-is-a-state-health-insurance-assistance-program-and-how-can-it-help-me)
What Is a Geriatric Care Manager? (https://www.nia.nih.gov/health/what-geriatric-care-manager)