by Leigh Ann Otte

You’ve saved up for retirement. You’re on Medicare; you’re living by a budget. Things are stable. Then you need care.

And it all falls apart.

From in-home aid to living in a nursing home, senior care can cost thousands of dollars a year, and Medicare only pays for certain medically necessary things. But take heart because there is some aid. Research and planning will help ensure you get the most out of these options.

Average Costs for Senior Care

How much money you need depends on the type of care and where you live. The MetLife Mature Market Institute found the following average national rates in 2010:

• Assisted living: $39,516 per year (or $57,144 with dementia care)
• Nursing home
• Semi-private room (with a roommate): $74,825 per year ($205 per day)
• Private room: $83,585 per year ($229 per day)
• In-home care: $19 per hour
• Home health care: $21 per hour
• Adult day care: $67 per day

These rates vary depending on where you live. For example, a private nursing home room in Alaska runs $687 a day on average. In Minnesota, it’s $154.

Personal Funds

Many people reach for their savings to pay for senior care. Oftentimes, adult children or other family members are also able to help.

If you’re facing financial difficulties while caring for an aging parent and you have siblings, don’t forget that what you’re doing has monetary value. Some families pay the sibling caregiver. That way, everyone shoulders responsibility, and the caregiver gets help paying for the resources, the days off from work, and the respite care. To avoid unnecessary family conflict, many experts recommend drafting a contract detailing how much will be paid and for what.

Some financial aid programs allow you to hire certain family members as caregivers. These include Cash & Counseling and some veterans pension benefits.

Social Security

You’re always free to use social security checks to help pay for long-term care. And if your spouse or ex-spouse is deceased, don’t forget to look into survivors benefits.

Some seniors also qualify for Supplemental Security Income (SSI). To receive SSI, the resource limit for an individual is $2,000. For a couple, it’s $3,000. (Resources can include things like property and cash.) There are also income limits. Social Security doesn’t count all types of income and resources though. For example, the home you live in, household goods and a car are exempt. Learn more at at the Social Security Administration’s website.

Private Insurance

Regular health insurance doesn’t usually cover senior care—only certain health-care needs. But if you have life insurance, you can do a few things to get money out of it now instead of later.

For example, you could cash out or borrow against your whole life insurance policy. Other options include:

• Accelerated death benefit: Some policies allow you to get cash advances. You may qualify if you have a terminal illness or need permanent senior care.
• Life settlement: Life settlement brokers buy life insurance, continue to pay the premiums, and get the benefits upon your death.
• Viatical settlement: This is the same as a life settlement, except it’s generally for people with a terminal illness.

These options “require a high level of skill to understand and execute,” says Jeanne Smith, C.F.P., R.N., owner of Marca Life Planning, a financial and life planning company with special expertise in senior care. “I do not advise these solutions unless professional help is available.”

That said, selling your policy may get you more money than cashing it out, depending on how much cash value it’s accumulated, she says. Also keep in mind that the money you receive from cashing out or selling a policy may be taxable. Check with a tax professional for details on your situation.

Long-Term Care Insurance

People having been talking more about long-term care insurance these days. There’s debate on expense versus potential benefit. For example, Smith recommends a limited net worth of $250,000, among other things. But if you’re already at the point of needing senior care, it’s probably too late to get this insurance.

Medicaid/Public Assistance

Unlike Medicare, which pays only for certain health-related expenses, Medicaid covers at least some long-term senior care. Eligibility varies from state to state.

To get senior care under Medicaid, you must usually qualify for nursing-home-level care, Smith notes. But that doesn’t mean you have to go to a nursing home. Here are a few programs that offer alternatives.

• “Forty-seven states have 19159© HCBS waivers that provide some home and community based services,” says Medicaid spokeswoman Mary M. Kahn. “The other three states offer similar services.”
• In the Program of All-Inclusive Care for the Elderly, even seniors not eligible for Medicaid can get in-home health care, as long as they qualify for nursing-home-level care. “PACE is offered in limited states, and the states where it is offered, it has limited service range,” says Smith. You can check your area at the National PACE Association website.
• With the Cash & Counseling program, senior Medicaid beneficiaries can hire their own caregivers—including family members. Find participating states at the Cash & Counseling website.

Some states also offer a relatively new program called Money Follows the Person that helps people transition out of nursing homes and into the community.

Benefits.gov should give you an overall view of what government programs you or your aging parents are eligible for.

Reverse Mortgage

Experts encourage careful consideration if you’re thinking about this option. The U.S. Department of Housing and Urban Development explains the concept on their website. With a reverse mortgage:

The equity that built up over years of home mortgage payments can be paid to you. … [N]o repayment is required until the borrower(s) no longer use the home as their principal residence or fail to meet the obligations of the mortgage.

Yes, “until the borrower(s) no longer use the home” includes death, at which point your estate must repay the loan.

A reverse mortgage usually causes your debt to grow and your equity to fall. Therefore, experts warn not to get one too soon, to avoid running out of equity. Smith, whose Alabama-based Marca Life Planning offers an aging in place program, expresses an even stronger opinion. “I don’t recommend reverse mortgages to my clients. They are not a good value,” she says.

The amount received is based on the appraisal and life expectancy of the homeowner. In today’s market, most homes are undervalued, and the life expectancy calculation is more favorable to the lender. I believe reverse mortgages have a high potential for fraud and abuse. The transaction fees are high, and it requires a high level of sophistication to execute.

Other Options

We’ve talked about some of the main ways to pay for senior care, but there are others. They include:

• Veterans benefits: If you’re a veteran or surviving spouse, make sure you’ve applied for the Aid and Attendance or Housebound benefit. VeteranAid.org offers some easy-to-read information about these pension programs. (Scroll down to the middle.)
• Local programs: Contact your local Area Agency on Aging to find out about help in your area, including free care.

“In addition, each state has a designated department on aging,” Smith says. And “churches with elder missions can be a great resource for families. In Alabama, we have the interfaith coalition on aging that helps communicate elder resources.”

If you need help sorting through the options, there are financial advisors and geriatric care managers who specialize in senior-care issues. Your Area Agency on Aging may be able to help as well.

Leigh Ann Otte is a freelance writer whose specialties include senior care and healthy aging. You can contact her here.

Thank you to Jeanne Smith, C.F.P., R.N., owner of Marca Life Planning, for lending her time and expertise to this article.