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How Can We Afford Long-Term Care?



Some older persons have very limited incomes and assets and are eligible to participate in a number of benefit and assistance programs. Others have adequate assets to cover their regular living expenses, but cannot pay for long-term care for a long time.

Programs for Older Persons with Limited Incomes and Assets:

  • Meals and In-home Services

If the person for whom you are caring has limited income and resources, there are programs that can help. You may want to find out about the Food Stamp program that provides coupons for purchasing food. Your older relative or friend may be able to participate in a group or home-delivered meals program and receive supportive in-home services through an Area Agency on Aging. These options are discussed in the section on What Services Can Help Us?

  • Benefit Programs

In addition to the Old Age and Survivors Benefit program, commonly called Social Security, the Supplemental Security Income program provides benefits to persons with limited incomes and assets who are blind, disabled, or 65 or older. To find out about these programs, contact your Area Agency on Aging or the Department of Social Services where your older relative lives. If your older relative served in the armed forces during wartime or has a service-connected disability, you should inquire about Veterans benefits and services.

  • Housing Programs

There are housing programs for older persons with limited incomes who do not own their own homes. These programs include public housing and Section 8 rental certificates that are available to low-income persons regardless of age and Section 202 housing for older persons. These are programs of the Federal Department of Housing and Urban Development, but you can contact your local housing authority for information about these rental housing options in your older relative's community.

There also are a number of U.S. Department of Agriculture Rural Housing Service programs for persons living in rural areas. These range from loans to buy homes to home-improvement and rent subsidy programs.

  • Health Benefits

Finally, you may want to check out the federal Centers for Medicare and Medicaid Services programs, such as the Qualified Medicare Beneficiary program, that assist low-income Medicare beneficiaries. These programs help low-income seniors pay all or part of the premiums for Medicare. The Medicaid program covers many of the medical expenses not covered by Medicare, such as prescription medications, and, in some cases, long-term home health and in-home personal care. Each state sets its own income and asset eligibility requirements for Medicaid benefits.

Most states now have programs that pay family caregivers to provide homemaker, chore, and personal care services. Most use state funds to compensate families, while other states use Medicaid waiver funds. Contact your Area Agency on Aging or your department of social services for more information.

You also may want to explore the possibility of purchasing medigap and/or long-term care insurance. Medigap insurance is private insurance that usually covers the cost of health care not covered by Medicare as well as Medicare deductibles. Long term care insurance generally pays a set amount or a percentage of costs for long-term care both at home and in long-term care facilities. However, long-term care insurance may:

  • Be quite expensive for persons aged 70 or older.
  • Unavailable to persons of advanced ages.
  • Not pay in the case of preexisting conditions.

Most experts recommend buying long-term care insurance when you are in your fifties and in reasonably good health.

Tax Deductions and Credits

Some out-of-pocket expenses associated with long-term care, including transportation to medical appointments, long-term care insurance premiums, prescription drugs, privately hired in-home health care employees, and changes to a dwelling or car for medical reasons, are tax deductible as medical expenses. The expenses must be for the care of a chronically ill individual who needs help with at least two activities of daily living or requires "substantial supervision to protect against threats to health and safety due to severe cognitive impairment." Tax credits generally benefit low-income taxpayers. Tax credits usually require the caregiver to live with the care recipient and to be employed outside the home.

Covering Long-Term Care Costs

Many caregivers and care receivers cannot qualify for public-funded assistance because they have substantial income and assets but do not have the financial resources to pay for needed services for extended periods of time without impoverishing themselves. In caregiving, many families deplete the resources they accumulated over a lifetime. If this happens, caregivers may try to provide all of the needed care. This can be difficult for spouses who are frail or have medical problems, as well as for family members especially those who work and/or have children. In these instances, you and your older relative should consider asking other family members to contribute to the cost of care and/or to provide some of the care on a regular basis.

If formal part-time care and informal help from families is insufficient, the older person can enter a skilled nursing or other long-term care facility that is certified to accept Medicaid patients. In some communities, however, facilities have waiting lists of persons who want to enter as Medicaid patients.

Ways to Maximize Your Assets

Most caregivers need to budget wisely and maximize their relative?s assets. There are several ways to do this:

  1. If your older relative wants to remain at home, she could live on one floor and rent out rooms in the rest of the house through a house-sharing arrangement. This arrangement can bring in a substantial amount of income where housing is relatively expensive or in short supply.
  2. Another option is to rent out her residence, and have her move to a smaller home, an apartment, your residence, or other housing option. Renting out a residence and house sharing both provide income that will usually keep pace with inflation and offer tax advantages. Improvements, repairs, and all or part of the house can be depreciated. If your older relative lives in the house, she also can claim some of the utilities as a tax exemption.
  3. If the house is in an unsafe area, or in a neighborhood or community that is declining in value, it may be best to sell. A federal tax exemption of up to $250,000 is available for a person 55 or older who sells his or her home, or $500,000 for a couple.
  4. Another possibility is to provide room and board to someone in exchange for caregiving and/or other needed services. There are several drawbacks to this arrangement, however. It may be difficult to:
    • Prove to the IRS that your older family member has received home health services in exchange for room and board.
    • Depreciate the room for tax purposes.
    • Ensure that the home care employee honors his or her part of the arrangement?providing services in exchange for room and board.

The better arrangement is to rent out the room(s) and pay a home care worker. Some home care workers work as independent contractors (check to see if they have a federal tax ID number to work as an independent contractor). While this arrangement frees you from dealing with social security, workers compensation, unemployment taxes, and other withholding taxes - all of which can be complex and time-consuming, there are Internal Revenue Service definitions that govern whether a person is considered to be a contractor or an employee (Go to the articles under payroll taxes). Thus, be sure to consult an income tax preparer, lawyer, or financial planner before considering this arrangement. If the home care worker is truly an independent contractor then he or she is responsible for paying social security and other taxes.

Contact your insurance company to be sure you are covered against possible liability should property be stolen, damaged, or destroyed, or if a renter or home care employee suffers injury. If you pay the home care worker as an employee, there are companies, listed in the yellow pages under payroll preparation services, which issue salary checks and arrange for withholdings for a fairly nominal fee.

Reverse Equity Mortgages are another option if an older person wants to remain at home and receive monthly payments from a lending institution. The upfront costs for negotiating this type of loan can be considerable, however. Before making a decision, talk to your lawyer and, if possible, a home equity conversion counselor.

Sale-lease back arrangements allow older people to sell their homes and remain as lifetime tenants. However, this arrangement is legally complex, can impact on an older person's eligibility for Medicaid and similar benefits, and precludes benefiting from any future gains in the value of the property.

Other ways to save money include:

  • Checking to see if there is property tax relief for older home owners and what the eligibility requirements are.
  • Joining clubs or organizations that offer group supplemental health and car insurance plans and discounts on other items and services.
  • Buying at discount and thrift stores, during sales and with coupons.
  • Checking with mass transit and taxi companies about senior discounts, non-peak hour ride discounts, and free ride services for persons with low-incomes.
  • Asking plumbers, trash pick-up services, restaurants etc. if they offer discounts to older customers - many do, but sometimes only if you ask.

You may be able to save 10 to 75 percent on some items and services, if you follow these suggestions.

Lastly and probably most importantly, be sure your relative?s assets and your assets are carefully reviewed, if you are helping with expenses. Are you getting the best return on your investments without risking your principle? Are you aware of all of your older relatives? bank accounts, stocks, bonds or other assets? What about pension plans? Some older persons are not getting the money to which they are entitled from pension plans. Having reviewed your assets, what changes can you make to bring in more income? Read good investment books, talk to your bank, your lawyer, and/or find a qualified investment planner or advisor for some ideas.

Sourced from "Because We Care: A Guide For People Who Care", published by the United States Administration on Aging.

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