Helping Seniors with Finances.

Financing Options for Care. Mary Alexander: Hi, I am Mary Alexander from Home Instead Senior Care. Today, I am discussing how to help your senior loved ones with their finances. Now, I want to talk about Financing Options for Care. As overwhelming as financial challenges seem, millions of seniors do get excellent care in their final months and years. Your senior loved one will almost certainly be among them. Generally, elder care is financed through a mix of resources including savings. Let's walk through some of those options.

Long-term care insurance has become an increasingly popular way of funding elder care. In fact, some eight million Americans are now covered under these policies. The actual plans can be written in an endless variety of ways to provide a range of benefits, and covering caregiver expenses for varying lengths of time.

When considering these complex plans, bring in the assistance of your parents professional services team, including Insurance and Financial Advisors. You might also consider getting the advice of a Geriatric Care Manager. A relatively new source of income that seniors over the age of 62 can take advantage of, is a reverse mortgage. Here is how it works.

Let's assume your parents have paid off the mortgage on their home. It has a market value of about $500,000. They might enter into an agreement by which the bank would in effect pay them, an income tax free mortgage of $2,000 per month. Typically, your parents would be allowed to remain in the home as long as they lived or chose to stay. They would have to continue to pay real estate taxes and up keep, including major repairs. If one of your parents dies, the survivor would be able to continue living in the house until he or she dies, or moves in with family, or a long-term care facility. At that point, the estate would pay the bank the cash the owners have received, plus interest and fees.

Reverse mortgages are complex, and have considerable consequences for the estate. Your parents should seek the advice of their Attorney and Financial Planner before entering into such agreements.

Another recent senior care funding innovation is the life settlement in which the senior's life insurance is treated as an asset in much the same way as a house or mutual fund. With a life settlement, the senior's life insurance policy is sold to an investor, while the policy holder is still alive for considerably more than the cash surrender value of the policy, but far less than its face value.

At the time of the sale, your parents will receive a lump sum payment. Most likely, less than half the face value of the policy depending on age, health, and other factors. The investors will continue to make premium payments and will collect its full face value when your parents pass on. This financing option may provide quick access to much needed monitory resources for your senior, but in the end, it's the investor who profits. Like reverse mortgages, the life settlement financing options have many complexities. It is best to get the advice of a Financial Advisor before proceeding with any agreement. Among the more common ways to finance medical care and health services is Medicare. This is a federal health insurance program that covers almost all Americans over the age of 65 for a large share of their medical expenses such as hospitalizations, doctors' bills, x-rays and therapies. The senior generally has to make a co-payment for a part of those services. But these days, many seniors have privately funded so called Medigap Policies to supplement Medicare. Medicare does not pay for non-medical care, including long-term care and assistance with daily living activities, except for a view instances. They will pay for a portion of Skilled RehabCare, Rehabilitation Therapies, and Limited Care Visits at home, but only if it's improving the senior's condition. Also, Medicare will pay for homecare services once a senior has entered Hospice care. A newer alternative for seniors is the Medicare Advantage Plan. This is a private insurance alternative to Medicare's traditional deductible and co-payment system, and does not require a Medigap Policy. Some Medicare Advantage Plans have small monthly premiums, but typically, much less than a Medigap premium. Well, Medicare Advantage Plans can add services typically not covered by Medicare, such as annual physicals, and other preventative services. None of them provide any custodial long-term care coverage beyond Medicare skilled, rehabilitative services.

Medicaid is a program often confused with Medicare, because they are both healthcare programs. But Medicaid is a means-tested welfare program, designed to help the poor of all ages, including the elderly. For those over 65, it will help pay for nursing home costs, once they've exhausted all, or most of their own means. Typically, Medicaid eligibility comes into play after the family spends down a senior's asset, until there is only about $2,000 left. Federal and state Medicaid Laws have changed in recent years to severely restrict and penalize any efforts by seniors or their families to artificially impoverish a senior by giving away or spending down the senior's assets in order to qualify for Medicaid.

Now that we've discussed some long-terms ways to finance care, let's discuss how you can help your parents manage their day-to-day finances, and how to manage difficult situations.