Paying For It

One of the cosmic indignities of growing old is that one has to pay for the privilege. And pay you will. Independent-living facilities can cost up to $8,500 per month, assisted-living up to $8,000, and nursing homes $18,000. And if you require specialized care, the numbers get even scarier. How to pay for all that?

These policies typically cover independent living, assisted living, and nursing-home costs, and sometimes home care as well. The younger you are when you buy your policy, the less it costs per year, but you’ll be paying for it for much longer. The average healthy 55-year-old buying a $150-a-day benefit will pay $1,156 per year, according to the American Association for Long-Term Care Insurance, while a 65-year-old buying the same policy will pay $3,086. There’s no date by which you are officially too old to get a long-term-care plan, but practically speaking there is: A 75-year-old buying the same policy can spend more than $10,000 on yearly premiums. When shopping for long-term-care insurance, look for a policy that guarantees premiums won’t rise beyond a reasonable level, offers inflation protection for benefits, and covers home care as well as nursing-home care. And be sure to purchase a policy with a state-backed “partnership” plan. When that type of policy maxes out (say, after six years of paying for nursing care), New York State will automatically qualify you for Medicaid, regardless of the value of your assets.

A reverse mortgage is essentially a home-equity loan. The bank will send you a check every month (or, in some cases, you can opt for a lump sum), and the loan will come due, with interest, only after you die or you sell your home (the loan is secured by the home’s value). If you or your spouse wants to stay in your home, but you need money to pay for elder care, a reverse mortgage can be a good way of generating the necessary cash. The loans had a bad reputation in the early eighties because they were extremely expensive and the amounts banks would lend were often too small to be useful. But they’ve been improved vastly since then, and most have variable interest rates that are comparable to the rates on traditional variable-rate mortgages, though fees can still be high. You have to be 62 and a homeowner to be eligible for a reverse mortgage, but the older you are, the more money you’ll qualify for.

If children help pay for their parents, they may be entitled to a tax deduction. Unreimbursed elder-care medical expenses that exceed 7.5 percent of an adult child’s adjusted gross income are tax-deductible. Furthermore, if multiple children help pay for a parent’s care, they can aggregate the costs and attribute them to one child, in order to qualify for the deduction. And if an aging parent earns less than $3,200 a year in taxable income—which is harder than it sounds, since IRA and 401(k) withdrawals are counted as income—then that parent can be declared dependent and there is a corresponding deduction.

Medicare, which kicks in at 65, will pay for at-home nursing care deemed medically necessary, but it won’t pay for meals, cleaning, and the like. Medicare also comes with a slew of rules designed to keep the program out of the long-term-care business—the average Medicare patient gets only 32 days of nursing-home coverage. Medicaid is more generous: It will pay for nursing-home care and home care, too. Experts say New York City has one of the best Medicaid home-care programs in the country. It will cover full nursing-home costs and a variety of home-care costs. The hard part is qualifying: After subtracting medical expenses, your income must be less than $692 a month for singles ($900 for couples) and you have to have less than $4,150 in assets ($5,400 for couples), not including your home (up to $750,000 in value), car, and personal property. You used to be able to give all your money to your heirs to become Medicaid eligible. Now, before you can qualify, authorities will run a check on your bank records going back five years and deduct benefits for money that has been transferred. Both Medicare and Medicaid are tangled in small print, so it’s vital to get the details as they apply to you personally. New York City’s Department for the Aging offers individualized counseling.

Paying For It