How To Pay For Assisted Living

Many are shocked to learn the monthly cost of assisted living, which averages $4,500 a month in the United States according to Genworth Financial’s 2021 Cost of Care Survey. Though some people pay for assisted living completely out of pocket, most take advantage of one of the several options available to help you cover the cost of assisted living and make it more affordable. 

However, knowing which route to take to pay for your assisted living can be confusing. To help you understand your options and make the best choice for your situation, we’ve outlined seven strategies you can use to pay for assisted living below. 

Take Advantage of Veteran’s Benefits

Veteran’s benefits cover residential care under multiple circumstances:

• If your loved one or their spouse has service-related injuries or disabilities, benefits can be applied toward the cost of assisted living.
• Aid and Attendance benefits are available to any disabled veteran (or spouse) whose income is below a given amount.

The process of applying for these benefits from your local Veteran’s Administration can be complicated. We recommend working alongside a geriatric planner familiar with the ins and outs of the system. Many senior living communities even offer financial concierge services to guide you through the process.

Cash In on Life Insurance

There are three ways to use a life insurance policy to pay for care:

• Living Benefit: This allows the policyholder to sell the policy back to the insurer for 50-75% of its value. Some policies require that the owner is terminally ill.
• Life Settlement: This entails selling the policy to a third-party company, which takes over the policy in exchange for paying you 50-75% of its value. They pay the monthly premiums from that point on, but they also collect the benefit when the senior passes.
• Life Assurance Benefit: Sometimes called a “life insurance conversion program,” this benefit in some policies allows seniors to get back 15-50% of their policy’s value to be used for long-term care. This is more common in lower-value policies that don’t qualify for a life settlement.

Pool Family Resources

Another option to cut care costs is to get the family to pool resources, including time, to help care for your loved one. Someone could take point on daily care and transportation while those living long-distance might be able to provide funds to help. When assisted living becomes necessary, those who help pay for it may get some of the proceeds from the house when it sells.

A geriatric care manager can help a family manage the complicated financial and logistical process of switching to a long-term care situation. These professionals can serve the family by presenting options, resolving issues, and finding financial aid opportunities.

This process can place strain on any family. If you’re having trouble negotiating with your relatives about the situation, a professional mediator may be able to help.

Consider Long-Term Care Insurance

Long-term care insurance policies apply to assisted living care, but they must be purchased far in advance of needing that care. Some long-term care policies have a designated benefit for assisted living or nursing home care based on certain mental or physical diagnoses.

The policy may also set a designated payment for home care, which can then be paid directly to the assisted living facility or to the beneficiary. If your loved one hasn’t already purchased long-term care insurance, it’s likely too late to do so now. However, there’s still time to sign up for a long-term care policy yourself to avoid putting your own family in the same situation in the future.

Use Annuities Wisely

An annuity could help you stretch your savings to ensure that you always have income available to pay for long-term care. After purchasing an annuity with an upfront payment, you will receive regular payments back even after you exceed your purchase premium. The underwriter of the annuity is hoping you pass away before that happens, but they can be a beneficial source of income if you live long enough to collect.

Crucially, annuities aren’t viewed as assets by Medicaid. They’re “resources,” which means you can still qualify for benefits while receiving payments in many cases. Annuities differ in terms of when they pay out and at what rate, so you may need a financial adviser to break it down for you.

Just note that fraudulent annuities are often marketed aggressively to seniors, particularly over the phone. Use common sense when shopping for an annuity by looking for reputable companies with good reviews.

Get a Reverse Mortgage

Reverse mortgages allow you to cash out on the value of your home’s equity based on its value, the interest rate on the loan, the applicant’s age, and more. Note that mortgages must be paid back before reverse mortgages can be paid out. They can be paid in full or over time, and the borrower can stay in the home even if the loan balance exceeds their equity. But on the borrower’s death, the full loan balance has to be paid, which usually means selling the house.

Homeowners usually have to be over the age of 62 to apply for a reverse mortgage, which has some disadvantages. If you plan on keeping the house in the family, reverse mortgages can be risky. Make sure to read the fine print of your offer, paying special attention to any hidden fees or clauses that could cost you the house.

Rent Out Your Home

If only one parent is currently living, or if both parents need assistance with daily living, the family home can be an important resource. While selling could be an option, many families aren’t ready to make that decision yet.

In this case, consider renting out the house and using the rental income to pay for assisted living. The idea of being a landlord might seem scary, but you could always hire a service to manage the property for you while still generating enough income to ease the burden of the assisted living costs.

Use Medicaid Benefits

Qualifying seniors may be able to use Medicaid to pay for assisted living. Eligibility varies by state, though most require seniors to have less than $2,000 in assets to qualify (not including your house or car). Read our overview of how to use Medicaid to pay for assisted living in each state to learn more about your state’s coverage and eligibility rules. 

Common Issues with Using Medicaid for Assisted Living

After you have done your preliminary research and found some assisted living facilities that accept Medicaid, you may run into some bumps along the road, particularly when applying for your state’s HCBS waivers. Some require high levels of medical need while others have limited availability, even for those who qualify.

Consider looking for non-Medicaid programs in your state to help pay for assisted living, sometimes called “Optional State Supplementation.” A geriatric care manager in your area may also be able to help you find local resources. Since Medicaid is a complicated system, you shouldn’t be afraid to ask for (or pay for) help if it means getting your loved one the care they need.

Next Steps and Additional Resources

The process of finding an assisted living community that meets your needs while also fitting your budget can feel overwhelming. For assistance narrowing down the many options, contact a Caring.com family advisor at no cost at (800) 973-1540. 

In addition to those already mentioned, make sure that you or your loved one take advantage of other resources that could make assisted living more affordable.