How to Pay for Assisted Living and Nursing Home Costs
As we age, our homes can become more challenging to navigate. At some point, the best living option could be at an assisted living community or a nursing home. While there are many factors to consider when making such a difficult decision, one of the most critical factors is costs. In this article, we’ll tackle how to pay for assisted living and nursing home costs. To start, let’s examine the costs of senior care.
Understanding assisted living and nursing home costs
If you’ve decided to consider assisted living communities for you or a loved one, it’s crucial to understand the costs of these facilities. The costs can vary based on a few factors:
- Geographic location: Higher cost of living cities tend to have higher assisted living costs
- Type of accommodation: Having your own space is typically more expensive than living with others or sharing a room
- Level of care: Those who need help with medication management, activities of daily living (ADLs), and getting around require more extensive care, which can increase costs.
According to Genworth’s Cost of Care Survey, the average monthly cost of assisted living in 2023 was $5,350, while monthly nursing home care costs averaged $9,733 for a private room and $8,669 for a shared room. Keep in mind that these are often out-of-pocket costs. There are many different payment options for these monthly payments. These consist of private pay options, insurance options, government programs, and alternative funding options. Let’s look at each of these types of funding.
Private pay options
Private pay options are simply sources of income or personal assets. Here are the different types of private pay options:
- Personal savings accounts: These can be a primary way for older adults and their families to pay for assisted living or nursing home care.
- Social Security benefits: These benefits can help pay for assisted living or nursing home costs. While they often don’t cover the entire cost, they can help supplement it. Additional Social Security programs, such as Supplemental Security Income or state benefits, may also be available for eligible people.
- Stocks: Many choose to utilize investments to pay for care. While this can be a great option, those who sell stock should discuss the tax implications with a qualified financial advisor.
- Retirement accounts: Another source of private funds is retirement accounts such as 401Ks and Roth IRAs.
- Home sale or home equity: If you are moving into a retirement community, there’s a chance you may want to sell your home. If you do, you can use the profits to pay for assisted living expenses. Other ways to put your home equity to work for you include bridge loans and reverse mortgages.
While many can pay for these expenses with assets, others may look to insurance plans that can help.
Insurance options
As you’ve seen, paying for senior living costs can be expensive. Insurance may help you pay for parts of this care.
- Private health insurance: If you have insurance coverage, you may be able to make care claims you receive within an assisted living community or nursing home. However, most private insurance plans do not cover the cost of personal care assistance. Therefore, the care you can pay for with private health insurance will most likely be direct healthcare from skilled nurses. Check with your insurance provider directly to understand what may qualify for coverage.
- Long-term care insurance: This is another type of insurance that can help pay for assisted living. Like private insurance policies, there are some eligibility restrictions, and you could be denied coverage for several reasons. If you qualify and purchase a long-term care policy, you can be reimbursed up to a certain amount. Policies often specify what care settings they cover, so finding the right plan for your or a loved one’s situation is crucial. Plans can cover services in assisted living communities, nursing homes, adult day cares, memory care communities, or hospice care. A long-term care insurance policy may cover assistance with ADLs, dementia care, assisted living services, skilled nursing care, speech, physical, or occupational therapy, respite care, and more. For more information on long-term care insurance, visit the Administration for Community Living’s website.
Government programs
Those who qualify for government assistance programs may be able to use some of this aid to pay for assisted living costs.
- Medicaid: This program assists low-income Americans who meet specific requirements. A joint program between the federal and state governments, Medicaid can help pay for some assisted living or nursing home expenses, including some care services. While the amount you receive won’t usually cover the entire cost of care, it can help you supplement additional payment methods. Most facilities accept Medicaid, although you should work directly with the facility to ensure they accept Medicaid. Individual states determine Medicaid eligibility, so contact your local office to determine if you’re eligible for benefits.
- Medicare: This program provides health insurance for those 65 and older. However, Medicare does not pay for assisted living long-term care. So, while you cannot pay for assisted living with Medicare, there are some things Medicare will pay for related to this kind of care. With Part A (hospital insurance) coverage, if you need a short-term stay in a skilled nursing facility after an inpatient hospital stay, Medicare will cover this cost. In addition, Medicare will also pay for other approved services such as doctor visits, screenings, and procedures.
- Veterans benefits: The U.S. Department of Veterans Affairs provides another form of government financial assistance. VA benefits are limited to those who have served in the military and their surviving spouses. While the VA will not pay for a veteran’s rent, it offers additional benefits, including arranging for a health professional to come and provide them with extra care. Additionally, those who need help with ADLs can receive Aid and Attendance benefits, an additional amount added to your monthly VA pension that you can use to pay for caregiver costs. For more details on how to get this benefit, check out the VA’s website.
Crowdfunding with GoFundMe
Asking for financial help can feel awkward, but a little help can go a long way. With crowdfunding, it’s easy for friends, family, and members of your community to show their support and make a donation. Whether for you or a loved one, establishing a GoFundMe is free, simple and only takes a few minutes to get started.
Alternative funding options
If you still need financial help to pay for assisted living or nursing home costs, there are a few other ways to close the gap.
- Reverse mortgages: While there are many misconceptions surrounding reverse mortgages, the basic premise is that they are loans against your home’s equity. Reverse mortgages are only available to those over the age of 62. The most common type of reverse mortgage is a Home Equity Conversion Mortgage (HECM). Unlike a regular loan, payments aren’t due until the borrower moves out of the home. In this case, the funds are often used to pay for the care of a spouse in an assisted living facility.
- Life settlements: While many view life insurance as a way to support their beneficiaries, it can provide some financial support to a policyholder. A life insurance settlement allows a policyholder to sell their life insurance policy to a third party for a cash value. The policyholder can then use the money to pay for long-term care costs. Another option is to surrender the life insurance policy, and the insurance company will pay the policyholder a cash value should cash accumulate from the policy premiums. Speak to a qualified insurance agent to learn more about these options.
Practical tips for reducing costs
In addition to ways to have the financial means to afford long-term care, you can do a few things to lower care costs. Here’s what you should consider:
- Negotiate the cost of care: You may be able to negotiate various costs. Discuss the possibilities with the community when you visit, from move-in incentives to waiving entrance fees to discounts for longer-term leases or lump-sum payments.
- Consider a roommate: Living in a shared space is another way to lower your cost. While many arrangements can be available, a shared space is generally cheaper than one’s room or apartment. In addition, a shared space can help prevent loneliness.
- Look for tax credits or deductions. Some tax incentives exist for those who pay for assisted living or nursing home costs. The Internal Revenue Service sets specific requirements for these medical tax deductions.
Get started paying for assisted living and nursing home costs with GoFundMe
While planning early for these costs can save you headaches in the future, there are still many ways to afford the care you or a family member needs – including utilizing personal assets, getting government assistance, crowdfunding, and more. If you decide that crowdfunding is right for you, GoFundMe is here to help. Follow some of our best tips to create your fundraiser.
Writing a heartfelt story can make a significant impact on your crowdfunding campaign. By sharing how you or someone you love can get the right level of assistance, you’re encouraging others to lend a helping hand. Get one step closer to covering your assisted living expenses by starting a GoFundMe today.