How a reverse mortgage can help pay for long-term care

Over half of seniors erroneously believe that Medicare funds long-term care, but a reverse mortgage might help

Seniors who are part of the Medicare program may think that long-term care (LTC) is covered under their health plans, but that is not actually the case. Confusion over what Medicare does and does not cover has erroneously led to seniors believing that LTC is covered under Medicare, according to a recent study.

Without Medicare to foot the bill for long-term care, it’s important to look at other options for LTC coverage, according to a new article from Forbes.

“Medicare does not now and never has covered long-term care. Problems tend to arise because there’s so much confusion about long-term care,” the article states.

And, one potential way to cover LTC expenses is with a reverse mortgage, according to the article.

Whether or not a person will need long-term care depends on numerous factors, but statistics show that a 65-year-old has nearly a 70% chance of needing some form of LTC, while 20% will require LTC that lasts more than five years.

While LTC can come from dedicated facilities, like adult day care centers and nursing homes, care more commonly occurs in a client’s home. An AARP report, published in 2020, states that one in five Americans provides unpaid at-home care for an adult family member with health or functional needs.

“The confusion likely stems from the services that Medicare Part A, hospital insurance, will cover,” the article states. “Two of those are inpatient care in a skilled nursing facility (SNF) and home health care, common settings for long-term care.”

Long-term care in the home could mean that proceeds from a reverse mortgage loan can be a viable way to fund care. One of the key loan requirements is that the borrower’ home remains their primary residence, and if they are aging in place, then using the proceeds for LTC is an option.

“A reverse mortgage is a special type of home equity loan that allows the mortgage holder to receive cash against the value of a home without selling it,” the article states. “An approved reverse mortgage counselor can discuss the many considerations, including how the mortgage will work, the criteria for spending the funds, and what heirs need to know.”

Other tools that can assist with paying for LTC care include an LTC insurance policy, a deferred long-term care annuity, a health savings account or a Medicare Advantage plan.

A 2022 report from the Associated Press cited reverse mortgages as an option to pay for LTC, while reverse mortgages were described as having “reemerged” as an LTC payment option in a story from U.S. News and World Report.

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