Howard Gleckman, Senior Research Associate at the Urban Institute writes about using a reverse mortgage to help the aging population pay for long term care through the state.
According to Gleckman only about seven million Americans have private long-term care insurance and the average retiree has financial assets of less than $100,000. If a 65-year old turned that into steady monthly income, he d get less than $600, barely covering home health aide for seven hours a week.
So here s a possible solution. What if your state, in effect, helped you turn unused home equity into cash to pay for the care you need when you become old and frail? To sweeten the deal, what if the state let you have easier access to Medicaid to supplement your own long-term care contributions?
You could use the money to make your home wheelchair accessible, or pay for a special van, or even for adult day care or that home health aide. You d have far more flexibility than with regular Medicaid. In return for this upfront cash, your heirs would repay the state with modest interest after you die, usually by selling your house. The state wins by saving the cost of caring for you in a nursing home. You win by easily accessing the equity that could allow you to stay at home.
This program would look a lot like a reverse mortgage. With those, if you are at least 62, you can take out a loan against the equity in your home. You get either a lump sum in cash, access to a line of credit, or a regular check each month. When you move or die, you or your heirs sell the house and repay the loan plus interest.
He adds that states could participate in a program allowing seniors to supplement their home equity with Medicaid and writes, “Several states already operate the Partnership Program that links long-term care insurance with Medicaid.”
Overall the idea is to reducing the financial burden on government-funded long-term care while giving people greater control over these services by encouraging them to use some home equity to pay for this assistance said Gleckman.