In addition to the emotional issues involved, caring for an aging parent often stretches a family’s financial resources. According to Consumer Reports, taking in a parent can add $7,000 or more to household expenses, including higher utility, food, and transportation costs and, possibly home remodeling.

A 2004 study of long-distance care providers estimated a monthly cost of $392 ($4,700 a year), which includes travel, medicine, phone bills, meals, and home maintenance. The cost is much higher when the value of lost wages and retirement plan savings, as a result of caregiving, is included.

Assisting a Parent Financially

If your parents need financial assistance, this advice may help you gather information, conserve assets, and make plans.

• Encourage parents to share their personal and financial records. Otherwise, it will be difficult to assist them. Understand, however, that it may be difficult for parents to share information about their financial affairs with their children. They may consider this information “private” or fear a loss of control. Explain that you aren’t being “nosy,” but simply want to be well prepared to help out if needed.
• Find out the location of important documents such as a will, marriage and birth certificates, military records, a living will, financial account information, mortgages and debts, and tax returns. Also secure the names and phone numbers of a parent’s advisors (such as their lawyer and insurance agent) and learn the location and contents of their safe deposit box. All of this information is frequently found in a parent’s home record-keeping system.
• Caregivers will need the information described above to pay bills, deposit money in accounts, apply for insurance benefits and Medicaid, and handle other financial transactions for their aging parents. They may also need some type of legal authority, such as a durable power of attorney, guardianship, or Social Security representative payee status.
• Help aging parents calculate their net worth (assets minus debts) and develop a budget for meeting basic living expenses.
• Arrange direct deposit for regular income streams (for example, Social Security and pension) and automatic withdrawals for regular monthly expenses. This will save caregivers time and prevent situations in which older persons forget to pay their bills.
• When caregivers first begin to handle their parents’ financial affairs, they may need to spend some time contacting creditors, paying unpaid bills, and organizing household records.
• Help parents stretch their assets as long as possible. For example, take advantage of all available public benefits such as Supplemental Security Income (SSI) and state prescription drug assistance programs for income-eligible seniors.
• Online resources to determine what benefits are available at www.benefitscheckup.org.
• A parent’s home equity, through either a reverse mortgage or a sale-leaseback arrangement with an adult child, can also provide income with which to pay long-term care expenses. ¹

Pay for care

An important part of planning for long-term care is deciding how to pay for services. This is because long-term care is very expensive, and contrary to what many people believe, their Medicare coverage will not pay for most of the long-term care services they need.

While some people may qualify for Medicaid – the major payer of long-term care services, most people won't. There are other federal public programs, such as the Older American's Act, or state funded programs, that pay some long-term care services, but like Medicaid they target those people with the most functional and financial need.

Consequently, if you are one of the 60% of people over the age of 65 who will need long-term care services – there's a very good chance you will have to pay for some or all of your long-term care services out of your personal income and resources.

Paying for long-term care out of your personal income and resources can be challenging. Even if you have a modest need for assistance at home with personal care, say a visit from a home health aide 3 times a week, based on 2006 average costs, you would have to pay about $16,000 a year for those services.

To make the best decisions about how to pay for long-term care you need to understand what services cost, what public programs you are eligible for and what they cover, what private financing options are available, and which ones work best for you.

What does Long-Term care cost?

LTC includes a broad range of health and support services that people need as they age or if they are disabled. The majority of these services are personal care, or assistance with activities of daily living that many families are able to provide all, or some of, free.

But, as care and support needs increase, paid care is usually needed to supplement family provided services and supports, provide respite to family caregivers, or to pay for more extensive services in a facility, such as a nursing home or assisted living, when individuals can no longer be cared for in their homes.

There are variations in costs based on the type and amount of care you need, the provider you use, and where you live. Home health and home care services, provided in two-to-four-hour blocks of time referred to as “visits,” are generally more expensive in the evening, or on weekends or holidays.

The costs of services in some community programs, such as adult day service programs, are often provided at a per-day rate, but vary based on overhead and programming costs. Many care facilities charge extra for services provided beyond the basic room-and-board charge, although some may have “all inclusive” fees.

The average costs in the United States (in 2006) are:

• $171/day for a semi-private room in a nursing home
• $194/day for a private room in a nursing home
• $2,691/month for care in an Assisted Living Facility (for a one-bedroom unit)
• $25/hour for a Home Health Aide
• $17/hour for a Homemaker services
• $56/day for care in an Adult Day Health Care Center

If you have sufficient income and assets, you are likely to pay for your long-term care needs on your own, out of those private resources. If you meet functional eligibility criteria and have limited financial resources, or deplete them paying for care, Medicaid may pay for your care.

If you require primarily skilled or recuperative care for a short time, Medicare may pay. The Older Americans Act is another Federal program that helps pay for long-term care services. Some people use a variety of payment sources as their care needs and financial circumstances change.

Long-Term Care Services

Nursing Home Care
Medicare	Pays in full for days 0-20 if you are in a Skilled Nursing Facility following a recent hospital stay. If your need for skilled care continues, may pay for days 21 through 100 after you pay a $119/day co-payment
Private Medigap Insurance	May cover the $119/day copayment if your nursing home stay meets all other Medicare requirements.
Medicaid	May pay for care in a Medicaid-certified nursing home if you meet functional and financial eligibility criteria.
You Pay on Your Own	If you need only personal or supervisory care in a nursing home and/or have not had a prior hospital stay, or if you choose a nursing home that does not participate in Medicaid or is not Medicare-certified.

Assisted Living Facility (and similar facility options)
Medicare	Does not pay
Private Medigap Insurance	Does not pay
Medicaid	In some states, may pay care-related costs, but not room and board
You Pay on Your Own	You pay on your own except as noted under Medicaid if eligible.

Continuing Care Retirement Community
Medicare	Does not pay
Private Medigap Insurance	Does not pay
Medicaid	Does not pay
You Pay on Your Own	You pay on your own

Adult Day Services
Medicare	Not covered
Private Medigap Insurance	Not Covered
Medicaid	Varies by state, financial and functional eligibility required
You Pay on Your Own	You pay on your own [except as noted under Medicaid if eligible.]

Home Health Care
Medicare	Limited to reasonable, necessary part-time or intermittent skilled nursing care and home health aide services, and some therapies that are ordered by your doctor and provided by Medicare-certified home health agency. Does not pay for on-going personal care or custodial care needs only (help with activities of daily living).
Private Medigap Insurance	Not covered
Medicaid	Pay for, but states have option to limit some services, such as therapy
You Pay on Your Own	You pay on your own for personal or custodial care, except as noted under Medicaid, if you are eligible.

Paying for Nursing Home Care

People usually pay for nursing home in one or more of the following ways:

• Private pay. Some people pay for long-term care with their own savings for as long as possible. When that is no longer possible, they may get help from Medicaid. If you think you may need to apply for Medicaid at some point, make sure the nursing home accepts it. Not all homes do.
• Medicaid. This is a State program for people with low incomes. Each State decides who qualifies. Contact your State government to learn if you qualify. Keep in mind that getting approved for Medicaid can take three or more months.
• Long-term care insurance. Some people buy private long-term care insurance. It can pay part of the costs for a nursing home or other long-term care. This type of insurance is sold by many different companies and benefits vary widely. Look carefully at several policies before making a choice.

Many people believe Medicare will pay for long stays in a nursing home, but it doesn’t. It is important to check with Medicare and private “Medigap” (Medicare add-on) insurance to find out the current rules. For example, Medicare may only cover the first 100 days in a skilled nursing home for people needing special care after leaving the hospital.

When thinking about costs, keep in mind that there can be extra out-of-pocket charges for some supplies, personal care like hair appointments, laundry, and services that are outside routine care.²

¹© 2005 National Endowment for Financial Education. All rights reserved.
²©National Institute on Aging