How to Pay for In-Home Care

What Medicare Actually Covers for Home Health Care

A common assumption is that Medicare will pay for whatever help a parent needs at home. The reality is narrower, and knowing the limits early can spare a family a hard surprise later.

Medicare's home health benefit is built around skilled care. It can include part-time or intermittent skilled nursing, physical therapy, speech-language pathology, and occupational therapy. It can also include home health aide services, but only when the person needs skilled care as well. Two conditions sit at the center of this benefit. A doctor must certify that the person is homebound, and the care must be medically necessary.

Medicare does not cover ongoing custodial care when that is the only need. If a parent simply needs help bathing, dressing, and eating, Medicare's home health benefit does not pay for that help.

Hospice is a separate Medicare benefit. When a doctor certifies a terminal illness with a limited life expectancy, Medicare hospice can cover care at home. That care can include nursing, aide services, and support for the person and the family.

Medicare publishes its current coverage rules, conditions, and costs at Medicare.gov. Those rules can change from year to year, so the official site is the place to confirm what applies now.

Medicare costs can also strain a fixed income. Medicare Savings Programs can help pay Part B premiums, and possibly deductibles, coinsurance, and copayments, for people who qualify. These programs are run by each state, and the state decides who qualifies.

If Medicare will not cover the help your family needs, that is not the end of the road.

Medicaid and Home- and Community-Based Services

Where Medicare stops, Medicaid may start. Medicaid is a health program run jointly by the federal government and each state. Because each state runs its own program, both the eligibility rules and the covered services vary from state to state.

The part of Medicaid most relevant to in-home care is called Home and Community-Based Services, often shortened to HCBS. States may offer HCBS waivers. A waiver lets the state pay for services that help a person stay at home instead of moving into a nursing facility. Those services can include personal care, homemaker help such as cleaning and laundry, and other supports for daily life.

PACE, the Program of All-inclusive Care for the Elderly, is another path. PACE combines Medicare and Medicaid funding into one coordinated program. It serves people who need the level of care a nursing facility provides but would rather live at home or in the community. To join, a person must meet the state's standard for nursing-facility-level care and live in an area that a PACE program serves.

Medicaid has income and asset limits, and each state sets its own. Those limits change over time. A benefits counselor, or a State Health Insurance Assistance Program (SHIP), can help a family understand how the rules may apply. Medicaid.gov publishes official information about the program. Planning to meet Medicaid's asset rules is a legal question, and an elder law attorney handles it.

If your family is not sure whether Medicaid could help, a benefits counselor can look at the specifics with you.

Veterans Benefits for In-Home Care

For a family with a veteran, or the surviving spouse of one, there is another place to look. The Department of Veterans Affairs (VA) has programs that can help with care at home.

Aid and Attendance is an extra amount added to a VA pension. It can help eligible veterans and surviving spouses who need another person's help with daily activities, and the money can go toward in-home care. Because it is a pension benefit, it is tied to financial need.

The Homemaker and Home Health Aide program provides personal care services in the home to eligible veterans. A trained aide may help with bathing, dressing, and similar daily tasks, so the veteran can keep living at home.

Eligibility for these programs depends on several conditions. They include the veteran's service history, any disability rating, and, for pension benefits, financial need. Each program applies its own rules. VA.gov publishes current eligibility rules and explains how to apply.

The VA does not offer reverse mortgages, a point the Consumer Financial Protection Bureau makes when it warns that some ads falsely promise veterans special deals or imply VA approval. Veteran families looking at home equity can keep that warning in mind.

Long-Term Care Insurance: That Old Policy May Matter Now

Some families discover that a parent bought a long-term care policy years ago. A folder in a desk drawer can matter a great deal at this stage.

Long-term care insurance is private insurance a person buys in advance, before care is needed. Policies differ widely. They differ in what they cover, in the daily or monthly amount they pay, in how long the person must wait before benefits begin, and in whether the benefit grows with inflation.

Policies are generally written to pay for both skilled and custodial care at home once the insured person meets the policy's "benefit triggers." A benefit trigger is the condition that starts payments. It is often an inability to do a certain number of activities of daily living, such as bathing, dressing, or eating, or a cognitive impairment such as dementia.

A family holding a policy can read the policy document or call the insurer to learn three things. The first is the elimination period, which is the waiting period before benefits begin. The second is the daily or monthly benefit amount. The third is whether the policy pays for a care coordinator, someone who helps arrange services. The benefit amount and the premium are set by each individual policy.

Older policies may have different terms than newer ones. The policy itself, not general descriptions, decides what it pays.

If a policy exists, reading it now, rather than later, can change what the family is able to plan for.

Private Pay: Out-of-Pocket and Family Arrangements

Paying for custodial care directly is common, and it is not a sign that anything went wrong. "Private pay" or "out-of-pocket" simply means the family pays the caregiver or agency itself. The money may come from savings, retirement accounts, a pension, or Social Security.

Family members often step in too. The National Institute on Aging notes that "family, friends, and neighbors are the biggest source of help for many older people," and that people often rely on a variety of payment sources to pay for care.

A question that comes up often is whether a parent can pay an adult child for this help. The answer is yes. A family member can be paid as a caregiver. A written personal care agreement, sometimes called a caregiver agreement, sets out the duties, the hours, and the pay. It helps avoid misunderstandings among siblings. It may also matter later if Medicaid eligibility comes into question, because Medicaid may look at past payments. An elder law attorney can explain how such an agreement fits a family's facts.

What care costs out of pocket depends on the region, the type of care, and the hours needed.

Some care costs may count as deductible medical expenses under federal tax rules, depending on the kind of care and the taxpayer's situation. The IRS publishes current guidance at IRS.gov, and a tax professional can say how it applies.

When the House Itself Could Help Pay for Care

For a homeowner, the house is often the largest thing they own. When income and savings fall short, it is natural to ask whether the house can help pay for care without being sold. Home equity is the part of the home's value that the owner holds free and clear, the value minus anything still owed. Several options exist, and each one uses the home as collateral, meaning the lender can look to the home if the loan is not repaid.

A home equity loan is a lump sum borrowed against the home and repaid in monthly installments. The trade is a new monthly payment on top of the cost of care. The CFPB notes these loans usually have monthly payments and depend on income and credit.

A home equity line of credit, or HELOC, is a revolving credit line secured by the home. The borrower draws money as needed. It also carries payments, and the rate may change.

A cash-out refinance replaces the current mortgage with a larger one and pays out the difference in cash. The trade is a bigger loan, new closing costs, and often a larger monthly payment.

A reverse mortgage is a loan for homeowners 62 and older. The most common kind is the Home Equity Conversion Mortgage, or HECM, the only reverse mortgage insured by the federal government, according to HUD. It requires no monthly mortgage payments, and the money can go toward care. But interest and fees are added to the balance each month, so the amount owed grows and the equity shrinks. The borrower must keep living in the home as a principal residence, pay property taxes and homeowners insurance, and keep the home in good repair. The loan comes due when the last borrower or eligible non-borrowing spouse dies, sells the home, or no longer lives there as a principal residence, as the CFPB explains. A borrower who does not keep up taxes, insurance, or repairs can face foreclosure.

Timing matters with care. The CFPB says that if a health issue may cause a move soon, a reverse mortgage is an expensive way to cover short-term cash needs. A stay of more than 12 consecutive months in a facility, with no co-borrower at home, also makes the loan come due.

Before a HECM, the borrower must meet with a HUD-approved counselor, who must explain the costs and the alternatives, according to the Federal Trade Commission. The FTC adds that the money is typically tax-free and won't affect Social Security or Medicare benefits. HUD's counselor roster helps homeowners find one. The CFPB's eligibility page lists other requirements and alternatives, and the CFPB's guide Considering a reverse mortgage? Proceed with caution walks through the questions to ask.

A reverse mortgage is one choice among several. These and other ways to get money out of your house without selling can be compared side by side, along with what high home equity but low income can mean.

Other Programs and Local Resources

The last place to look is often the closest to home. Local programs can fill gaps that the large programs leave.

The Eldercare Locator is a free federal service, found at eldercare.acl.gov. It connects older adults and caregivers to local resources, including in-home care programs, benefits counseling, and caregiver support.

Area Agencies on Aging serve every part of the country. They run local programs that may include subsidized in-home care, meal delivery, rides to appointments, and respite care, short breaks that give family caregivers time to rest.

State Health Insurance Assistance Programs (SHIP) offer free, unbiased counseling about Medicare and Medicaid. A SHIP counselor can help a family sort out which benefits may apply.

Some nonprofit groups and faith communities offer volunteer caregivers or lower-cost services. The Eldercare Locator can help find these in a given area.

Lowering everyday costs can free money for care, too. The CFPB notes that state and local programs can help with utilities, fuel, and home repairs, and that local tax offices may have property tax help. Those steps, and others that support staying in your home after retirement, can ease the budget, especially for someone living on Social Security.