|
Use Your Home to Stay at Home Program
Reverse Mortgages Can Help with Long-Term Care
Expenses, Study Says
April 15, 2004 - A new study by The National
Council on the Aging (NCOA) shows that using reverse mortgages to pay
for long-term care at home has real potential in addressing what remains
a serious problem for many older Americans and their families.
In 2000, the nation spent $123 billion a year on
long-term care for those age 65 and older, with the amount likely to
double in the next 30 years. Nearly half of those expenses are paid out
of pocket by individuals and only 3 percent are paid for by private
insurance; government health programs pay the rest.
According to the study, of the 13.2 million who are
candidates for reverse mortgages, about 5.2 million are either already
receiving Medicaid or are at financial risk of needing Medicaid if they
were faced with paying the high cost of long-term care at home. This
economically vulnerable segment of the nation’s older population would
be able to get $309 billion in total from reverse mortgages that could
help pay for long-term care. These results are based on data from the
2000 University of Michigan Health and Retirement Study.
“There’s been a lot of speculation whether reverse
mortgages could be part of the solution to the nation’s long-term care
financing dilemma,” said NCOA President and CEO James Firman. “It’s
clear that reverse mortgages have significant potential to help many
seniors to pay for long term care services at home.”
According to the study, out of the nearly 28
million households age 62 and older, some 13.2 million are good
candidates for reverse mortgages.
“We’ve found that seniors who are good candidates
for a reverse mortgage could get on average $72,128. These funds could
be used to pay for a wide range of direct services to help seniors age
in place, including home care, respite care or for retrofitting their
homes,” said Project Manager Barbara Stucki, Ph.D. “Using reverse
mortgages for many can mean the difference between staying at home or
going to a nursing home.”
The study is part of the NCOA’s National Blueprint
for Increasing the Use of Reverse Mortgages for Long-Term Care due to be
published in June. The blueprint will offer new insights into the
potential market for reverse mortgages along with recommendations for
administrative action, regulatory changes, consumer protections, and
demonstration programs. The study results were announced at a press
briefing at the American Society on the Aging/National Council on the
Aging joint conference here.
Reverse mortgages are a special type of loan
allowing people aged 62 and older to convert equity in their home into
cash while they continue to live at home for as long as they want.
Eighty one percent of households in the U.S. with homeowners age 62 and
older own their own homes and many own them free and clear.
Seniors can choose to take the cash from a reverse
mortgage as a lump sum, in a line of credit or in monthly payments. If
they choose a lump sum, for example, Stucki said that they could pay to
retrofit their home to make kitchens and bathrooms safer and more
accessible – especially important to those who are becoming frail and in
danger of falling. If they choose a line of credit or monthly payments,
an average reverse mortgage candidate could use the funds to pay for
nearly three years of daily home health care, over six years of adult
day care five days a week, or to help family caregivers with
out-of-pocket expenses and weekly respite care for 14 years. They could
also use it to purchase long-term care insurance if they qualify.
“Up until now, though, most of these seniors have
not tapped the equity in their homes -- estimated at some $1.9 trillion
-- to pay for either preventive maintenance or for services at home,”
noted Peter Bell, executive director of the National Reverse Mortgage
Lenders Association. Noting that the average income of men aged 65 and
over is $28,000 and $15,000 for women, he added, “This study shows that
unlocking these resources can help millions of ‘house rich, cash poor’
seniors purchase the long-term care services they feel best suit their
needs.”
The National Council on the Aging, with the support
of both the Centers for Medicare and Medicaid Services (CMS) and the
Robert Wood Johnson Foundation, is laying the groundwork for a powerful
public-private partnership to increase the use of reverse mortgages to
help pay for long-term care. The ultimate goal of the Use Your Home to
Stay at Home™ program is to increase the appropriate use of reverse
mortgages so that millions of homeowners can tap home equity to pay for
long-term care services or insurance.
For a fact sheet on reverse mortgages, please go to
www.ncoa.org and visit our press room.
Founded in 1950, The National Council on the Aging
is a national voluntary network of organizations and individuals
dedicated to improving the health and independence of older persons;
increasing their continuing contributions to communities, society, and
future generations; and to building caring communities. NCOA is a
national voice and powerful advocate for public policies, societal
attitudes, and business practices that promote vital aging. NCOA is an
innovator, developing new knowledge, testing creative ideas, and
translating research into effective programs and services that help
community service organizations serve seniors in hundreds of
communities. And, NCOA is an activator, turning creative ideas into
programs and services that help community services organizations serve
seniors in hundreds of communities. For more information on NCOA, visit
www.ncoa.org.
Fact Sheet - Background
Reverse Mortgages for Long-Term Care
“Use Your Home to Stay at Home”™
Started in September 2003 by The National Council
on the Aging, the “Use Your Home to Stay at Home” project is developing
a national blueprint for encouraging the use of reverse mortgages to
help older Americans pay for long- term care services at home. Reverse
mortgages are a special type of loan that allows people age 62 and older
to convert equity in their home into cash while they continue to live at
home for as long as they want.
Long-Term Care Costs and Home Equity
Currently, the costs of long- term care are
primarily paid out of pocket by consumers or by Medicaid, the
federal/state program designed to pay costs of health care for
low-income individuals. In 2000, our nation spent $123 billion a year on
long-term care for those age 65 and older, with the amount likely to
double in next 30 years. Most of those dollars pay for care in skilled
nursing facilities.
Recent studies show that older Americans, including
those who have serious health problems and need long-term care, want to
live at home rather than in an institution. Most elders (81% of those
age 62 and older) own their homes and 74% of those own them free and
clear. With $1.9 trillion tied up in home equity, this financial
resource has the potential to dramatically increase the ability of
seniors to pay for long-term care at home. Reverse mortgages can free up
needed cash while enabling seniors to continue to own their home.
Of the nearly 28 million American households age 62
and older, NCOA has found that almost half (48%), or about 13.2 million,
are good candidates for a reverse mortgage. The amount that these older
households could receive from a reverse mortgage is substantial – on
average $72,128. These funds can go a long way to pay for help at home
and for retrofitting the home to make it safer and more comfortable.
They could also use it to purchase long-term care insurance if they
qualify. In total, an estimated $953 billion could be available from
reverse mortgages for immediate long-term care needs and to promote
aging in place.
For many older families, home equity is their
single, biggest financial asset. Unlocking these substantial resources
can help empower “house rich, cash poor” seniors by giving them
additional resources to purchase the services they feel best suit their
needs. The use of private funds from reverse mortgages can also
strengthen community long-term care programs and reduce the burden on
state Medicaid budgets.
Policy Implications
The NCOA study also shows that of the 13.2 million
reverse mortgage candidates, about 5.2 million are either already
receiving Medicaid or are at financial risk of needing Medicaid if they
were faced with paying the high cost of long-term care at home. This
economically vulnerable segment of the older population would be able to
get $309 billion in total from reverse mortgages that could help pay for
long-term care.
Key policy changes can significantly alter the
dynamics and momentum for using reverse mortgages for long-term care.
NCOA’s project “Use Your Home to Stay at Home” will combine research,
consumer surveys, and discussions with experts to identify
cost-effective government interventions and other incentives that can
facilitate their use. To be published in June 2004, A National Blueprint
for Increasing the Use of Reverse Mortgages in Long-Term Care will offer
new insights into the market along with recommendations for
administrative action, regulatory changes, and demonstration programs.
Funders
The “Use Your Home to Stay at Home”™ project is
funded by the Centers for Medicare and Medicaid Services, the federal
agency that operates Medicare and Medicaid, and the Robert Wood Johnson
Foundation. |
