Reviewed by Michael FerrainaMichael Ferraina is a home health care executive skilled in creating and implementing organic and acquisition growth strategies, business development initiatives, and guiding teams to deliver results. He has served as a director or executive in numerous organizations and is the chief growth officer for AmeriBest Home Care based in Philadelphia.

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Caring for an aging loved one on your own can be difficult in many ways. That’s why family members often turn to in-home care for assistance. But, with the cost of senior care rising and surprise expenses popping up, you and your parent may be climbing a very steep financial hill. Fortunately, government health programs, private insurance plans, and community-based resources can help seniors and their families save money on the costs of in-home care.

Key Takeaways

You can use a combination of insurance and personal savings to pay for a loved one’s home care. Eligible health benefit programs may include long-term care insurance, life insurance, Medicare, Medicaid, and VA benefits.
How you pay may depend on whether your loved one needs nonmedical or medical care. Medical care tends to be more expensive, and some insurance plans won’t cover nonmedical care costs.
In-home care is generally less expensive than facility-based care. You may be able to save even more money by hiring an independent provider rather than going through a home care agency.
Lean on local services and nonprofit programs to help save money. Meal services, adult day care, and state assistance programs are great sources of assistance.

What are your loved one’s home care options?

How you choose to cover the cost of a loved one’s in-home care will depend on the type of care they need. In-home care can generally be broken down into two main categories: home care and home health care.

Basic home care involves nonmedical services. You may also hear this type of in-home care referred to as personal care, companion care, homemaker services, or custodial care. Nonmedical home care is typically provided by home care aides who can offer companionship, assistance with household chores, and help with activities of daily living (ADLs), such as dressing, grooming, bathing, and using the restroom. Nonmedical home care is a great resource for seniors who may need daily assistance but don’t require medical support.

Home health care, sometimes referred to as clinical or skilled care, provides a patient with technical or specialized medical services. These services are provided by licensed professionals, such as registered nurses (RNs) or licensed practical nurses (LPNs), and usually require a doctor’s prescription to obtain. Home health care can provide an aging loved one with skilled medical care, including medication administration, physical and occupational therapy, monitoring of vital signs, and expertise in specific medical conditions. Because of the level of skill and expertise required for a provider to carry out these services, home health care is typically more expensive than nonmedical home care.

Payment options for in-home senior care

Most families use a combination of insurance plans and personal savings to cover the cost of a loved one’s home care. If you’re not sure what home care and home health care insurance policies or health benefits your loved one may be eligible for, reach out directly to the insurer for details on coverage and eligibility requirements. You can also consider talking to a financial advisor, an accountant, or an elder law attorney for financial guidance.

Here are some home care financial assistance options.

Insurance plans

Medicare Parts A and/or B can cover home health care services, as long as they’re ordered by a physician and your loved one meets certain eligibility requirements. However, Medicare won’t cover nonmedical home care services if it’s the only type of care your loved one needs. It also only covers episodic events and will not cover ongoing, long-term needs. Services that Medicare can cover may include the following:
- Some skilled nursing care and home health aide care
- Some prescription medications
- Medical equipment and supplies for at-home use
- Medically necessary social services
- Physical, occupational, and speech therapies

Let our care assessment guide you

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Medigap coverage, or Medicare supplemental insurance, works alongside Medicare Parts A and B. It’s a additional coverage sold by private insurance companies that can help pay for things not covered by original Medicare, like copays or deductibles. But, because neither Medicare nor Medigap are designed to cover the costs of long-term care, coverage is still limited to short-term, medically necessary services.
Medicaid provides health coverage to low-income seniors with limited assets. Because benefits are administered on the state level, eligibility requirements can vary greatly. If your loved one qualifies, Medicaid can help cover costs of both home health care and personal care services over the long term.
Long-term care insurance is purchased from private companies and can cover costs of some facility-based care and home health care. Some plans may also include an allowance for nonmedical services. Because plans can vary, be sure to clarify the services covered at the time of purchase. In general, long-term care insurance may help pay for respite care, certain home modifications, adult day programs, and assisted living or nursing home care should your loved one’s needs change.
Life insurance can be a great way to pay for a loved one’s care. Cashing in a life insurance policy can free up funds to help cover the costs of retirement and health care expenses. Policyholders may have the option of exchanging a life insurance policy for a different kind of coverage, taking out a loan on their policy, or selling it to a third party for a lump sum (a life settlement).

Veterans benefits

The Veterans Health Administration offers a benefits package that can cover home-based services. In addition, VA pension benefits can help veterans and their surviving spouses cover home care costs, provided they meet specific requirements. Aid and Attendance and Housebound pensions may be added to the amount of a monthly VA pension and can increase the monetary benefits for those who need an increased level of care.

Private pay

Both home care and home health care can be funded through private pay. Private pay simply means the home care expenses are paid for out of pocket rather than with insurance or other health benefits. The following sources can be used to pay for a loved one’s care:

Retirement savings
Health savings accounts (HSA)
Pensions
Investments
Annuities
Real estate
Social Security benefits

Reverse mortgages and HELOCs

A reverse mortgage involves borrowing money based on the equity of one’s home. To qualify for a reverse mortgage, a person must be aged 62 or older, live in the home, be approved by a lender, and be financially capable of continuing to pay property expenses, among other things. The proceeds of a reverse mortgage can be used to cover costs of in-home care, home modifications, and other expenses that enable your loved one to live and receive care in the comfort of their own home.

Home equity lines of credit (HELOCs) work in a similar way. A HELOC essentially gives your loved one a line of credit to use for larger expenses, such as costs related to their home care. Money is borrowed against the home’s equity, and the house is then used as collateral for that line of credit.

If you choose to use a reverse mortgage or HELOC, do so with caution because these can both be financially risky. For example, if for any reason your loved one is unable to repay their HELOC, they risk losing their home to foreclosure.

Affordable home care: Tips for saving money while a loved one ages in place

Aside from savings, insurance, and other health benefits, there’s a range of other considerations to factor into the method of payment. Will you and your loved one hire privately or through an agency? Does your state or community offer financial assistance programs? Read below for more tips on planning for your loved one’s home care and saving what money you can in the process.

Weigh the pros and cons of hiring independently vs. through an agency

Hiring a caregiver through a home care agency tends to be a more formal approach as opposed to hiring a private or independent provider. But what suits one individual may not suit another, so it’s important to understand the differences.

Independent providers, or caregivers not affiliated with an agency, tend to have lower hourly costs. Pay is agreed upon by the client and caregiver and should be documented in a contract. However, as the caregiver’s employer, you and your parent become responsible for taxes, workers’ compensation, and more. There may also be some additional costs relating to the hiring process, conducting background checks, and having an attorney create and review contracts.

Agencies take care of the hiring process, payroll, and taxes for you. They also employ multiple employees and pay their salaries, workers’ compensation, and liability insurance. These things are generally included in the agency’s costs, making them slightly more expensive than independent providers. Many agencies even provide their staff with continued education opportunities, which may increase the agency’s rates.

Talk with a Senior Care Advisor

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Lean on local community services

Meal delivery services, such as Meals on Wheels, provide seniors living at home with access to free meals as often as they need them. For families who have the funds for food but lack the time to cook, consider a subscription service like Hello Fresh or Every Plate. These offer a variety of service plans, and the meals are designed to be prepped, cooked, and served in under an hour.
Adult day care centers provide basic care and companionship to seniors during the day. It’s ideal for older adults who need supervision or assistance with certain tasks. These programs can offer quality short-term care to an aging loved one, as well as relief for family members during the day. Many adult day cares will even provide transportation to and from the center for anyone who needs it. You can use the Administration on Aging’s Eldercare Locator to find adult day care services in your area.
The Home- and Community-Based Supportive Services (HCBS) program funds state services like transportation, in-home personal care and homemaker assistance, and adult day care. This helps seniors stay in their own homes for as long as possible.
State assistance programs can offer things like local counseling, financial assistance, assistance for those with disabilities, and more. The State Health Insurance Assistance Program (SHIP), for example, provides seniors with free counseling on Medicare coverage options. Most states have some type of assistance programs that are worth looking into, such as the Attendant Care Program in Maryland or the Respite for Elders Living in Everyday Families (RELIEF) program in Florida.

Consider these other resources

Elder law attorneys. These are specialists that focus on age-related legal and financial issues related. They can help you and your parent navigate long-term care options, insurance, living wills, public benefits planning, and any tax implications of these matters.
Medicaid planning specialists. These are professionals that help seniors through the process of planning and applying for long-term care Medicaid benefits.
Public benefits counselors.Area Agencies on Aging (AAA), for example, knowledgeable about local, state, and federal programs programs. AAAs make up a nationwide network that serves seniors aged 60+ through federal funding under the Older Americans Act. While they don’t provide hands-on care, they can connect families with things like caregiver support, transportation, nutrition services, and care management.

Is home care a better financial fit than facility-based care?

Research shows that people — especially those over the age of 75 — who choose in-home care experience fewer health complications, fewer repeat hospitalizations, and lower costs than patients in a facility-based setting. To paint a clearer picture of what this looks like, the national median cost of personal care services provided by home health aides is $27 per hour. For nonmedical homemaker services, it’s $26 per hour. One of the advantages of in-home care is that families can schedule anywhere from a few hours per week up to 24/7 continuous care. In comparison, the median monthly cost of an assisted living facility is about $4,500, while a private room at a nursing home facility is upwards of $9,000 per month.

So, yes, home-based care is generally more cost effective than facility-based care. However, this should all be taken with a grain of salt as care costs can vary tremendously depending on factors like the duration of care, service level, and the location where your loved one receives care. You can explore the most recent Genworth Cost of Care Survey for a breakdown of national median home care costs versus facility-based care costs in each state.

How to get in-home care for the elderly

Have a conversation with your loved one’s doctor, and ask them about conducting an activities of daily living (ADL) needs assessment. This can give you a better sense of what your parent really needs help with and what type of care they’ll benefit from the most. After an assessment, the doctor should be able to refer you to a home care agency or an independent provider. You may also be able to get recommendations from friends and family, online resources, and local churches and senior centers. Keep in mind that home health care, or medical care, typically requires a doctor’s prescription.

Don’t forget to involve your loved one in the process, too. Ask them what they’re comfortable with, what qualities they value most in a caregiver, and if they have any reservations or anxieties about hiring in-home help. The best caregiver is one that makes both you and your loved one happy.

Finding further support

If you’re still not sure what your next move should be, or you’d like additional advice on in-home senior care options, you may benefit from a one-on-one conversation with one of our Senior Care Advisors. They’re trained to provide personalized guidance and can help you better understand the costs of and payment options for senior care services.

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References

Medicare.gov. Home health services.
Centers for Medicare and Medicaid Services. Medicare and Home Health Care.
American Council on Aging. (2023, February 27). Medicaid and home health care & non-medical, in-home care.
Federal Trade Commission. (2022, August). Reverse mortgages.
Kurt, D. (2022, September 17). A guide for home equity loans and HELOCs. Investopedia.
Megido, I., Sela, Y., & Grinberg, K. (2023, February 2). Cost effectiveness of home care versus hospital care: A retrospective analysis. Cost Effectiveness and Resource Allocation.
Genworth. (2022, June 2). Cost of Care Survey.

Meet the Author

Grace Styron

Grace Styron is a writer at OurParents specializing in assistive technology, memory care, and home care. Before writing about healthy aging, she worked for an online women’s lifestyle magazine and as a grant writer for a nonprofit regenerative permaculture farm in Virginia. She earned her bachelor’s degree from Missouri State University.

Reviewed byMichael Ferraina

The information contained in this article is for informational purposes only and is not intended to constitute medical, legal or financial advice or create a professional relationship between A Place for Mom (of which OurParents is a trademark) and the reader. Always seek the advice of your health care provider, attorney or financial advisor with respect to any particular matter and do not act or refrain from acting on the basis of anything you have read on this site. Links to third-party websites are only for the convenience of the reader; A Place for Mom does not recommend or endorse the contents of the third-party sites.

How to Pay for Home Care: Financial Assistance Programs, Insurance, and More