[tag]Reverse mortgages[/tag] are seen by some as a major element in financing [tag]long term care[/tag] (LTC) for an expanding [tag]elderly population[/tag]. The arguments in favor go like this:

- [tag]LTC[/tag] provided in-home is far more cost-effective that institutional LTC;

- Seniors by and large prefer to remain in their homes;

- Society at-large should not have to finance [tag]LTC costs[/tag] for seniors having substantial untapped home equity.

The issue is complex and many barriers will have to be overcome before public policy is changed to encourage (require?) widespread use of reverse mortgages to pay for long-term care. Some policy changes have been made already:

1) the American Homeownership and Economic Opportunity Act of 2000 provides for waiver of the upfront (2%) mortgage insurance premium for borrowers who take out a [tag]Home Equity Conversion Mortgage[/tag] (HECM) and use all the proceeds to purchase a tax-qualified long-term care insurance policy and,

2) provisons in the [tag]Deficit Reduction Act of 2005[/tag] will make it more difficult for families to avoid using home equity to help pay for long term care needs.

Following are some facts and figures indicating just how far-reaching the long term care issue is. Unless otherwise noted, the information is from the National Council on Aging (NCOA) study Use Your Home to Stay at Home:

• Among today’s seniors, 43 percent will likely enter a nursing home at some time before they die
• Rising longevity is expected to increase this risk to 46 percent in the next 20 years
• Of those who enter a nursing home, about half (51 percent) can expect to stay less than three months
• One in five seniors (21 percent) will likely need five or more years of care in a facility
• The average yearly cost of a private room in a nursing home in 2005 was more than $74,000 (MetLife Study)
• Increased use of reverse mortgages for long-term care could result in savings to the already financially-strapped Medicaid program ranging from about $3.3 to almost $5 billion annually in 2010
• The total average cost of caring for an Alzheimer’s patient is $174,000. (MetLife)
• About 66% of single adults and about 33% of couples become impoverished after only 13 weeks in a nursing home. (MetLife)

Couple the magnitude of the LTC problem with [tag]Social Security[/tag]/[tag]Medicare[/tag] funding and other retirement financing problems facing baby boomers and it’s not too hard to surmise that there will be strong government pressure to tap senior’s home equity in the years ahead.

Social tagging: Long Term Care (LTC)

A Few More Related Articles of Interest:

LTC(i) - Long-Term Care (insurance)

Potential Reverse Mortgage Market - How Large?

Reverse Mortgages and the Deficit Reduction Act of 2005

Met Life Predicts Surge in Reverse Mortgages

2. How long do I expect to stay in my home?