Program promotes reverse mortgages to pay LTC

Nursing Homes, March, 2004

No wonder they're called the golden years: Older Americans have almost $1.8 trillion in home equity--and the National Council on the Aging (NCOA) sees this as a source of financial relief for the chronically underfunded long-term care industry. Hence, NCOA has launched the "Use Your Home to Stay at Home" program, ultimately aiming to increase seniors' use of reverse mortgages to purchase long-term care insurance and services.

Reverse mortgages are special loans that allow people aged 62 to convert equity in their homes into cash, while remaining in their homes for as long as desired. In the spring, an NCOA-organized panel of experts--including an American Association of Homes and Services for the Aging (AAHSA) representative--will issue a report exploring this market and offering recommendations for administrative action, regulatory changes, and demonstration programs.

"Reverse mortgages can give millions of older Americans choices about how they want to receive long-term care," said Tom Scully, CMS administrator when the program was announced (he has since resigned). "Tapping their home's equity gives them the purchasing power they need to buy comprehensive long-term care insurance that will provide services they need to stay in their homes and out of nursing facilities," Scully said. CMS and the Robert Wood Johnson Foundation are providing financial support for the program.

Reverse mortgages are an option for many seniors, with 80% of those over age 65 owning their homes, 73% of them free and clear of mortgages. Incentives for seniors to exercise this option, according to proponents, include avoiding the Medicaid spend-down process and accepting personal responsibility, recognizing that the long-term care system is under strain and that Medicaid was created to pay for healthcare for the poor.