If you’re not prepared, paying for long-term care can be one of the most stressful financial burdens many adults face in their golden years. With costs running into the tens of thousands of dollars per year, and only increasing, long-term care requires thoughtful financial planning.

Thankfully, there are several options for paying these costs, as we outlined in our post “3 Ways to Cover the Costs of Long-Term Care.” Here are 3 more ways to cover the costs of long-term care.

Medicare and Medicaid

These government insurance programs are an important safety net for American seniors, but they have their limitations when it comes to long-term care.

Medicare is the health insurance program for people ages 65 and over (it also covers those with disabilities). While it’s helpful for providing affordable health insurance and prescription drugs, it actually doesn’t cover much in the way of long-term care expenses. Medicare is designed more for acute care, like hospital stays, short-term skilled nursing care, and rehabilitative care.

Medicaid does more to cover long-term care, paying for stays in certain nursing home facilities, for those who qualify. Although it’s a program for low-income families, others may qualify after they have spent down their assets.

Until recently, a life insurance policy was categorized as an unqualified asset, meaning that individuals generally had to abandon these policies when trying to qualify for Medicaid.

However, that has changed. Now, certain policyholders can sell their policies on the secondary market as a life settlement, with the proceeds from the sale being transferred into an irrevocable, FDIC-insured bank account that makes payments directly to a long-term care provider. You can read more about this development in our post “Potential Medicaid Recipients Don’t Have to Abandon Life Insurance Policies.”


People in need of long-term care can enter into annuity contracts that will pay the person a monthly income in exchange for one premium payment or a series of monthly payments.

Immediate annuities are for people with immediate long-term care needs, and convert the premium payment into a guaranteed monthly income stream for a set period of time or until you die. These can be a good option for people who don’t qualify for long-term care insurance, because there are no health requirements.

Deferred long-term care annuities create two separate funds. One is the long-term care fund, which can be accessed immediately, and the other is an unspecified fund that can be used for anything. This second fund cannot be accessed until a specified day in the future.

This kind of annuity does carry some health requirements, and it can affect whether you qualify for Medicaid. In addition, since annuities can have a major effect on your taxes, it’s important to talk these options over with your financial advisor before making a decision.

Paying out-of-pocket

Long-term care is certainly expensive, but if you have a healthy retirement fund and steady sources of passive income that you can rely on, paying out of pocket may be an option. This is, of course, easier if you don’t have a spouse who’s relying on that same retirement income to cover his or her basic expenses.

Another option is to cobble together multiple sources of care in order to decrease the overall expenses. A majority of seniors and their families do this: in fact, in the U.S., only 35 percent of seniors eventually end up in nursing homes. Most care is provided by family members or at-home nursing staff.

If you have a family member or family members who can help provide at-home care, you not only drastically increase quality of life, you decrease long-term care expenditures. By incorporating at-home nursing care and community services into your caregiving plan, you may be able to forgo a nursing home or assisted living facility for good.

Paying for long-term care is complicated, but it can be managed. To learn more, read our post “Life Settlement Funds Retirement and Long-Term Care for Seniors.”