Use Your Home to Stay at Home Program Study Shows That Reverse Mortgages Can Help Many with Long-Term Care Expenses
SAN FRANCISCO - 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.
Contact:
Scott Parkin
202-479-6975
703-975-2007 (cell)
scott.parkin@ncoa.org
For additional information or to discuss your personal situation, please contact us at 1-888-9REVERSE (888-973-8377) or email one of your officers for assistance.
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