Tuesday, October 21, 2008

Reverse Mortages and the Long-Term Care Problem

By John LaPlante

Categories: Long-term care, Medicaid

The need to pay for long-term care (LTC) presents political, financial, and ethical challenges. Among other things, a growing use of Medicaid by the middle class to pay for LTC could threaten the solvency of state governments as the baby boom generation ages.

One way around Medicaid financing, at least for some people, is the reverse mortgage, which uses home equity, built up over a lifetime, to pay for long-term care.

Three scholars with the Urban Institute show that the reverse mortgage concept could be useful even for llow-income families who have built up equity. Though the use of these financial arrangements is still small, it is growing--a good sign for taxpayers and for families who will benefit from self-financing long-term care.