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.

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Fact Sheet - Background

Reverse Mortgages for Long-Term Care
“Use Your Home to Stay at Home”™

Started in September 2003 by The National Council on the Aging, the “Use Your Home to Stay at Home” project is developing a national blueprint for encouraging the use of reverse mortgages to help older Americans pay for long- term care services at home. Reverse mortgages are a special type of loan that allows people age 62 and older to convert equity in their home into cash while they continue to live at home for as long as they want.

Long-Term Care Costs and Home Equity

Currently, the costs of long- term care are primarily paid out of pocket by consumers or by Medicaid, the federal/state program designed to pay costs of health care for low-income individuals. In 2000, our nation spent $123 billion a year on long-term care for those age 65 and older, with the amount likely to double in next 30 years. Most of those dollars pay for care in skilled nursing facilities.

Recent studies show that older Americans, including those who have serious health problems and need long-term care, want to live at home rather than in an institution. Most elders (81% of those age 62 and older) own their homes and 74% of those own them free and clear. With $1.9 trillion tied up in home equity, this financial resource has the potential to dramatically increase the ability of seniors to pay for long-term care at home. Reverse mortgages can free up needed cash while enabling seniors to continue to own their home.

Of the nearly 28 million American households age 62 and older, NCOA has found that almost half (48%), or about 13.2 million, are good candidates for a reverse mortgage. The amount that these older households could receive from a reverse mortgage is substantial – on average $72,128. These funds can go a long way to pay for help at home and for retrofitting the home to make it safer and more comfortable. They could also use it to purchase long-term care insurance if they qualify. In total, an estimated $953 billion could be available from reverse mortgages for immediate long-term care needs and to promote aging in place.

For many older families, home equity is their single, biggest financial asset. Unlocking these substantial resources can help empower “house rich, cash poor” seniors by giving them additional resources to purchase the services they feel best suit their needs. The use of private funds from reverse mortgages can also strengthen community long-term care programs and reduce the burden on state Medicaid budgets.

Policy Implications

The NCOA study also shows that of the 13.2 million reverse mortgage candidates, 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 older population would be able to get $309 billion in total from reverse mortgages that could help pay for long-term care.

Key policy changes can significantly alter the dynamics and momentum for using reverse mortgages for long-term care. NCOA’s project “Use Your Home to Stay at Home” will combine research, consumer surveys, and discussions with experts to identify cost-effective government interventions and other incentives that can facilitate their use. To be published in June 2004, A National Blueprint for Increasing the Use of Reverse Mortgages in Long-Term Care will offer new insights into the market along with recommendations for administrative action, regulatory changes, and demonstration programs.

Funders

The “Use Your Home to Stay at Home”™ project is funded by the Centers for Medicare and Medicaid Services, the federal agency that operates Medicare and Medicaid, and the Robert Wood Johnson Foundation.

Program Management

* James P. Firman, Ed. D., NCOA president and CEO
* Barbara Stucki, Ph.D., project manager

Headquarters

The National Council on the Aging
300 D Street SW, Suite 801
Washington, DC 20024
(202) 479-1200
(202) 479-0735

About NCOA

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.

Press Contact

Scott Parkin, Vice President of Communications
202-479-6975, scott.parkin@ncoa.org

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