LTC Bullet:  The "Durable" Reverse Mortgage 

Thursday, June 2, 2005 

Washington, DC-- 

LTC Comment:  Reverse mortgages have captured the imagination of many experts and organizations as a way to finance home-based long-term care for aging homeowners.  But RMs are not much help with assisted living or nursing home expenses, the biggest costs incurred by the financially strapped Medicaid program.  Here's a solution.  After the ***news.*** 

*** HOMEWARD BOUND.  I'm in the latter half of my second week pounding the pavement in DC meeting with LTC policy wonks and legislative assistants all over the Hill.  I hope you've enjoyed our "LTC Embed" reports recounting the progress being made.  On Friday, I'll provide a list of contacts and a summary of outcomes, but only to dues-paying Center for Long-Term Care Reform members.  So join the Center, get your user name and password to access The Zone, and start receiving our daily members-only LTC E-Alerts.  Go to for the details, call Damon at 206-283-7036, or email him at .  We're going to change Medicaid and long-term care as we've known them and for the better . . . THIS YEAR.  Don't miss out on the fun of following the big change step-by-step all the way to the end Zone. *** 

*** LTC BLOG.  If you haven't visited in awhile, you're in for a treat.  The Center's new LTC Blog is worth a visit at least once a day.  Get hooked.  If you care about long-term care service delivery and financing, the LTC Blog is where to stay in touch . . . with new data and statistics, with summaries of research findings and news, with insightful and provocative analysis, and with thoughtful commentary.  If you want to know where long-term care is going . . . before it gets there . . . read the LTC Blog.  Then join the Center for Long-Term Care Reform.  Be part of the solution.  Join the fight for rational long-term care policy reform.  This is the year. *** 



LTC Comment:  Here's an idea for a new kind of financial product that would help people purchase the highest quality long-term care without giving up their choice and independence by going on Medicaid.  Conversely, here's an idea that could save Medicaid billions while improving long-term care for everyone.  People paying privately from the proceeds of this new kind of reverse mortgage will command the best care money can buy.  With more people paying privately, fewer people will become dependent on Medicaid, so that program will be better able to finance higher quality across a wider spectrum of care.  

We welcome your feedback on this proposal.  We would especially like to hear from people in the reverse mortgage business regarding the feasibility of a new product of this kind. 

Reverse Mortgages for Nursing Facility and Assisted Living Care 

Reverse mortgages are a powerful tool to help aging Americans remain in their own homes as long as possible.  They permit homeowners to tap equity that would otherwise remain illiquid.  The proceeds may be used for any purpose, but are especially helpful to pay for health care and other services so that homeowners can age in place.  Therefore, reverse mortgages have captured the imagination of many analysts and interest groups as a possible source of long-term care financing that could supplement Medicaid, relieve the fiscal squeeze on public programs, and breathe new financial oxygen into a foundering home and community-based services infrastructure. 

Those are wonderful goals that everyone would like to see achieved, but they don't help nursing and assisted living facilities, which are also desperately in need of reliable funding sources.  This is true because conventional reverse mortgages are due and payable no later than one year after the borrower has died, no longer lives in the home, or has sold it.  A new kind of reverse mortgage is needed that can remain in effect after the homeowner moves out, especially to an assisted living or nursing facility.  Call it a "durable reverse mortgage" because it parallels conceptually the idea of a "durable power of attorney," i.e. one that remains in effect after the principal is no longer competent mentally and needs the attorney in fact to take over his or her affairs. 

A durable reverse mortgage would remain in effect when an unmarried or widowed borrower can no longer remain at home even with assistance purchased with help from the reverse mortgage.  At that point, the reverse mortgage would supplement the person's other income and contribute toward private-pay nursing facility care or assisted living.  An adult child, an heir or some other responsible individual would stand in for the senior to ensure maintenance of the home.  The home could be used by another family member or even rented out for supplemental income to help with the long-term care payments.  In the absence of another party willing to take on this responsibility, a real estate management firm could handle it for a fee.  As long as the value of the underlying collateral is assured, the lender should not care who is living in the home.  Of course, new actuarial and underwriting analysis would have to be done to price the loan fees correctly given the somewhat longer duration of the loan.  But conceptually, it should not matter whether the homeowner resides in the home or not. 

If someone owns a home of substantial value that has the potential to generate the funds to guarantee red-carpet access to top-quality long-term care, why should that funding source be cut off just because the homeowner's long-term care needs escalate to a higher level?  We need a durable reverse mortgage that automatically takes effect when the homeowner's long-term care becomes more critical than ever with increasing acuity.  Such a funding source would help nursing and assisted living facilities provide the highest level of care for all their residents.  It would considerably relieve the financial burden on Medicaid, which currently exempts the home and usually takes over when home care is no longer feasible medically or affordable financially by the individual.   

In today's tight fiscal environment, and with the expectation of further long-term care financing challenges due to aging demographics, we cannot afford to leave any stone unturned, or any home equity unutilized, to ensure access to quality long-term care at the most appropriate level for all Americans.