The cost of nursing homes ranges from expensive to exorbitant--on the order of $25,000 to $50,000 a year. It's like private college, only more so, and quite possibly, for more than four years. Paying for nursing home care requires planning, creativity, and ingenuity. It may precipitate conflict and resentments among family members. That's why you should start planning for it early, ideally, shortly after your loved one is diagnosed with Alzheimer's disease.

Payment options include:

Self-financing. Affected individuals may have enough financial assets to pay for their nursing home care. Of course, the person's assets may be tied up in a home and in various investments and insurance policies. You may have to do some detective work to locate them all.

Life-insurance. You may be able to use the person's life insurance policy(ies) to raise cash. Here's how:

Viatical settlements. In recent years, special brokerage firms-- viatical settlement companies--have made a business of buying life insurance policies for cash. The viatical firm has a physician examine the policy-holder, assesses how long the person is likely to live, and then offers to buy the policy for an amount that gives the policy holder immediate cash for long-term care while still living, and at the same time, gives the brokerage and its investors a return on the investment. Viatical settlements typically range from less then 60 percent of the death benefit if the person appears to have more than two years to live, to around 90 percent if the person appears likely to die within a few months.

Say the policy death benefit is $100,000, and the viatical company believes the person's life expectancy is four years. The firm might offer $45,000. The family can then use this money to pay for nursing home care, and the brokerage collects the $100,000 when the person dies. If the person dies sooner, the brokerage makes more money. If the person survives longer, the firm loses money.

Pre-death sale of life insurance policies developed to cover the cost of AIDS care. But the concept has been expanded to include Alzheimer's disease and other conditions that require extended nursing home care. For more information about pre-death sale of life insurance policies, contact an insurance broker

Viatical Association of America

Loans from life insurance policies. If your loved one has a "whole life" or "universal life" policy, it is usually possible to borrow against its cash value. (Cash value is different from the death benefit; check the paperwork or call the insurer to find out the cash value.) You have to repay the loan with interest. If you repay it in full by the time the person dies, the beneficiary receives the full death benefit. If not, the insurer reduces the death benefit by the amount of the unpaid loan balance.

A Reverse Mortgage. Reverse mortgages allow people age 62 or older to convert their home equity into monthly income that can be used to cover caregiving costs. Instead of you making payments to the bank, the bank pays you. But unlike a regular mortgage, in which you own more and more equity over time, with a reverse mortgage, the bank buys equity from you, and when it comes time for you or your heirs to sell the home, the bank owns a portion of it--or possibly all of it.

Reverse mortgages are good alternatives for people with early Alzheimer's disease who want to stay in their homes, or in cases where a caregiver moves into the affected person's home. They work best, of course, for those who have considerable equity in their homes.

Reverse mortgages are available through many banks, the Federal Housing Administration (FHA), and the Federal National Mortgage Administration (Fannie Mae). In general FHA reverse mortgages are most attractive to those with less than $150,000 of home equity. Fannie Mae reverse mortgages tend to be most attractive for those with home equity of $150,000 to $225,000. And private bank reverse mortgages are usually most attractive to those with home equity of more than $225,000.

For more information, contact your bank, or consult the U.S. Government listings in your phone book for FHA or Fannie Mae.

Long-Term Care Insurance. With nursing home care costing $25,000 to $50,000 a year, and the government periodically threatening to cut Medicaid payments for long-term care, many people have turned to long-term care insurance as a way to guarantee payment of nursing home care.

The problem is that consumer groups complain that long-term care insurance policies rarely pay out as purchasers hope. So shop very carefully.

Long-term care policies must be purchased before the policy-holder needs long-term care. The time to buy is as soon as possible after an Alzheimer's diagnosis. Unfortunately, some long-term care insurers do not sell policies to people with pre-existing conditions, such as Alzheimer's disease. Be sure to examine excluded conditions before you buy.

Long-term care insurance rarely covers the entire cost of care for the remainder of the person's life. Most long-term care policies offer benefits that range from $50 to $200 a day, with a maximum number of days stipulated in the policy.

The cost of long-term care insurance varies tremendously depending on:

The age and health of the policy-holder. The older and sicker you are, the more expensive the coverage. The daily pay-out. The more money, the more expensive the coverage. The pay-out duration. The longer, the more expensive.

Some cover both. Check the coverage before you buy. Most policies have deductibles and elimination periods. You must pay a certain amount before the policy pays anything, and you must pay for a certain period of time before the policy coverage begins.

Some policies have fixed premiums. In others, the premiums increase annually.

Some policies require continued payment of premiums while the policy-holder is in long-term care collecting benefits. Others have "premium waiver" that allows policy-holders to stop paying premiums while they are receiving benefits.

Some policies pay-outs offer inflation protection. Others do not.

Read the fine print before you buy. Talk with several brokers before you buy.

For more information, check www.safenet.com

VA benefits. If the person is an armed forces veteran, placement might be possible in a Veterans Administration facility. For information, contact the Veterans Administration or the Alzheimer's Association.

Family. Family members might decide to pool their resources and pay for nursing home care. In some states, relatives are required to provide a certain amount of support for a certain time. Check your state regulations.

Medicare. Medicare pays for up to 150 days of nursing home care in cases of serious illness in those who need intensive rehabilitation. Alzheimer's disease does not qualify because currently there is no possibility of rehabilitation. However, if a person with Alzheimer's also has some other condition, for example, a stroke, Medicare financing may be possible for a time. For more information, contact a Medicare office, social worker, or the person's physician.

Medicaid. Medicaid is a federal safety-net program administered by the states. It pays for health care, including long-term nursing home care, for those who have no other financial resources. In most states, it is known as Medicaid, but some state programs have different names. California's program is called Medi-Cal.

Some people recoil from Medicaid because it feels like welfare. However, there is no shame in receiving benefits. It's rather like Social Security. People with Alzheimer's disease paid taxes before they were stricken, and some of that money went to Medicaid benefits for other people. Now that they need Medicaid, it's there for them. Medicaid currently pays the bills for about two-thirds of the nation's nursing home residents.

Eligibility criteria differ from state to state, but in most states, people in nursing homes receiving Medicaid cannot have more than a few thousand dollars in total personal assets (which can be used for gifts and personal items). Individuals must "spend down" their own funds until they qualify for Medicaid, and then the program assumes the cost of their care for the rest of their lives.

In cases where one spouse has Alzheimer's and the other needs money to live on, asset transfers can be arranged. This strategy enumerates the couple's assets, and divides them in two. (The couple's home is exempt as long as the unaffected spouse continues living in it.) The half belonging to the affected individual can then be spent on nursing home care until Medicaid eligibility has been established. The half belonging to the unaffected spouse can be used by that person with no restrictions, and those assets in no way make the spouse with Alzheimer's ineligible for Medicaid.

However, asset transfers can be tricky. They must be arranged at least 30 months before the affected individual applied for Medicaid. In addition, you must keep detailed records, and present them for inspection when you apply. The Alzheimer's Association can help you arrange things. You might also need an accountant and an attorney. If you need a lawyer, find one experienced in handling Medicaid applications. For a referral, contact your local Bar Association.

It may be a struggle to obtain Medicaid benefits--even if you're confident that the person qualifies. The reason is that states generally interpret eligibility criteria conservatively in order to save money. Be persistent. File appeals if necessary. For more information, contact the National Citizen's Coalition for Nursing Home Reform (1424 - 16th St. N.W., Suite 202, Washington, D.C. 20036-2211; (202) 332-2275;). You may have to hire an attorney.

For more information on Medicaid, contact the nursing home you're considering, or your local or state Departments of Health, Social Services, or Welfare.

Darwin Connor (c) copyright 1995