How To Pay For A Nursing Home

How to Pay for a Nursing Home 

Navigating the costs associated with long term care can be daunting, but being aware of your options and knowing how to access resources can help reduce the worry. This article touches on the various avenues for paying for nursing home care, from utilizing long term care insurance to exploring Medicaid and private pay options. 

Comparison Between Nursing Homes and Assisted Living Facilities 

Differentiating Features of Nursing Homes and Assisted Living Facilities 

Nursing homes- sometimes called convalescent homes or skilled nursing facilities- offer the highest level of onsite care to older adults.  Many nursing home residents have chronic, progressive physical and cognitive conditions that require round-the-clock care and supervision.

Nursing homes provide more specialized services than assisted living facilities or memory care communities. They are highly regulated by the state and federal government and are operated by licensed professionals.  

Choosing the Right Facility

Deciding between a nursing home and an assisted living facility depends on factors such as the level of care needed, personal preferences and financial circumstances. Visiting various communities and asking pertinent questions can aid in making an informed choice. 

Financial Considerations 

Generally, nursing homes have higher costs compared to assisted living facilities due to higher staffing ratios and more advanced medical services. Understanding the level of care needed and what services are included in each cost structure is critical to making the best decision.  Typically, nursing homes charge an all-inclusive, daily rate.  If care needs increase, the daily rate stays constant. 

With assisted living facilities, the daily (or monthly) rate is variable.  As care needs increase, à la carte charges above the base room and board rate will increase.  This cost structure benefits older adults with minimal care needs.  A person with progressive and complex care needs who chooses to remain in an assisted living may see charges exceeding those of a nursing home.     

Understanding the Financial Aspects of Nursing Home Care 

Factors Impacting Nursing Home Costs 

Nursing home care is expensive. That’s the bottom line. Any scenario that requires a lot of nurses and other trained caregivers to be onsite 24hrs/day, 7 days/week will be expensive.  This level of staffing is required in a nursing home setting.  (On the other hand, assisted living facilities are able to staff with lower resident to caregiver ratios and can request families hire their own, additional 24hr/day caregiver if needed.)        

Accommodation Options in Nursing Homes 

Choosing a semi-private accommodation rather than a private accommodation can reduce the daily charge but only slightly.  For instance, a private room at a nursing home in Connecticut in 2024 may cost $550/day and a semi-private room, meaning two or more residents share the room, may cost $520/day.  The difference in charge is negligible since the costs to provide comprehensive services are identical.   

Location Impacts Costs

As you might expect, nursing home costs vary substantially across the country.  States with a higher cost of living, such as Hawaii or Connecticut, typically have higher average nursing home costs compared to states with a lower cost of living, like Oklahoma or Arkansas.  There are also cost differences between facilities in rural and urban areas as there would be variability in salaries, housing options, and taxes. 

How the geographic location of the nursing home affects costs is just something to be aware of.  If the older adult needing care is located in the same state as family and friends, it’s unlikely that a choice for nursing home placement would be made based on a lower cost state vs. higher cost state.     

Paying for Nursing Home Care with Personal Funds

If an older adult needing placement in a nursing home has enough income and savings, then they will need to pay for nursing home care on their own, from monthly income, savings, and possibly the equity in their home. In most cases, consulting with a trusted financial advisor, estate planner, and/or elder care attorney is the best course of action. Methods for paying for nursing home care with personal funds include:

Reverse Mortgages 

A reverse mortgage is a financial option that allows homeowners who are 62 years old and above to convert a part of their home equity into cash, which can be utilized for covering long term care expenses including nursing homes.

Annuities

Entering into an annuity contract with an insurance carrier can help pay for nursing home services.  Annuity contracts typically provide a guaranteed distribution of income over time, until the death of the person named in the contract or until a specified date, whichever comes first.

Trusts

A trust is a legal entity that allows a person (the trustor) to transfer assets to another person (the trustee). Once the trust has been established, the trustee manages and controls the assets for the trustor or for another beneficiary.  Two types of trust that can help pay for long term care expenses are charitable remainder trusts and Medicaid disability trusts.

Family Contributions 

In some circumstances, family members pitch in to help with the costs associated with nursing home care. This assistance can come in the form of direct monetary support or pooling resources together to meet the required expenses.  Note that this should not be an expectation on the part of any nursing home.  Admissions applications ask both medical and financial questions specific to the individual in need of care.  This is to assess whether the nursing home has the resources to take care of the applicant and to know how the bill will be paid, i.e. are there private funds, a long term care insurance policy, active Medicaid, or potential Medicaid eligibility.  

Utilizing Long Term Care Insurance (and other insurance policies) for Nursing Home Costs

Benefits of Having Long Term Care Insurance 

Long term care insurance provides significant financial assistance by covering a large portion of nursing home expenses.  But let’s be honest.  If the person in need of a nursing home level of care doesn’t already have long term care insurance, then now probably isn’t the time to seek it out.  At this point, policy premiums will be cost prohibitive.

Benefits Offered by Long Term Care Insurance 

Most nursing homes provide long term “custodial” care in addition to short term rehabilitation or “sub-acute” care.  Unlike the benefits provided by Medicare, long term care insurance policies are designed to help cover “custodial care” expenses associated with all forms of long term care services whether provided at home, in an assisted living facility, or at a nursing home. The specifics of each policy vary, so it’s crucial to understand what services are included under your coverage detail. 

How to Make Payments with Long Term Care Insurance 

Typically, the resident or “responsible party” makes payments to the nursing home, then files a claim for services rendered. You’ll need to file a claim with your insurance provider in coordination with the nursing home business office which will provide documentation verifying the level of care provided. 

The long term care insurance provider will then reimburse the policyholder up to a preselected amount for care expenses. Note that many of these policies have a waiting period, also called an “elimination period,” which is a specific number of days you must pay for your care before your insurance benefits begin. Common waiting periods range from 30 to 90 days.

Life Insurance Policies 

Certain life insurance policies offer access to funds that can be used towards covering long term care expenses, providing a valuable resource when it comes to nursing home costs. Options to research and discuss with a financial advisor include: Combination (Life/Long-Term Care) Products, Accelerated Death Benefits (ADBs), Life settlements, and Viatical settlements.

Medicaid Coverage for Nursing Home Care 

How Medicaid Supports Nursing Home Costs 

Medicaid is a joint federal and state program that covers medical costs, including nursing home care, for people with limited income and assets. While most nursing homes accept Medicaid, there are specific requirements for eligibility that vary from state to state. 

Meeting the Requirements for Medicaid 

Eligibility for Medicaid is based on income and asset thresholds, which can differ from state to state. Understanding these requirements is crucial for effective planning.  Your state Medical Assistance office is the best source for information about how to qualify for Medicaid and if you qualify specifically for long-term care services.  Be aware: a transfer of assets within a specified period prior to accessing nursing home care can make you ineligible for Medicaid.   

Process of Applying for Medicaid 

The application process for Medicaid can be complex, involving detailed financial documentation and evidence of medical necessity.  In most cases, the application can be downloaded from your state Medicaid assistance website.  Take time to review the application in full before deciding to invest in the assistance of an elder care attorney.  It’s a bit like filing taxes. 

If your circumstances are straightforward enough, you likely don’t need the support of an accountant and you can file on your own.  If there is more complexity, then it’s probably well worth the investment and peace of mind to work with a seasoned professional.

What about Medicare?

Medicare Does NOT pay for long term care in a nursing home.

Medicare is a federal health insurance program that provides hospital and medical expense benefits for people over age 65, or those meeting specific disability standards. Benefits for nursing home and home health services are limited.  Medicare does not pay for assisted living fees or long term care in a nursing home.  Following a qualified hospital admission, Medicare will pay for a short stay in a nursing home for skilled nursing services and rehabilitation so long as several conditions are met.  The inpatient skilled nursing facility (nursing home) Medicare benefit is 100 days.  However, very few beneficiaries meet care criteria to utilize all 100 days at a nursing home.  

Bottom line: traditional Medicare, Medicare Advantage (Part C), and other commercial health insurance policies do not pay for long term care in a nursing home.

The Importance of Planning for Long Term Care

You may have been told that the best time to think about long-term care is before you need it.  Easier said than done, right?  We should have all been saving for retirement when we got our first jobs at sixteen too!  The bottom line is that nobody wants to prepare for a time when they may be chronically ill and have lost a good deal of independence.  If you haven’t prepared for the eventuality of needing long term care, then rest assured you’re part of a group with a lot of other awesome people.  

However, if you are ready and able to prepare, it’s important to consider the full picture: likely expenses, current financial status, potential insurance options and other resources. Speaking with family members and seeking advice from experts on legal and financial matters can be valuable in navigating the complexities of financing nursing home care, which may involve setting up trusts or accessing equity in your home. 

Aside from the financial aspects, emotional factors should also be taken into consideration when planning for long term care. Maintaining open communication within families and providing mutual support throughout the decision making process is ideal. 

Check out these National RESOURCES compiled by the Administration for Community Living (ACL)

Long Term Care.gov

This site provides information and resources to help plan for future long-term care.

NIA-Long Term Care

Long term care information from the National Institute on Aging, National Institutes of Health.

Medicare.gov – Long-Term Care

General information on long-term care options.

Advance Care Planning Fact Sheets

Prepared by Elder Locator to assist you in making plans now for the care you want when you have a serious illness.

Guide to Long Term Care for Veterans

The Guide provides information on home and community based, and residential care options for veterans.

In conclusion

Nursing home care is expensive but may be necessary when extensive, long term medical and personal care is needed.  How to pay for nursing home care is dependent on a number of individualized factors, such as: ability to pay with current income and assets, whether the older adult meets eligibility requirements for state and federal programs, or has a long term care insurance policy.   

Frequently Asked Questions