Nursing Home Costs and How to Pay

Many people grow up with grandparents who lived for years in their homes and, despite various illnesses and conditions, never saw the inside of a nursing home.

That still may be true for some of today’s older adults, a third of whom may never need long-term care services and support.

However, according to the U.S. Department of Health & Human Services’ Administration on Aging, the average 65 year old has an almost 70% chance of needing some type of long-term care – like that at a nursing home – at some point, and 20% will need such care for more than five years.

With those odds, you’ll need to account for how you’ll pay for a nursing home. In this simple and straightforward guide, we’ll explore practical steps, government programs and financial options to ensure your loved ones get the care they need.

There are many options out there for older adults who need care or assistance.

Nursing homes, for instance, offer both long-term, round-the-clock custodial, or nonmedical, care as well as skilled nursing care. Skilled care can include specialized therapy and services only licensed professionals can provide, such as catheter management. In many cases, a stay in a nursing home follows a period of hospitalization.

“Residents typically need less assistance with daily activities and are more independent than nursing home residents,” explains LaShuan Bethea, executive director of the National Center for Assisted Living in Washington, D.C.

These communities offer assistance with:

Nursing home care can be expensive. According to Genworth Financial, the median cost of nursing home rooms is:

Nursing home costs, based on the Cost of Care survey data, can also vary depending on your geographical location:

In addition to geographic location, there are other factors that can contribute to the high cost of nursing homes. These include:

For seniors opting to age in the comfort of their own homes, in-home care typically doesn’t cost as much as a nursing home.

According to Genworth Financial, the median monthly cost of in-home care is:

The annual cost for a private room in a nursing home can cost about $108,000 on average. The good news is there are a few options, including:

If you are fortunate to have savings or investments that you can use to pay for a nursing home out of pocket, it is important to know the pros and cons. There are some complicated tax rules, so it is best to seek guidance from your accountant or another expert.

If you have an individual retirement account, you can use this money to pay for long-term care. However, you may have to pay taxes on withdrawals.

Signing up for long-term care insurance before you actually need long-term care is one way to help defray costs if and when you do. Long-term care insurance is used to cover care in settings like a nursing home or an individual’s home in their own community.

This option can be pricey, though. For instance, a 55-year-old man can expect to pay an annual premium of about $2,200 for this insurance. The cost for women is about $1,500 higher, and it’s about $5,000 for a couple, according to the American Association for Long-Term Care Insurance.

Of course, the older you are when you purchase a policy, the more expensive it will be. Certain serious medical conditions – such as muscular dystrophy and cystic fibrosis – can also make it difficult, if not impossible, to purchase a policy.

At the same time, while long-term care insurance premiums may sound high, it is important to consider the costs associated with nursing home care. Even if you are able to stay in your home instead of going into a nursing home, the cost of a home care aide or homemaker can be around $60,000 a year, Genworth Financial notes.

“People often don’t think that they’ll need nursing home care, and they assume that Medicare or private health care insurance will cover it. This can be a costly mistake,” says Dr. Charles Crecelius, a geriatrician and medical director of post-acute care with BJC Medical Group in the greater St. Louis area.

He suggests seeking guidance or information from an insurance expert or financial professional.

“It’s important to know before you get ill or need long-term care for some other reason what you’re paying for and what to expect,” he says.

At the same time, an independent insurance broker, someone who is not affiliated with any particular insurer, can help you find a plan that might work for you. Some insurers, for instance, have started offering hybrid insurance plans that include a long-term care rider within a permanent life insurance plan.

The VA Aid and Attendance pension can provide up to $1,881 per month to a veteran, $1,209 per month to a surviving spouse or $2,230 per month to a couple, according to VeteranAid.org. Like Social Security, this pension is dependable and is paid directly to you by the Department of the Treasury.

Navigating the specifics of VA benefits related to long-term care can be challenging. The American Health Care Association suggests going to the VA website for details about general benefits and to the VA Geriatrics and Extended Care page for information about benefits and costs for services in residential settings, such as assisted living communities and nursing homes.

Paying for a shorter stay in a nursing home to receive skilled nursing care is different from paying for an extended stay for ongoing assistance and personal care. Convalescent nursing home care, which follows a major surgery or other hospitalization, is typically short term and can be covered by Medicare, the federal health insurance program for adults age 65 and older.

Seniors and their families facing an imminent need for a nursing home should first determine whether Medicare will cover at least a portion of the stay. The Medicare program provides coverage for rehabilitation, but it does not cover not long-term care.

“Medicare does provide coverage for care in nursing homes, but it is subject to certain limitations and conditions,” adds Diane Omdahl, Wisconsin-based president and co-founder of the Medicare consulting firm 65 Incorporated.

To qualify for Medicare coverage for nursing home care, the facility must be certified by Medicare as a skilled nursing facility, and the patient must need continuous care after a minimum of three days in a hospital. Medicare covers the first 20 days of care at the facility at 100%. For days 21-100, Omdahl says, the daily copayment is $200. Coverage ends after day 100.

Medicare can also help if a long-term nursing home situation looks inevitable but isn’t immediately necessary. For as long as the individual is able to stay at home, Medicare can be tapped for up to 35 hours per week of home health services. Medicare covers home health services – like intermittent skilled nursing care, physical therapy, speech-language pathology and occupational therapy – for up to 60 days at a time, called an “episode of care.”

To secure these funds, individuals must be living at home (not in a nursing home or other long-term care facility), must have their physician approve a plan of care and must use a Medicare-certified provider. If you require help only with personal care, such as meal preparation, bathing, using the bathroom and dressing, you do not qualify for the Medicare home health benefit.

If an individual lacks enough savings to cover the cost of a nursing home – or if the cost of a protracted stay exhausts their assets – they can become eligible for assistance from Medicaid, a state-administered health insurance program for low-income individuals. State Medicaid programs are required to cover nursing home care, according to the American Health Care Association.

To qualify for these services, a person would have to meet their state’s level of care criteria and financial eligibility requirements. Eligibility for Medicaid, however, is complex, as there is often more than one eligibility pathway that allows a person to qualify for these services. Some of these are options the state can choose, while others are mandatory.

In addition, depending on how a person qualifies for nursing home care with Medicaid, the state may determine that the beneficiary must contribute toward the cost of their care.

Before applying for Medicaid, seniors who own their homes also need to consider the fate of the property. Under federal law, a home is exempt from the income and savings limits described above, but if the owner dies while receiving Medicaid nursing home benefits, the government can take the house.

Families that want to avoid losing a treasured home, therefore, might choose to forgo Medicaid, especially if the applicant’s life expectancy is short and relatives have the means to pay anticipated costs out of pocket.

A senior may be able to keep his or her home in the family either by adding a child’s name to the deed at least five years before applying for Medicaid or by setting up an asset-protection trust before applying. This type of trust enables a person or couple to transfer some type of property, such as a home or cash-like assets, to another person to hold and manage for their benefit.

A Medicaid lawyer can help you navigate the eligibility requirements. One way to find a qualified lawyer is to call your local bar association and find out which attorneys are teaching seminars on Medicaid planning to other attorneys. The attorney also must be licensed in the same state as the person needing Medicaid assistance.

State-based Long-Term Care Partnership Programs can help protect the assets of individuals using Medicaid coverage to pay for long-term care services. Most states offer these supplemental programs, such as the Indiana Long-Term Care Insurance Program and the Arizona Long-Term Care System, so people don’t have to spend all their resources to qualify for Medicaid.

Most nursing homes won’t lower their rates, which are keyed to the payment levels offered by Medicare and Medicaid. Still, there may be room to negotiate when it comes to long-term nursing home care costs.

Rather than accept a lower Medicaid rate, for instance, a facility might agree to take a lower private-pay rate, which is still higher than the Medicaid rate but lower than published private-pay rates.

By contrast, assisted living facilities, some of which cannot accept Medicare, and home health agencies often face steep competition, so consumers shouldn’t be shy about talking prices with these organizations.

An assisted living facility with a high vacancy rate or no waiting list may be more willing to negotiate a monthly rate, according to Genworth Financial. If you’re considering a home health agency, you may be able to secure a lower hourly or daily rate if you indicate that you’re shopping around for the best price.

If a senior who needs long-term care has children, grandchildren or other relatives residing in a city or state where nursing homes are less expensive, moving that person could be a good option. A move might not only reduce the cost of care but also make it easier for relatives to check in on the resident.

Those deciding whether to move an elderly relative should consider the individual’s health and whether moving away from doctors who have an established relationship with the senior could harm their care.

Additionally, it’s valuable to consider factors about the quality of life for the person. For instance, will Mom be able to get visits from her beloved dog? Will the climate allow Dad to sit outside and enjoy fresh air?

Moving an elderly relative to a new location solely to find cheaper care might backfire if it leaves the patient far from family or away from all they know. Relatives could face higher travel expenses when visiting their loved one, offsetting any family savings.

Nursing home care can help individuals in certain circumstances, but it can be expensive. There are a variety of ways to pay for it, but in all cases, it’s best to plan ahead as much as possible. Long-term care insurance or setting aside funds to use when needed can help ensure that you have the money you or a loved one need when nursing home care becomes necessary.