My father had two nursing home stays. I remember sitting with my sisters as we met with the first facility’s director. She discussed what would happen if our dad required an extended stay and how he would be personally responsible for the costs. As she reviewed the daily cost of his stay, I was completely dumbfounded. This was not a ritzy hotel with top-notch amenities. This was a nursing home, and not even one of the best. Medicare covered the costs both times, so we never faced that challenge. However, many families struggle financially while attempting to pay for nursing home expenses out-of-pocket.
According to the Center for Medicare and Medicaid Services (CMS), 40% of Americans will require nursing home care. In addition to dealing with the challenges of choosing a nursing home (See “5 Things You Must Consider When Choosing a Nursing Home “), individuals and their caregivers must deal with the staggering expenses. In 2016, the average cost for a semi-private room was $225/day, or more than $82,000/year. Private room costs were $248/day, or more than $90,000/year. When you consider that the average nursing home stay is 835 days, it becomes painfully clear that paying for nursing home care will require planning and preparation.
It is important to know that nursing home costs are NOT covered by traditional commercial health insurance. If you or your family member is admitted to a nursing home, these are the options for payment:
Medicare is the federal health insurance program for individuals 65 years of age and older. It also covers those with End-Stage Renal Disease and a subset of disabled younger people. There are several restrictions that govern Medicare payment for care provided in nursing homes. Medicare covers short-term rehabilitative care only. This typically involves care provided after surgery, an acute hospitalization, or an acute injury. Long-term care for patients with Alzheimer’s disease or other forms of dementia is not eligible for Medicare coverage. Medicare pays for 100 days of nursing home care. It covers the first 20 days at 100% and the next 80 days at 80%. The patient will be responsible for the balance. Additionally, the facility must be Medicare-certified and the patient must have been hospitalized (in inpatient status) for at least 3 consecutive days. If any one of these conditions is not met, the patient will be responsible for all of the costs.
Medicaid is a jointly funded (state and federal) health insurance program for families and individuals with limited resources. To be eligible for Medicaid-covered long term care, one must have both a medical need and meet financial eligibility criteria. These criteria change each year and vary according to state of residence, age, and marital status. In 2016, individuals eligible for long term care had to have both a monthly income of no more than $2199 and no more than $2000 in liquid assets (cash, bonds, retirement accounts, etc.). For married individuals, the spouse is allowed to have additional assets up to a maximum amount that is determined by the Social Security cap. Of note, the marital home is not counted in these assets. It is important to note that the facility must be Medicaid-certified and that some facilities limit the number of beds designated for Medicaid residents.
Many find that they cannot afford to pay for a nursing home out-of-pocket, but they have too many assets to qualify for Medicaid. Some have attempted to reconcile this dilemma by making large financial gifts to family members or transferring ownership of assets just before entering the nursing home. Beware, as this practice can result in penalties rendering individuals ineligible for Medicaid. Medicaid has a five-year “Look Back” period, which includes a review of all financial transactions made by the senior applicant. For assistance with legal methods to reallocate resources, it is best to consult a Medicaid Planning professional or an attorney specializing in this area.
- Long term care insurance
Approximately 5% of individuals use long term care insurance to help with the cost of nursing home care. Long term care insurance will pay for a portion of nursing home costs, reducing out-of-pocket expenses. Most individuals purchase a policy while in their 50s or 60s, as the cost of the premium increases with age and you must be in reasonably good health to qualify. The cost of these policies ranges from $2000-$2500/year for someone between the age of 55-65 years old, and pales in comparison to the cost of the care provided.
- Assistance for Veterans
Assistance is provided to veterans of the United States military and their spouses who require long term nursing home care if they meet certain criteria.
- Personal funds
When the options above are not available, individuals must pay for the cost of nursing homes using personal and/or family assets. Many pay out-of-pocket initially, then they become eligible for Medicaid once they have exhausted their assets. It is not uncommon for seniors to spend the entirety of their life’s savings on long term care, and often their adult children and other family members have to contribute as well.
Most patients and caregivers are shocked to learn how much it costs to stay in a nursing home and are doubly shocked to learn that, in many cases, the individual is responsible for payment. Unless your loved one has accumulated substantial liquid assets or purchased a long term care insurance policy when they were younger and healthier, navigating the financial burden of nursing home care will be extremely challenging. I encourage you to plan ahead, both for your family members and for yourself. Please share this post with others, as being equipped with the information is the first step toward taking appropriate action. Be informed so that you can be empowered. Waiting until the nursing home admission to learn about payment options is certainly too late.
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