Introduction to Paying for Nursing Home Care
In discussing programs that help pay for or provide financial assistance for nursing home care, it is important to mention a category of program whose objective is to prevent the unnecessary placement of individuals in nursing homes. As nursing homes can be the most expensive form of caring for the elderly, many states and organizations provide services to individuals who require nursing home level care but choose to remain living outside of nursing homes. We have organized the following forms of assistance into two groups: programs that help pay for nursing home care and programs and options that can help prevent nursing home placement.
Cost of Nursing Home Care – State by State
Prior to a discussion of the financial options available to help pay for nursing home care, it is helpful to understand the costs involved. In 2014, the national, daily average for nursing home care for a shared room was $212. The least expensive states are located in the Southeastern US where the daily cost was closer to $155. The most expensive area of the country, excluding Alaska and Hawaii, is the Northeast where the daily cost averages are closer to $330. A state-by-state breakdown of nursing home costs is available further down this page. Interesting to note is that Alzheimer’s care in skilled nursing homes is usually subject to the same fee structure as regular nursing home care. This differs from assisted living communities which typically charge 20% – 30% over their standard fees to care for an individual with Alzheimer’s.
Payment Options & Financial Assistance for Nursing Homes
Medicare’s Benefits for Nursing Homes
The benefits that Medicare offers toward the cost of nursing home care are limited. Medicare is not intended to provide a long term care solution rather it is designed for those who need skilled nursing care for a limited time. As such, Medicare will pay for twenty days of care at 100% of the cost. For the eighty days following, Medicare will pay 80% of the cost. For those who subscribe to a Medicare Supplemental plan, the secondary insurance will pay the remaining 20% of the cost for the last eighty days of coverage. Neither Medicare nor Medicare Supplemental Insurance will pay for nursing home care after the 100 day maximum is reached. There is an minor exception when the nursing home doubles as a psychiatric hospital. In this situation Medicare increases assistance for up to 190 days.
Further limiting Medicare’s coverage is the policy that skilled nursing be only for those recovering from an illness or injury, not for those with an irreversible long term or chronic condition. For example, a person who requires nursing home care to recover from a hip injury will be covered while a person suffering from Alzheimer’s who requires nursing home care, will likely not be covered. As with many things Medicare related, there is a partial exception to this rule for individuals who live in states that offer Medicare PACE Programs. One can read about Medicare PACE here.
Medicaid and Nursing Homes
Medicaid through its state affiliates is the largest single payer for nursing home care. While estimates vary it is safe to say that Medicaid pays at least 40% of the total nursing home costs in the United States. While on the surface, this may sound encouraging for families whose loved one requires nursing home care, it is important to be aware that Medicaid is a means-tested program, meaning that the applicant’s income and financial assets are closely analyzed prior to acceptance into the program. Persons must meet strict financial guidelines in order to qualify. However, should an individual qualify, Medicaid will pay for 100% of their nursing home costs at a Medicaid approved skilled nursing facility.
Medicaid’s eligibility requirements vary depending on the age, marital status and state of residence of the applicant. A rule of thumb for financial eligibility is the $2,000 / $2,000 rule. The applicant’s monthly income cannot be greater than $2,163 and the value of their financial resources cannot be greater than $2,000. However, they are many exceptions to these rules. Certain resources, such as one’s home, are considered exempt from counting, other resources can be allocated to a non-applicant spouse. There are similar exceptions made for the applicant’s income. Learn more about Medicaid eligibility or find assistance qualifying for Medicaid.
Veterans Assistance for Nursing Homes
There are two options for specifically for veterans. The first is the Aid and Attendance Benefit, also referred to as the Improved Pension. This is a program the provides financial assistance to war-time veterans that “require the aid of another person in order to perform his or her activities of daily living”. The Aid and Attendance program is intended to help those with limited financial means (though not as limited as Medicaid). A veteran’s income and financial assets are both considered during the application process. Veterans can use the Benefit towards the cost of nursing home care or assisted living. Read about how the Aid and Attendance Benefit amount is calculated and it’s eligibility requirements.
The second option for veterans and their spouses which is not limited to those who served during war-time, are state VA nursing homes. Care in a VA nursing home is offered as an alternative to the Aid and Attendance benefit; one cannot concurrently receive both benefits. The state VA nursing homes, unfortunately, do not have a unified eligibility or application process. However, a rule of thumb is the veteran or their spouse must be at designated at least 70% disabled. Each state has its own nursing homes and each nursing home has its own eligibility requirements. There are a limited number of spaces available within each home and not all of them are designated for long term care. Waiting lists for admission to a VA nursing home are very common. Find VA nursing homes.
Other Options
Reverse Mortgages
Reverse mortgages can be used to help pay for nursing home care in some limited situations. A reverse mortgage is a loan that a borrower takes from a bank against the value of their home. The loan can be paid out in monthly installments which can be used to offset the cost of nursing home care.
Reverse mortgages have several requirements of the borrower(s). Most relevantly, the homeowners must be at least 62 years of age and they must continue to live in the home against which the mortgage is taken. This limits a reverse mortgage’s usefulness in this situation as an individual cannot simultaneously live in a nursing home and at home. However, if they are married and their spouse continues to live at home, then the spouse can collect the monthly proceeds and use them to help pay for care. Read more about the pros and cons of reverse mortgages as a funding source for long term care.
Long Term Care Insurance
Most individuals who have long term care insurance are aware of its benefits with regards to nursing home care and most individuals who do not have it and have a need for nursing home care, probably cannot afford the premiums. That said, long term care insurance is worth mentioning as it is estimated to pay for approximately 5% of the total US nursing home bill. Typically long term care insurance has a triggering event, something based on the medical or care needs of the beneficiary which allows them to start receiving insurance payouts. Those payouts can usually be put towards any care requirement the individual has, be that nursing home fees or companion care at home. Monthly premiums escalate with the advancing age and deteriorating health of the enrollee. Individuals over 65 and with considerable health problems may be presented with monthly premiums in the thousands of dollars or be denied coverage outright.
Nursing Home Tax Deductions
Nursing home care is tax deductible. Medical procedures performed at nursing homes as well as the cost of room and board are both deductible. Most frequently, these costs are deducted by using the Medical and Dental Expense Tax Credit. Learn more about this tax credit here.
Relocation
One option that can reduce the cost of nursing home care is to relocate the individual in need of care to an area of the country where the cost of care is lower. For a variety of reasons, this approach is not appropriate for every family. However for families in which it is feasible, the cost of care can be reduced by half or even more. For example, a family in the Northeast US with siblings or other relatives in the Southeast might find relocation of their loved one to another state can reduce the cost of nursing home care from $330 to $155 / day. On a monthly basis, this could reduce their cost of care by as much as $5,000. In some states, even relocation within the state might reduce costs by several thousand dollars per month.
Families do not need to be familiar with nursing homes in the area as there are free services that help match families with the most affordable and quality care in any geographic area. Find affordable nursing home care.
The table below shows the high variability in nursing home care costs throughout the 50 states. The first column is sorted alphabetically and the second column is sorted by way of increasing average daily cost.
Assistance to Prevent Nursing Home Placement
When a nursing home is under consideration, on occasion that is because a family believes they cannot afford to care for their loved one at home. Nursing home care is in fact less expensive than 24/7 home care, however there are other factors of which not every family is aware. Since nursing home care is so expensive and because state and federal governments often foot the bill for nursing home care, they have developed multiple programs designed to help individuals who require nursing home level care to remain living at home or in the community. These programs function by providing care assistance, financial assistance and other in-home supports to help care for the loved ones at home, at least for part of the time.
Medicaid Waivers
Each state has Medicaid waivers that permit individuals who are medically eligible for nursing home care to receive that care outside of nursing homes while they remain living in their homes or communities. There are waivers that help individuals with home care, others in assisted living residences and still other waivers that don’t distinguish where the beneficiary resides provided it is not in a nursing home. Medicaid waivers are also referred to as HCBS Waivers or Home and Community Based Services.
Medicaid waivers usually have the same eligibility requirements as the state’s institutional Medicaid plan. For most states this means the applicants must have less than $2,163 in monthly income and less than $2,000 in financial assets (which does not include their home’s value). Typically states also have a provision which says the cost of caring for these individuals at home cannot exceed the cost to care for them in a nursing home (or a certain percentage of that cost). Medicaid waivers also have participation caps. There are a limited numbers of waiver slots created and often times there are waiting lists to receive services.
On this website, we maintain a list of all Medicaid waivers, organized by state, that are relevant to the elderly and a webpage for each that details the specific eligibility requirements and benefits.
Nursing Home Diversion Programs
Most states have non-Medicaid funded programs that provide care services and supports to individuals who require nursing home level care but are not eligible for Medicaid. As with Medicaid waivers, these programs provide services to beneficiaries in their homes or communities with the specific goal of preventing nursing home placement as the cost to support an individual full-time in a nursing home greatly exceeds that to provide assistance at home. Recognizing that much of the burden of caregiving is shifted to family members, nursing home diversion programs often offer support services to the family caregivers as well as services to the individual in need of care. Support like respite care to relieve the family caregiver, transportation assistance and home delivered meals serve the objective of unburdening family members.
Nursing home diversion programs is a loose categorization. These programs typically do not refer to themselves using that name. Rather, each program in each state has its own name. Some states offer more than one program targeting different groups of seniors and other states offer no programs. The types of services available are centered around helping an individual remain living at home, therefore home care, respite care, transportation assistance and chore services are usually included but the complete list is usually broader and is specific to the program. A state by state list of programs is available here.
Money Follows the Person (MFP) Program
The MFP Program provides financial assistance to the states to help them transition individuals who live in nursing homes from the nursing home back into their communities. While this program does not provide direct financial and care assistance to individuals, it does expand the options available to nursing home residents. This program is currently available in 44 states. Read more about the MFP Program here.
Nursing Home Care vs. Assisted Living
Not every nursing home resident actually requires nursing home care. It is important to recognize many assisted living communities now offer advanced care services almost on par with nursing homes. One option for reducing nursing home costs is to consider assisted living instead. Read about the key differences between assisted living and nursing home care.