Do Nursing Homes Take All Your Money?

The substantial costs of long-term care often lead to concerns about how nursing home expenses might affect personal savings and assets. This article clarifies how nursing home costs are typically covered and the treatment of assets within various funding mechanisms.

Understanding Nursing Home Expenses

Nursing homes provide comprehensive health and personal care services for individuals needing continuous medical support or assistance with daily activities. These services include skilled nursing, 24-hour supervision, help with personal care, meals, and room and board. Many facilities also offer rehabilitation services and recreational activities.

The financial burden of nursing home care is significant, with costs varying substantially by location, facility, and care level. For example, the national annual median cost for a semi-private room was about $111,325 in 2024, and a private room around $127,750. These figures translate to monthly costs of about $9,277 for a semi-private room and $10,646 for a private room nationally.

Funding Nursing Home Care

Nursing home care is typically funded through several methods, often used sequentially as an individual’s financial situation changes.

Initially, many individuals use private pay, covering costs with personal savings, pensions, or other income and assets. This continues until personal funds are depleted or reduced enough to qualify for other assistance programs.

Long-term care insurance policies can cover a portion or all nursing home costs based on policy terms. These plans help mitigate financial risk for extended care needs, though coverage limits and waiting periods apply. Benefits become available when specific triggers, such as needing assistance with daily living activities, are met.

Medicare, the federal health insurance program, has a limited role in covering nursing home care. It primarily covers short-term, medically necessary skilled nursing facility stays, usually following a hospital stay. Medicare Part A may cover 100% of eligible costs for the first 20 days and a portion for days 21 through 100, with a daily coinsurance amount of $209.50 in 2025. After 100 days, Medicare generally ceases to cover nursing home care, especially for long-term custodial needs.

Medicaid, a joint federal and state program, is a significant payer for long-term nursing home care for individuals meeting specific income and asset requirements. Unlike Medicare, Medicaid can cover extended stays, including custodial care, for those with limited financial resources. Eligibility criteria are complex and vary by state.

Medicaid Eligibility: Asset and Income Considerations

Medicaid eligibility for nursing home coverage hinges on meeting specific financial criteria for both assets and income. For a single individual, the countable asset limit for Nursing Home Medicaid is typically $2,000 in most states. For married couples, the combined asset limit is often $3,000 to $4,000, though some states consider each spouse as a single applicant.

Countable assets include liquid resources like checking and savings accounts, certificates of deposit, stocks, bonds, and investment accounts. Exempt assets typically include a primary residence (under certain conditions), one vehicle, household goods, personal effects, and prepaid funeral arrangements.

Income limits for a single senior applying for Nursing Home Medicaid or Home and Community Based Services Waivers are often around $2,901 per month in most states for 2025. Nearly all income, including Social Security benefits, pension payments, and IRA distributions, counts towards this limit.

The Medicaid “look-back period” is generally 60 months in most states. During this time, state Medicaid agencies review financial transactions for asset transfers made for less than fair market value. If uncompensated transfers are found, a penalty period of Medicaid ineligibility may be imposed. This means the applicant must pay for their care privately for a specified duration, calculated by dividing the uncompensated transfer amount by the average monthly cost of nursing home care in that state.

Spousal impoverishment rules protect married couples when only one spouse needs nursing home care. These rules prevent the “community spouse” from becoming impoverished. The Community Spouse Resource Allowance (CSRA) allows the community spouse to retain a portion of combined countable assets, up to $157,920 in many states for 2025. A Minimum Monthly Maintenance Needs Allowance (MMMNA) also allows the community spouse to receive a portion of the institutionalized spouse’s income if their own income falls below a certain threshold, typically around $3,948 for 2025.

Impact on Specific Assets

Medicaid rules determine whether specific assets are counted towards eligibility limits or are considered exempt. A primary residence is generally exempt for Medicaid eligibility if the applicant intends to return home, or a spouse, minor, or disabled/blind child resides there. States may have an equity limit for the home, such as $730,000 in some states for 2025. While exempt for eligibility, the home can be subject to estate recovery by the state after the Medicaid recipient’s death to recoup care costs.

One automobile is typically excluded for Medicaid eligibility, regardless of its value or age. If an applicant owns more than one vehicle, the one with the highest equity value is usually exempt, while others may be counted. Personal belongings and household goods are generally exempt assets.

Financial accounts like savings, checking, and certificates of deposit are almost always countable assets. Their combined value must fall within Medicaid’s asset limits. Investments like stocks, bonds, and mutual funds are also typically counted, with their market value contributing to the total.

The treatment of retirement accounts, including IRAs and 401(k)s, varies by state. Some states exempt these accounts if they are in “payout status” and the owner takes Required Minimum Distributions (RMDs), with distributions counting as income. Other states may count the principal as an asset, requiring them to be “spent down” for Medicaid qualification. Life insurance policies with a cash surrender value exceeding about $1,500 are generally countable assets. Term life insurance, with no cash value, is typically exempt.