How Are Nursing Homes Paid for Long-Term Care?

Navigating the financial landscape of nursing home care presents a significant challenge. The substantial costs of long-term care services often necessitate a multifaceted payment approach. Understanding available funding mechanisms is essential for effective financial planning, as relying on a single source may not be feasible or sufficient. Different types and durations of care are covered by distinct programs and private arrangements.

Medicare Coverage for Skilled Nursing Care

Medicare covers skilled nursing facility (SNF) care, but only for short-term, medically necessary rehabilitation, not long-term custodial care. To qualify for Medicare Part A, an individual needs a qualifying inpatient hospital stay of at least three consecutive days before SNF admission. This stay excludes emergency room or observation time. SNF admission typically occurs within 30 days of hospital discharge, and care must relate to the hospital stay or a new condition developed during SNF care.

Skilled nursing care refers to services performed by licensed medical professionals, such as nurses or therapists, to improve or maintain a condition. Examples include intravenous injections, wound care, physical therapy, occupational therapy, and speech-language pathology. Medicare Part A covers services like a semi-private room, meals, skilled nursing care, therapies, medications, and medical supplies. For 2025, Medicare covers the full cost for the first 20 days of a SNF stay within a benefit period.

A benefit period begins the day an individual is admitted as an inpatient to a hospital or SNF and ends when they have been out of an SNF or hospital for 60 consecutive days. From day 21 through day 100 of a SNF stay, beneficiaries are responsible for a daily copayment of $209.50 in 2025. After 100 days in a benefit period, Medicare does not cover SNF costs, and the individual becomes responsible for all expenses. Medicare does not cover long-term, non-medical custodial care, which involves assistance with daily activities like bathing, dressing, and eating.

Medicaid for Long-Term Care

Medicaid serves as the primary payer for long-term nursing home care for individuals meeting specific financial and medical eligibility criteria. As a joint federal and state initiative, eligibility rules vary significantly across jurisdictions despite federal guidelines. Medicaid covers a comprehensive range of services for eligible nursing home residents, including room and board, skilled nursing care, personal care, and medications. Unlike Medicare, there is no time limit on the length of a covered stay, with Medicaid potentially covering care as long as medically necessary.

Financial eligibility for Medicaid involves strict limits on income and countable assets. For 2025, many states set the individual asset limit for nursing home Medicaid at approximately $2,000, and the monthly income limit for a single applicant is often around $2,901. For married couples where only one spouse applies, the non-applicant spouse (community spouse) is generally allowed to retain higher assets, often up to $157,920 in 2025, to prevent spousal impoverishment.

Individuals whose income or assets exceed these limits may still qualify through “spend down.” This process involves reducing excess financial resources to meet Medicaid’s eligibility thresholds by paying for medical expenses or converting countable assets into exempt assets. Common strategies include paying off debts, making necessary home improvements, or purchasing exempt assets like an automobile or an irrevocable funeral trust. A “look-back” period, typically 60 months, reviews past financial transfers to prevent gifting assets to qualify for Medicaid, with penalties for impermissible transfers.

Beyond financial requirements, applicants must meet medical necessity criteria, demonstrating a need for nursing facility care. This often involves an assessment confirming the individual requires assistance with activities of daily living or needs skilled nursing or rehabilitative services. Medicaid becomes a payer of last resort, stepping in when other payment options, such as private funds or long-term care insurance, are exhausted or unavailable.

Private Payment and Long-Term Care Insurance

Private payment involves using personal financial resources to cover nursing home care costs directly. This includes tapping into savings, investments, pension income, Social Security benefits, or other personal assets. Nursing home care costs are substantial, making private payment a significant financial undertaking.

For 2025, the median cost for a private room nationally is approximately $10,965 per month, with a semi-private room averaging around $9,555. Annually, these costs can range from over $114,000 for a semi-private room to more than $131,000 for a private room. Due to these high costs, private payment can quickly deplete resources, becoming unsustainable for many over prolonged periods.

Long-term care insurance (LTCI) offers a private solution to help cover these expenses and protect personal assets. These policies are purchased individually and involve regular premiums. LTCI policies generally pay a set daily or monthly benefit amount for covered services, including nursing home care, assisted living, or in-home care. Many policies include an “elimination period,” a waiting period (often 30 to 90 days) during which the policyholder pays for care out-of-pocket before benefits begin.

The “benefit period,” or duration for which benefits are paid, is chosen at purchase, with common options ranging from three to five years. Some policies may offer lifetime benefits, though these are less common and more expensive. Premiums for LTCI policies vary based on age at purchase, health status, gender, and coverage amount. While insurers can increase rates for all policyholders if actuarially justified, premiums for a specific policyholder generally do not change based on individual health or age after policy issuance. Some policies also offer hybrid options, combining long-term care coverage with life insurance, providing a death benefit if long-term care is never needed.

Veterans Benefits and Alternative Programs

Veterans and their surviving spouses may be eligible for financial assistance for nursing home care through Department of Veterans Affairs (VA) benefits. The Aid and Attendance program is a pension benefit assisting eligible veterans and their survivors with long-term care costs, including nursing home services. This benefit is an additional payment added to the basic VA pension for those requiring the aid and attendance of another person.

Eligibility for the Aid and Attendance program requires specific criteria related to military service, medical need, and financial status. Veterans must have served at least 90 days of active duty, with at least one day during a wartime period, and not have received a dishonorable discharge. Medical criteria involve needing assistance with activities of daily living, being bedridden due to disability, severe vision impairment, or residing in a nursing home due to physical or mental limitations. Financial eligibility includes an annual net worth limit, encompassing countable income and assets. For 2025, the net worth limit for VA pension eligibility, including Aid and Attendance, is approximately $159,240.

Beyond VA benefits, other programs can offer assistance, though they may be less common or have more specific eligibility requirements. One such program is the Program of All-Inclusive Care for the Elderly (PACE). PACE provides comprehensive medical and social services to individuals eligible for nursing home care who wish to remain in their homes and communities. This program integrates various healthcare and support services, covering primary care, specialist services, therapy, social services, and in-home care. Eligibility for PACE requires participants to be 55 years or older, certified by their state as needing nursing home level of care, and able to live safely in the community with the program’s support.