How Nursing Homes Get Paid: A Financial Breakdown

Nursing home care in the United States involves a complex financial landscape. Understanding these funding streams is important for individuals and families planning for potential long-term care needs. The methods for covering the costs of nursing home stays range from government programs to private arrangements, each with distinct eligibility criteria and coverage limitations, enabling them to provide a range of medical and personal care services.

Medicare Payments

Medicare, a federal health insurance program, provides limited coverage for skilled nursing facility (SNF) care. For Medicare Part A to cover SNF services, a beneficiary must first have a qualifying inpatient hospital stay of at least three consecutive days. The individual generally needs to be admitted to the SNF within 30 days of hospital discharge for a condition related to the hospital stay. This coverage is specifically for skilled care, such as nursing and therapy services, which require medical expertise.

Medicare Part A covers the full cost of approved SNF care for the first 20 days within each benefit period. A benefit period begins the day an individual is admitted as an inpatient in a hospital or SNF and ends when 60 consecutive days have passed without inpatient hospital or skilled nursing care. For days 21 through 100 of a benefit period, Medicare covers most costs, but the beneficiary is responsible for a daily copayment, which is $209.50 per day in 2025.

Beyond 100 days in a benefit period, Medicare generally does not cover SNF costs, and the individual becomes responsible for all charges. Medicare does not cover long-term custodial care, which involves assistance with daily activities without requiring skilled medical services. Nursing homes bill Medicare through a consolidated claim for bundled services.

Medicaid Payments

Medicaid serves as the primary payer for long-term nursing home care in the United States. This joint federal and state program is means-tested, meaning eligibility depends on an individual’s income and assets falling below specific limits. While specific thresholds vary by state, a single applicant typically must have countable assets below a certain amount, often around $2,000, and income under a set limit, such as approximately $2,901 per month in 2025 for nursing home Medicaid. For married couples where only one spouse is applying, special rules apply to protect a portion of the couple’s assets for the non-applicant spouse, known as the Community Spouse Resource Allowance, which can be up to $157,920 in most states.

Individuals whose income or assets exceed Medicaid’s limits may still qualify through a process called “spend-down.” This involves reducing countable assets or income by paying for medical expenses, nursing home care, or other approved costs until the financial thresholds are met. For example, excess income can be used to pay for medical bills not covered by insurance. Medicaid covers comprehensive long-term custodial care, including room and board, medical services, and personal care, distinguishing it from Medicare’s limited SNF coverage. Nursing homes often receive lower reimbursement rates from Medicaid compared to private pay or Medicare. The application process for Medicaid nursing home care requires extensive documentation to verify income, assets, and medical necessity.

Other Payment Sources

Several other avenues exist for covering nursing home expenses.

Private Pay

Private pay involves individuals using their own financial resources, such as savings or income, to directly cover care costs. This method offers flexibility in choosing facilities and services, and it is often utilized when individuals do not qualify for government assistance or prefer a specific facility. Many residents initially pay privately before exploring other options, especially if their assets are substantial.

Long-term Care Insurance

Long-term care insurance policies cover various long-term services, including nursing home care. These policies typically reimburse for services such as room and board, skilled nursing care, and assistance with daily activities. Policyholders usually select a daily benefit amount and a total benefit period or maximum dollar amount. Most policies include an “elimination period,” which is a waiting period, often 30 to 90 days, during which the policyholder must pay for care out-of-pocket before benefits begin. Nursing homes may bill the insurance company directly, or the resident is reimbursed by the insurer.

Veterans’ Benefits

Veterans’ benefits can provide financial assistance for nursing home care for eligible veterans and their surviving spouses. One notable program is the Aid and Attendance pension benefit, which supplements a veteran’s pension to help cover the costs of long-term care when a veteran requires assistance with daily living activities. To qualify, veterans must meet service requirements, and both income and asset limitations apply, though these are typically less stringent than Medicaid. The amount received can vary based on the veteran’s dependency status and the cost of care, but it may not cover the entire expense of a nursing home.