How to Pay for a Nursing Home When Money Runs Out

Nursing home care costs can be substantial. This article explores primary methods of funding nursing home care after personal funds have been spent, including government assistance programs.

Qualifying for Medicaid Long-Term Care

Medicaid serves as the largest payer of long-term care in the United States, providing a safety net for individuals whose private funds are depleted. Eligibility for Medicaid long-term care hinges on two main categories: financial and medical. Applicants must meet specific income and asset limits, which vary by state because Medicaid is a joint federal and state program. Generally, these programs require applicants to have very low income and minimal countable assets.

Medical eligibility requires a state agency assessment to determine if institutional care is needed. Meeting this medical necessity is a prerequisite for receiving Medicaid coverage for such services.

Some states have “medically needy” or “spend down” provisions. These allow individuals with higher incomes to qualify by using excess income for medical care, including nursing home costs, until their income meets the state’s Medicaid limit. This mechanism helps bridge the gap for those with incomes slightly above the threshold.

Federal “spousal impoverishment” rules protect the community spouse from financial hardship when their partner requires nursing home care under Medicaid. These rules, including the Community Spouse Resource Allowance (CSRA) and the Minimum Monthly Maintenance Needs Allowance (MMMNA), allow the community spouse to retain a certain amount of assets and ensure a minimum monthly income.

Certain assets are exempt from Medicaid’s countable resource limits, meaning they do not affect eligibility. These include the primary residence (with equity limits or if a spouse, minor child, or disabled child resides there), one automobile, personal belongings, household goods, and certain prepaid burial funds.

Applying for Medicaid Benefits

Application forms are available from a state’s Medicaid agency website or local social services office. Online submission is often encouraged for faster processing.

Applicants must provide extensive documentation to support their eligibility claims. This typically includes:
Proof of income (e.g., Social Security award letters, pension statements, tax forms)
Bank statements
Property deeds
Insurance policies
Medical records
Identification documents (e.g., driver’s license, state ID)

A caseworker interview may be required to verify information and assess the applicant’s circumstances. Processing times vary by state, from a few weeks to several months.

Applicants are notified by mail. Denials include reasons and appeal information; applicants can request a fair hearing.

Veterans Aid and Attendance Pension

The Veterans Aid and Attendance Pension is a tax-free monthly benefit from the U.S. Department of Veterans Affairs (VA). It is available to eligible wartime veterans and their surviving spouses. Veterans must have served at least 90 days active duty, with one day during wartime, and received an honorable or other than dishonorable discharge.

Medical requirements include needing assistance with daily activities like bathing or dressing. Eligibility also applies if the applicant is bedridden, has severe vision impairment, or resides in a nursing home due to mental or physical incapacity.

Financial limits apply, with an annually adjusted net worth limit. Countable income can be offset by unreimbursed medical expenses, including nursing home costs.

The application involves submitting specific VA forms. VA Form 21-2680, for physician’s medical needs, and VA Form 21-0779, for nursing home information if applicable, are required. Supporting evidence includes military discharge papers, income and asset proof, and medical records. The VA may review asset transfers with a three-year look-back period.

Medicaid Asset Rules and Transfers

Medicaid has rules preventing asset transfers to qualify for benefits. A 60-month (five-year) “look-back period” from the application date allows state agencies to review financial transactions, including gifts or assets sold below market value. The purpose of this look-back is to ensure applicants genuinely require financial assistance for long-term care.

Identified asset transfers during the look-back period may result in a “penalty period” of Medicaid ineligibility. This period is calculated by dividing the uncompensated transfer value by the state’s average monthly nursing home cost, known as the penalty divisor. The individual must cover nursing home costs during this time.

Certain asset transfers and financial arrangements, like annuities and promissory notes, are scrutinized and must be structured to be Medicaid-compliant to avoid triggering a penalty. Assets in irrevocable trusts transferred before the look-back period may be protected, but transfers during this period can incur a penalty. Revocable trusts are countable assets.

Exceptions to the look-back rule include transfers to a spouse, a permanently disabled child, or a caretaker child. Payments for legitimate debts, like a mortgage, are also exempt.

The Medicaid Estate Recovery Program (MERP) requires states to seek reimbursement for long-term care costs from a deceased recipient’s estate. This primarily targets those aged 55 or older who received nursing facility or home-based services. Recovery is not pursued if a surviving spouse, a child under 21, or a blind or disabled child lives in the home. States must also have hardship waiver procedures.