What Happens If You Are in a Nursing Home and Run Out of Money?

Long-term nursing home care presents significant financial considerations, as high costs can quickly deplete personal savings. When personal funds are nearing exhaustion, understanding available pathways and support systems becomes important. This guide clarifies the steps and considerations involved when private resources for nursing home care are no longer sufficient.

Immediate Actions When Funds Run Out

When a nursing home resident’s private funds are depleted, the facility typically initiates communication regarding the financial change. Nursing homes provide notice of impending fund depletion, often requesting a plan for how future care will be financed. This signals the need for prompt action from the resident or their designated representative.

Engage directly with the nursing home’s administrative or social services staff as soon as financial concerns arise. Social workers can assist residents and families with navigating financial issues, providing information on available programs. They can also help coordinate resolutions with the resident, family, and facility business office. Gathering all relevant financial documents is a crucial immediate step to prepare for any applications for assistance.

Nursing homes are generally limited in discharging residents solely due to a change in payment source, especially if the resident still requires their level of care. Proactive engagement is important. Seeking guidance from the facility’s social worker or a benefits counselor can provide a clear understanding of the options available, ensuring a smooth transition to an alternative payment method and avoiding care disruptions.

Understanding Medicaid Eligibility

Medicaid is a primary solution for long-term nursing home care once private funds are exhausted, operating under specific eligibility criteria. Most of a nursing home resident’s income, beyond a small personal needs allowance (typically $30-$200 per month, varying by state), is expected to contribute to their care costs. This “patient share of cost” means Medicaid covers the remainder of the nursing home expenses after the resident’s contribution.

Asset limits are stringent for individuals seeking Medicaid long-term care. Countable assets must not exceed $2,000. Exempt assets, which do not count towards this limit, commonly include a primary residence (if a spouse or dependent child resides there), one automobile, personal belongings, and pre-paid burial plans.

A significant aspect of Medicaid eligibility is the 60-month, or five-year, look-back period. This period reviews financial transactions for any asset transfers made for less than fair market value prior to applying for benefits. If uncompensated transfers are identified, a penalty period of ineligibility for Medicaid benefits may be imposed. The length of this penalty period is calculated by dividing the value of the uncompensated transfer by the average monthly cost of nursing home care in a given state, often referred to as the “penalty divisor”.

For married couples where one spouse requires nursing home care and the other remains in the community, spousal impoverishment rules offer financial protection. The Community Spouse Resource Allowance (CSRA) permits the non-applicant spouse to retain a portion of the couple’s combined assets. For 2025, the federal minimum CSRA is $31,584 and the maximum is $157,920. Additionally, the Minimum Monthly Maintenance Needs Allowance (MMMNA) allows the community spouse to receive a portion of the institutionalized spouse’s income if their own income is insufficient, with federal guidelines for 2024 setting the maximum at $3,853.50.

To demonstrate eligibility, a comprehensive array of documents is required, including:
Bank statements, investment statements, and other financial records for the full 60-month look-back period to verify assets and transfers.
Income verification documents such as Social Security statements, pension statements, and tax returns to assess monthly income.
Legal documents like photo identification, Social Security cards, and any durable power of attorney forms.
Deeds for property and car registrations.
Health insurance premium statements.

The Medicaid Application Process

Once eligibility requirements are understood and necessary documents gathered, submitting a Medicaid application begins. Applications are typically filed through the state Medicaid agency or a local social services office. Some states also offer online application portals, which can result in faster processing. Applications can generally be submitted in person, by mail, or through these online platforms.

After submission, the Medicaid agency initiates a review process, which may include an interview with a caseworker to clarify information. The agency verifies provided details and may request additional documentation to complete their assessment. This verification process ensures accuracy and adherence to program guidelines.

Applicants are notified of the decision regarding their eligibility. If approved, the notification specifies the effective date of coverage, which can sometimes be retroactive to the month of application if all criteria were met. If denied, the applicant has the right to appeal the decision. The denial notice includes information on how to request a fair hearing, and it is important to adhere to specified deadlines (typically 30-90 days from the denial notice date). During the appeal, a neutral party reviews the decision, with a resolution generally provided within a specific timeframe, often 90 days.

Life After Medicaid Approval

Upon Medicaid approval for nursing home care, the resident’s financial landscape shifts considerably. The “patient share of cost” means the majority of the resident’s income, after deducting the personal needs allowance and any allowances for a spouse or dependents, is contributed directly to the nursing home for their care. Medicaid then covers the remaining balance of the nursing home costs.

Medicaid eligibility is not a one-time determination; annual reviews are typically required to re-verify the recipient’s income and assets. This ongoing assessment ensures individuals continue to meet the program’s financial criteria. Recipients or their representatives must promptly report any changes in income, assets, or living situation to the Medicaid agency.

A significant long-term implication of Medicaid coverage is the Medicaid Estate Recovery Program (MERP). Federal law requires states to seek reimbursement for long-term care costs from the deceased recipient’s estate. This recovery typically targets assets that pass through probate, such as the home, though some states may also seek recovery from non-probate assets. Common exemptions exist where recovery is not pursued, such as when a surviving spouse, a child under 21, or a blind or disabled child of any age resides in the home. States also have provisions to waive estate recovery if it would cause undue hardship to the heirs.