What Happens to My Money if I Go Into a Nursing Home?

Entering a nursing home presents significant financial challenges due to substantial long-term care expenses. These costs can quickly deplete personal savings, making it essential to understand available payment sources and eligibility for assistance programs. This article clarifies the financial implications of nursing home care, detailing payment options and the path to securing support.

Understanding Nursing Home Costs

Nursing homes provide extensive medical and personal care, leading to considerable expense. Costs include medical care, room and board, personal care assistance, and other services.

The national median cost for a semi-private room is about $9,277 per month ($305 per day). A private room costs more, around $10,646 monthly. Annually, these costs range from over $111,000 for a semi-private room to nearly $128,000 for a private room. These figures vary significantly by location, required services, and room type.

Initial Payment Sources

Individuals typically use private pay to cover nursing home expenses before government assistance. This involves using personal financial resources like savings, retirement funds, investments, or pension income.

Medicare, the federal health insurance program, offers limited coverage for skilled nursing facility (SNF) care. Medicare Part A may cover short-term SNF stays if conditions are met, such as a qualifying inpatient hospital stay of at least three consecutive days. This coverage is for rehabilitation or recovery, not long-term custodial care. Medicare covers the full cost for the first 20 days of a skilled nursing stay, followed by a daily copayment for days 21 through 100. After 100 days, Medicare coverage ceases, and the individual is responsible for all costs.

Long-term care insurance policies cover extended care services. These policies reimburse for services assisting with daily living activities or cognitive impairment. Coverage extends to care in various settings, including home, assisted living, or a nursing home. Policy benefits usually have daily or monthly limits and a lifetime maximum, often starting after an “elimination period” (a waiting period, such as 30 to 90 days). Premiums can be substantial and may increase; some newer policies combine long-term care benefits with life insurance.

Medicaid Eligibility Rules for Income and Assets

Medicaid is a joint federal and state program providing medical assistance to individuals with limited income and resources. It is a primary payer for long-term nursing home care for those meeting specific financial and medical criteria. Eligibility is determined by strict income and asset limits, which vary by state, though federal guidelines provide a baseline.

For a single applicant, the countable asset limit is typically around $2,000 in most states. Countable assets include cash, bank accounts, stocks, bonds, mutual funds, and second properties. Certain assets are “non-countable” or exempt, such as personal possessions and one motor vehicle used for transportation. An applicant’s primary residence is often exempt if in the same state, or if a spouse or dependent relative lives there. However, home equity limits can range from approximately $730,000 to $1,097,000, depending on the state.

Income limits for nursing home Medicaid vary, but many states align with a federal maximum of $2,901 per month for a single applicant in 2025. This income, excluding a small personal needs allowance ($30 to $200 per month), generally contributes towards nursing home costs once eligibility is established. Some states use an “income cap”; if an applicant’s income exceeds this, they are ineligible unless they use a “qualified income trust” or “Miller Trust” to manage their income. This trust allows income over the limit to be placed into the trust, making the individual financially eligible.

The “look-back period” is a 60-month (five-year) period immediately preceding a long-term care Medicaid application. During this time, Medicaid agencies review financial transactions for assets gifted or transferred for less than fair market value. This prevents individuals from divesting assets to qualify while retaining control.

If such transfers are identified, a penalty period of ineligibility is imposed. The penalty length is calculated by dividing the transferred asset value by the state’s average monthly nursing home cost. For example, a $50,000 transfer in a state with a $10,000 average monthly cost results in a five-month penalty. This penalty begins when the individual would otherwise be eligible and has entered a nursing home.

The Medicaid Application Process

Applying for nursing home Medicaid involves several steps. The process begins by contacting the state’s Medicaid agency, which may be known as the Department of Health or Social Services. Many states offer online, mail, or in-person application submission.

Applicants must gather documents to support their application. These include:
Proof of identity and citizenship or lawful residency (e.g., birth certificate, passport, green card).
Financial records (e.g., recent bank statements, investment accounts, income proof like pay stubs, pension statements, or Social Security).
Medical records indicating the need for nursing home care.
Power of attorney or other legal authorizations if an authorized representative assists.

After submission, the application undergoes a review, which may involve interviews. The state agency verifies information, often requesting additional documentation. Processing times vary by state, from weeks to months. Upon review completion, the applicant receives formal notification of approval or denial. If denied, the notice explains the reason, and the applicant has the right to appeal.

Special Considerations for Married Couples

When one spouse needs nursing home care and the other remains in the community, Medicaid rules prevent the community spouse from impoverishment. These “spousal impoverishment” provisions ensure the community spouse retains sufficient income and assets to live independently.

The Community Spouse Resource Allowance (CSRA) allows the community spouse to keep a protected portion of the couple’s combined countable assets. While the institutionalized spouse is typically limited to $2,000 in countable assets, the CSRA allows the community spouse to retain a substantially higher amount. In 2025, the CSRA generally ranges from approximately $31,584 to $157,920, with specific limits varying by state. This allowance is in addition to non-countable assets like the primary residence.

The Minimum Monthly Maintenance Needs Allowance (MMMNA) addresses income protection. This provision allows a portion of the institutionalized spouse’s income to be transferred to the community spouse if their own income falls below a certain threshold. The MMMNA ensures the community spouse has a minimum monthly income for living expenses.

In 2025, the MMMNA can range from approximately $2,644 to $3,948 per month, depending on the state and housing costs. If the community spouse’s income is less than their state’s MMMNA, they can receive an allocation from the institutionalized spouse’s income to reach this protected amount. This allocated income is not counted towards the institutionalized spouse’s patient liability for nursing home care.