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

Nursing home care raises financial concerns about savings and assets. Substantial long-term care costs prompt questions on managing expenses without depleting savings. Understanding funding and eligibility rules aids families in navigating these challenges and making informed decisions.

Funding Nursing Home Care: Sources and Costs

Nursing home care can be financed through several avenues, each with specific conditions. Many individuals initially cover these costs through “private pay,” using personal savings, investments, and retirement until these resources are reduced or exhausted. The median cost for a private room in a nursing home in the United States was approximately $116,940 per year in 2023, illustrating how quickly assets can be depleted.

Long-term care insurance offers a private option to cover nursing home costs. These policies pay a daily or monthly benefit for a specified period after a waiting period, once the policyholder meets triggers like needing daily living assistance. However, premiums can be expensive, and coverage limits may not always keep pace with rising care costs.

Medicare, the federal health insurance program for those 65 or older, has a limited role in covering nursing home care. It primarily covers short-term, skilled nursing facility (SNF) care for rehabilitation after a hospital stay, up to 100 days. It covers skilled nursing or therapy services, not long-term custodial care. After the first 20 days, a daily co-payment applies, which was $204 per day in 2024.

Medicaid, a joint federal and state program, serves as the primary public funding source for long-term nursing home care for those meeting specific financial and medical eligibility. It is designed for individuals with limited income and assets, stepping in when other resources deplete. While Medicare provides acute medical care, Medicaid is the safety net for extended long-term care needs.

Asset Treatment for Eligibility Determination

Asset categorization is fundamental to determining long-term care assistance eligibility, especially for Medicaid. Assets are generally classified as either “countable” or “exempt,” dictating if they are available for care or protected.

Countable assets include financial resources like checking and savings accounts, CDs, and most investment accounts; certain retirement accounts, particularly those that can be liquidated, may also be countable depending on state rules. Non-homestead real estate, such as vacation properties or rental units, also falls into this category. These assets are expected to be used for care costs before public assistance becomes available.

Exempt assets are not factored into eligibility, allowing individuals to retain possessions. These commonly include:
A primary residence, though most states impose an equity limit (e.g., $713,000 in 2024).
One vehicle.
Household goods and personal effects.
Certain pre-paid burial arrangements.

Income refers to regular payments like Social Security, pensions, or wages. Assets represent what an individual owns, such as bank balances or real estate. Both are evaluated under different rules for long-term care benefits eligibility.

Medicaid Eligibility: Income, Asset, and Transfer Rules

Medicaid eligibility for long-term nursing home care involves specific financial thresholds and rules for income, assets, and past transfers. For a single individual, income limits typically require monthly income below the cost of care, or a specific “income cap” in income-cap states. If income exceeds the cap, a “spend-down” process may be required, where excess income pays for medical expenses until eligibility is met.

Asset limits for single individuals seeking Medicaid nursing home coverage are strict. In most states, the countable asset limit is $2,000. After accounting for exempt assets, an individual’s combined countable resources must not exceed this amount to qualify.

Medicaid eligibility includes a 5-year “look-back” period. This period extends 60 months prior to application, allowing the state to review all financial transactions. It identifies uncompensated asset transfers, such as gifts or sales below fair market value. If such transfers are identified, a penalty period of ineligibility for Medicaid may be imposed.

The penalty period is calculated by dividing the total value of the uncompensated transfer by the average monthly cost of nursing home care in the applicant’s state. For example, if $100,000 was gifted and the average monthly cost of care is $10,438 in Florida, a 9.58-month penalty period would apply. During this period, the individual is ineligible for Medicaid and responsible for care costs. After a Medicaid recipient passes away, state Medicaid agencies seek recovery of long-term care costs from the deceased individual’s estate.

Spousal Protections in Medicaid

Medicaid protects the financial well-being of the “community spouse” (who remains home while their partner receives nursing home care), preventing impoverishment due to care costs. One key protection is the Community Spouse Resource Allowance (CSRA).

The CSRA allows the community spouse to retain a portion of the couple’s combined countable assets, even if it exceeds the individual asset limit. In 2024, the minimum CSRA allowed was $30,828, and the maximum was $154,140. The couple’s total countable assets are assessed, protecting an amount up to the state’s maximum CSRA for the community spouse.

Another important protection is the Minimum Monthly Maintenance Needs Allowance (MMMNA). This allowance permits the community spouse to receive a portion of the couple’s combined income each month for living expenses. In 2024, the MMMNA ranged from $2,465 to $3,853.50 per month, depending on the community spouse’s housing and utility costs. If the community spouse’s income falls below this threshold, a portion of the nursing home spouse’s income can be allocated to them.

While spousal asset transfers are generally not subject to the 5-year look-back penalty, asset division still impacts the nursing home spouse’s eligibility. This ensures a fair assessment of resources for both partners.