Who Pays for Nursing Home Care When Money Runs Out?

The cost of nursing home care in the United States presents a significant financial challenge for many families. When personal savings, long-term care insurance, and other private resources are depleted, the concern of who will cover these expenses becomes immediate. This article explores primary avenues for financial assistance for long-term nursing home care after personal funds are exhausted.

Medicare’s Limited Role

Medicare, the federal health insurance program for individuals aged 65 or older and certain younger people with disabilities, covers specific healthcare needs, but its role in long-term nursing home care is restricted. Medicare is primarily designed for acute medical care and short-term rehabilitative services, not for long-term custodial care. This distinction is important for those seeking assistance with ongoing nursing home costs.

Medicare may cover skilled nursing facility (SNF) care only under specific conditions. An individual must have had a qualifying hospital stay of at least three consecutive days before SNF admission. Admission to a Medicare-certified SNF must be for the same condition treated during the hospital stay. The individual must require daily skilled nursing care or therapy services, such as physical therapy or intravenous injections, provided by professional medical personnel.

Even when these conditions are met, Medicare coverage for SNF care is limited in duration. Medicare covers 100% of approved costs for the first 20 days in a benefit period. For days 21 through 100, the beneficiary is responsible for a daily coinsurance payment ($204 per day in 2024). After 100 days, Medicare coverage for SNF care ceases entirely, meaning it does not cover long-term custodial care needs when personal funds are exhausted.

Medicaid as a Primary Funding Source

Medicaid is the primary government program providing financial assistance for long-term nursing home care once personal resources are depleted. This joint federal and state program offers health coverage and long-term care services to low-income individuals and families. For nursing home care, Medicaid eligibility hinges on meeting specific financial and medical criteria, ensuring assistance for those with genuine need.

Eligibility Requirements

Medicaid nursing home benefits require meeting income and asset limits. Income limits require an individual’s monthly income to be below a certain threshold, which varies by state. Some states implement a “Medically Needy” or “Spend Down” provision, allowing individuals with income exceeding the standard limit to qualify if their medical expenses, including nursing home costs, reduce their “countable” income below the set threshold.

Asset limits are set, with many states setting the countable asset limit at $2,000. Countable assets include cash, funds in checking and savings accounts, stocks, bonds, and most retirement accounts. Certain assets are considered “non-countable” or “exempt” and do not factor into this limit; these commonly include a primary residence (up to an equity limit that can range from approximately $713,000 to $1,071,000, depending on the state, unless a spouse or dependent lives there), one vehicle, personal belongings, household goods, and certain burial funds or plots.

Asset Transfer Rules

Medicaid programs implement a “look-back period” to prevent individuals from transferring assets to qualify for benefits. This 60-month (five-year) period immediately precedes the Medicaid application date and nursing home entry, allowing the state to review financial transactions. Any uncompensated transfers of assets, such as gifting money or property for less than fair market value, during this look-back period can result in a penalty period of ineligibility for Medicaid benefits. The length of this penalty period is calculated by dividing the uncompensated transfer amount by the average monthly cost of nursing home care in the state.

Spousal Impoverishment Protections

Federal law protects the “community spouse” from financial hardship when their partner requires nursing home care and applies for Medicaid. The “Community Spouse Resource Allowance” (CSRA) allows the community spouse to retain assets (ranging from approximately $30,828 to $154,140 in 2024, varying by state). This allowance ensures the community spouse has resources to maintain their household.

The “Minimum Monthly Maintenance Needs Allowance” (MMMNA) protects a portion of the institutionalized spouse’s income for the community spouse. If the community spouse’s income is below a state-determined minimum, they can receive a portion of the institutionalized spouse’s income to meet monthly living expenses (up to approximately $3,853.50 per month in 2024). These protections prevent impoverishment of the spouse remaining in the community.

Medicaid Estate Recovery

Federal law mandates states recover Medicaid long-term care costs from deceased recipients’ estates. This “Medicaid Estate Recovery” provision applies to nursing home care, home and community-based services, and related hospital and prescription drug services. The state can seek reimbursement from the deceased’s “estate,” including assets passing through probate, and in some states, assets held in joint tenancy, life estates, or revocable trusts.

There are specific circumstances under which estate recovery may be deferred or waived. Recovery is not pursued if there is a surviving spouse, or a surviving child who is under 21, blind, or permanently and totally disabled. States may also waive recovery in cases where it would cause undue hardship, such as when the estate is the sole income-producing asset of the survivors, or when the property is a family farm or business and recovery would result in the family losing its primary source of income.

Veterans Benefits

Veterans and their surviving spouses may find financial assistance for nursing home care through Department of Veterans Affairs (VA) benefits. These benefits are distinct from Medicare and Medicaid, supporting those who served the nation. The Aid and Attendance benefit is a relevant enhanced pension for eligible individuals covering nursing home costs.

The Aid and Attendance benefit provides a monthly payment to wartime veterans or their surviving spouses who meet criteria. To qualify, a veteran must have served at least 90 days active duty, including one day during wartime, and received an honorable discharge. Surviving spouses may also be eligible. This benefit is for those requiring aid for daily activities, who are housebound, or are nursing home patients due to mental or physical incapacity.

Aid and Attendance financial eligibility involves income and asset limitations, more generous than Medicaid’s. The applicant’s net worth (income and assets) must not be excessive, allowing qualification while retaining some resources. The VA assesses “countable” income and assets against thresholds. The Aid and Attendance benefit helps offset nursing home care costs, providing a resource for eligible veterans and their families.

Applying for Financial Assistance

Applying for financial assistance programs like Medicaid and Veterans benefits requires preparation. This involves gathering documentation and understanding submission requirements for each program. Initiate the application promptly once personal funds begin to deplete.

Collecting all financial and personal records is important. Documentation includes bank statements, investment account statements, property deeds, vehicle titles, and life insurance policies. Medical records, proof of identity, Social Security cards, and marriage certificates are also required. For veterans, military discharge papers (DD-214) are essential; power of attorney documents are needed for those acting on behalf of an applicant.

Medicaid applications are initiated through the state Medicaid agency, a local Department of Social Services office, or an Area Agency on Aging. These agencies provide application forms and guidance on state requirements. For Veterans benefits, individuals can apply directly through a local VA office, or seek assistance from accredited Veterans Service Organizations (VSOs) or qualified elder law attorneys.

The submission process can involve paper applications (mail or in-person) or online portals. After submission, applicants should expect interviews, requests for additional information, and home visits for needs assessments. Processing time varies from several weeks to several months. If an application is denied or a decision is disputed, there is a right to appeal.