According to LongTermCare.gov, the average cost per day for nursing home care is now $253 per day for a private room and $225 per day for a semi-private room. This amounts to approximately $6,844 to $7,698 per month (roughly $80,000 to $90,000 per year). In the most expensive states, including several Northeastern states, these costs can be nearly double the national averages, with the most expensive states approaching $150,000 per year. Costs are also higher for people with Alzheimer's or other forms of dementia requiring memory care. While nobody wants to face this realization, according to the AARP, more than one in three Americans over age 65 will eventually end up in a nursing home and nearly one in five will stay there for more than one year. Due to the high costs and relatively high probability of needing a nursing home, finding ways to pay for nursing home care should be a major concern for most people as they age.
For people who are able to live more independently, assisted living may be a more affordable option than nursing home care. With an average cost of $4,000 per month nationally, the base cost for assisted living is only about half of the cost of nursing home care. With the modern trend of assisted living facilities providing increasingly more services (including those traditionally associated with nursing homes), assisted living is becoming an option for more and more people. However, keep in mind that the base cost referenced above generally does not cover many medical and personal care services that residents in lesser health will require. Most additional services cost extra, with additional fees often approaching $1,500 to $2,000 per month. At this point, the cost could be comparable to that of a nursing home.
Independent living offers a lower level of care than assisted living and at a more affordable price. At this level of care, you must privately contract for nearly all medical and personal services. If you opt for this level of care, you are likely looking at the combined cost of independent living and some level of home healthcare as described below.
For people who only require assistance on a part-time basis or temporary basis after a fall or injury but are otherwise capable of living independently, home healthcare may also be a viable cost-effective alternative to institutional care. The cost of home healthcare varies dramatically based on the level and frequency of services required, with housekeepers and home health aides typically costing around $15 to $20 per hour and registered nurses and physical therapists costing as much as $100 per hour. As a result, this is a very affordable option for people who only need a few hours of care per day, but it is generally not practical if you require around the clock medical and personal care.
Finally, home healthcare could be supplemented by other forms of care such as adult day care or respite care to add more socialization or provide coverage when your caregivers are not available.
For people with significant liquid assets (typically in excess of $1,000,000), they may be able to afford to simply pay out of pocket (known as “private pay”). For those who survive for a long period of time with a chronic illness or who are married and have a spouse who also ends up requiring nursing home care, the asset threshold for private pay can be much higher (perhaps as high as $3,000,000 or more). Fortunately, there are also options available to those with lesser means.
There are five common methods for paying for long-term care. The most obvious is that you can private pay and simply pay the bill yourself. Second, a select few people have long term care insurance policies that cover most types of long-term care. However, very few companies still sell this and the prices are usually prohibitive.
Third, for those age 65 or older, you are likely on Medicare, which covers some rehabilitation costs at skilled nursing facilities, but not long-term care. Even when you have coverage under Medicare, it is usually very limited and runs out after a relatively short period of time. At some point, most people who live long enough in a nursing home will simply run out of resources.
Fourth, for those with limited resources or who run out of resources paying for nursing home and other medical costs, Medicaid may be an option. While many presume that Medicaid is only an option for the select few who are poor enough to qualify, many estimates indicate that between 60% and 70% of all seniors in nursing homes are now on Medicaid. Sadly, this is a testament to how expensive nursing homes have become and how many seniors have seen their life savings evaporate. Medicare and Medicaid coverage are discussed in more detail below.
Finally, veterans who either have a service-connected disability or who are sufficiently impoverished may be eligible to receive long-term care from the Department of Veterans’ Affairs. Even veterans who do not qualify for covered placement in a long-term care facility may be eligible for subsidies or pension payments.
If you are age 65 or older, Medicare may be an option to pay for some rehabilitation costs in skilled nursing facilities. As a federal program, application of Medicare is uniform throughout the country. To understand how this works, it helps to start with a brief summary of the various Medicare plans that are available and how they differ:
All of the Medicare plans above have some form of nursing home coverage, but it is more limited than most people realize. There is a widespread myth, even among many elected officials, that Medicare provides long term nursing care coverage and that is absolutely not the case. In fact, the purpose of Medicare nursing home coverage is really limited to providing a cheaper alternative to hospital care to people who require hospital level care that would be covered by Medicare but would likely be able to receive those same services in a nursing home. After all, while nursing homes are expensive, they’re usually a cheaper option compared to hospitals. Generally, this limits coverage to people who have just been involved in an accident or had a stroke or heart attack or some major surgery and require short-term rehabilitation. Generally, these people are initially hospitalized and then transferred to a nursing home to finish their rehabilitation process.
The key issue here is that Medicare only covers skilled nursing care and rehabilitation care. This care must be provided by a facility certified by Medicare as a skilled nursing facility. In other words, the care must require the supervision of a skilled medical professional, such as a physician, nurse or physical therapist. Even when you require skilled nursing care or rehabilitation care, Medicare only provides coverage as long as you are progressing towards recovery. If Medicare determines that you are not progressing in your recovery or that you are stabilized, they may terminate coverage at any time.
Medicare only covers custodial care while you are in a skilled nursing facility receiving the covered services described above. Custodial care includes most aspects of daily living and most of the care traditionally provided by nursing homes, including eating, using the bathroom, dressing and similar tasks of daily life. Once Medicare coverage ends for your skilled nursing services and rehabilitation, coverage of room and board and custodial care terminates. Medicare does not cover room and board or custodial care under any other scenario.
Medicare also does not cover nursing home care for chronic conditions, such as Alzheimer’s or dementia. Medicare would not cover these services if you were not in a nursing home, so Medicare will not cover nursing home costs of people requiring these services.
Medicare offers coverage for home health care, but it is limited. At most, Medicare will cover up to 10 hours per week of home health care services. During this covered period, Medicare may cover personal care by a home health aid under limited circumstances, but it will not cover other services such as housekeeping. Medicare also covers in-home hospice care provided for patient’s suffering from terminal illnesses with less than 6 months to live. Medicare does not cover assisted living, independent living or other types of residential care.
With such a limited scope of coverage, the rules for qualifying for Medicare coverage of nursing home costs are very restrictive. In order to qualify for coverage, you must meet all of the following criteria:
Even if Medicare does cover your nursing home costs, you are likely to be required to pay a significant portion out of pocket. Medicare will only pay 100% of the costs for the first 20 days provided that you continue to satisfy all of the criteria. After that, Medicare will continue to provide coverage for up to 100 total days, but they will charge you a $176 per day co-pay (for 2020) for days 21 through 100. This means, even if you have coverage, after the first 20 days, you will be required to pay around 80% of the total cost of nursing home care.
If you are on Original Medicare, you will be required to pay these co-pays out of pocket. If you have Medicare Advantage, the co-pays may be covered once you reach your out of pocket maximum for the year. Some Medicare Advantage plans also waive the requirement that you have a 3-day hospital stay prior to being transferred to the skilled nursing facility. If you have Medigap or supplemental insurance, the plan will generally cover all of these co-pays. After 100 days, Medicare coverage terminates.
Even if you leave the nursing home and return, you will not have a new round of coverage if you are readmitted within 60 days of discharge. Once your Medicare nursing home coverage terminates, you will be required to pay out of pocket for the remainder of your nursing home stay.
In summary, if you require hospital or rehabilitation services from an accident or injury, Medicare will likely provide coverage at least temporarily, but if you are need of a long-term care solution providing more custodial services, you likely will not have any coverage under Medicare. If you don’t have coverage under Medicare for these reasons and you run out of resources to continue paying out of pocket, you may qualify for a separate government health insurance program known as Medicaid.
Medicaid is a joint state and federal program intended to provide health insurance coverage to the poor or medically needy. As such, the federal government sets standards for care and coverage that all states are required to abide by, however, the states have substantial flexibility in crafting their own Medicaid programs which can vary substantially from state to state. Below is a summary of how most of these rules work in most states, but it should not be taken as advice for complying with the Medicaid rules of any single state, as each state has many unique rules and exceptions.
If you are blind, disabled or age 65 or older and you require the type of services provided in a nursing home, you may qualify for Medicaid long term care, which covers nursing home costs. Unlike Medicare, Medicaid will cover all of your nursing home costs, minus your co-pay which will be determined by your monthly income and other factors. Medicaid generally covers most custodial care, eating, using the bathroom, dressing and similar tasks of daily life. Finally, in many states, Medicaid also covers services (but generally not room and board) provided to people in assisted living facilities, adult day care, respite care and a broader array of home health care services than Medicare. Generally, these home and community based services are covered through Medicaid waiver programs. However, in some states these waiver programs have long waiting lists of several years or longer.
In order to qualify for Medicaid long term care in any state, you will first need a physician’s assessment that you require long term care based on your medical condition and your ability to perform activities of daily living. You will also need to meet both an income test and an asset test.
For qualification purposes under the income test, it generally makes no difference if you are single or married. The test only focuses on your income and disregards the income of your spouse. In order to meet the income test in many states, you generally must have less than $2,349 (in 2020) in monthly income for single individuals. In 2020, there are a handful of states that have income limits below this figure, with some as low as $859 per month. There are also several states that tie the income limit to the cost of your nursing home care and a few others that don’t have any income limit at all. For purposes of determining whether you meet the income test, only your income is counted and none of your spouse’s income (if married) is attributed to you. If income flows to you and your spouse jointly or from an asset owned jointly, 50% of the income will be attributed to you unless the applicable governing instrument (i.e. a partnership agreement) provides otherwise.
If your income exceeds your state’s income limit, whether you qualify for Medicaid may depend on whether you live in an “income-cap” state or a “spend-down” state (also known as a medically needy state). In an income-cap state, if you exceed the income limit by a single dollar, you will not qualify for Medicaid. In a spend-down state, you are allowed to spend down your income on medical expenses and if that reduces your income below the income limit, you may qualify for Medicaid (provided that you also meet the asset test). Most states allow you to spend down your income on nursing home costs as well but you should confirm that your state allows this. As a practical matter, as long as your nursing home costs exceed your income, you will satisfy the income test in these states. Currently, approximately half of the states are income-cap states and half are spenddown or medically needy states.
Fortunately, even in income-cap states, you may still be able to qualify for Medicaid if your income exceeds the income limit. All states now allow you to create a Qualified Income Trust (sometimes known as “Miller” trusts) and transfer any excess (or in some cases all) of your income into the trust. Rules vary from state to state and some states make a simple version of this trust available for free on their website. Generally, the trust would use all of the income in the trust to pay towards your nursing home costs or other medical costs. These trusts often allow you to achieve a similar result in an income-cap state as you would in a spend-down state.
As mentioned at the beginning of this section, you must meet both the income test and the asset test in order to qualify for Medicaid long term care. In fact, for most people the asset limit is often more difficult to satisfy. There are two reasons for this: (1) most states have a very low asset limit of only $2,000 for single individuals and $3,000 for married couples (although some are higher with a few in the $10,000 to $15,000 range); and (2) unlike with the income test, your spouse’s assets (including both jointly owned and separately owned assets) are generally counted for purposes of determining whether you qualify under the asset test. If you do not satisfy the asset test because you have too many assets, you will need to spend down your assets on medical and nursing home care until you reduce your countable assets below your state’s asset limit. Fortunately, not all assets are countable for purposes of determining qualification under the asset test. Also, each state allows your spouse to protect a certain portion of the countable assets, with all states allowing your spouse to protect at least $25,728 in countable assets and most allowing up to a maximum of $128,640.
Single Individuals: As mentioned above, most states only allow a single individual to have $2,000 in countable assets. For single individuals, the key consideration is usually which of their assets are countable. The most valuable non-countable asset for most people is their home, which is generally excluded subject to equity limits ($595,000 in most states in 2020). A more detailed analysis of countable and non-countable assets may be found below.
Married Couples: For married couples, satisfying the asset test is more complicated. The problem here is unlike with the income test, your spouse’s assets generally count for purposes of determining whether you qualify for Medicaid long term care. As a result, you can’t satisfy the asset test simply by transferring your assets to your spouse. Fortunately, in addition to being able to exclude non-countable assets (as described above for single individuals), your community spouse will be able to protect a portion of your countable assets. This is known as the Community Spouse Resource Allowance (“CSRA”). All states are required to allow your community spouse to protect a minimum CSRA of least $25,728 in countable assets and some states allow them to protect up to $128,640 (for 2020) in countable assets. Remember that this is in addition to any non-countable assets owned by a married couple. The exact amount your spouse will actually be able to protect depends on the value of your countable assets and whether you are in a 50% state or a 100% state.
The 50% states are less generous in terms of the assets they allow your spouse to protect. In 50% states, the state will generally set both a minimum CSRA (usually around $25,728) and a maximum CSRA (usually $128,640). You begin by taking your total countable assets and dividing by two. If this amount is below the minimum CSRA, your spouse will be allowed to protect the minimum CSRA, which is usually around $25,728. If the value of half of your countable assets is over the maximum CSRA, your spouse will be allowed to protect the maximum CSRA, which is usually $128,640. Your spouse will never be allowed to protect more than $128,640.
In 100% states, this calculation is much simpler and in many cases your spouse will be able to protect more assets. In these states, your spouse will generally simply be able to protect 100% of your countable assets up to the federal maximum CSRA of $128,640.
If you and your spouse are both in nursing homes and applying for Medicaid, there is no CSRA and you may not protect any countable assets. In most states, you and your spouse will only be allowed to have a combined total of $3,000 in countable assets to qualify for Medicaid long term care. Unique planning opportunities may arise if you and your spouse are both in nursing homes but only one of you is applying for Medicaid long term care, but these issues are beyond the scope of this article and we recommend you consult a qualified professional.
Below is a list of assets that are generally countable or non-countable in most states. You should always check your state’s rules because there are exceptions and for some states this list could be inaccurate. For instance, a handful of states do not count or limit the extent to which they count certain retirement accounts, including IRA’s, in specific situations.
|Countable Assets||Non-Countable Assets|
|Bank Accounts, Stock Accounts and Cash||$2,000 of Cash|
|Retirement Accounts (IRA’s, 401(k)’s, etc.)||Household Furnishings and Personal Effects|
|Whole or Universal Life Insurance||Term Life Insurance|
|Real Estate (other than principal residence)||Your Home (subject to equity limits|
|Some Vehicles||One Vehicle|
|Some Annuities||Burial Spaces, Funeral Funds and Prepaid Funeral Contracts (subject to limits)|
|Property Used in a Business|
For your home, you should be aware that it may only be excluded if you intend to return to it. In most states this intent may be subjective and you simply need to assert your intent to return. In about nine states (as of 2020), they disregard your intent and require a physician to determine whether a return home is likely. Some of these states simply determine you will not be returning home after a certain number of months in the nursing home. You may be able to do some planning to avoid being disqualified or being forced to sell your home to pay for nursing home costs. Generally, if the home is not countable under your state’s rules, you will also be able to sell the home and use the proceeds to purchase another home. This issue often arises when someone is moving to relocate to a nursing home in another state. You must be a resident of that state in order to qualify for Medicaid long term care there and of course you cannot change residency to that state if you are asserting an intent to return to a home in another state. In these situations, you may choose to sell your home and purchase another one in the state you are moving to in order to qualify for Medicaid while still protecting your home equity. Be sure to check the residency requirement of the state you are moving to, however, as many states require that you are a resident for a minimum period of time (often 6 months) before qualifying for Medicaid long term care. These rules are complex and vary significantly from state to state.
Finally, even if your home is not a countable asset under your state’s rules, all states are required by federal law to limit the amount of home equity you may protect. Most states set the limit at $595,000 (for 2020), but a handful of states have raised the home equity limit as high as $893,000.
As mentioned above, a select few states do not count certain retirement accounts. Other states count your retirement accounts, but not the retirement accounts of your community spouse. Finally, a few states make special exceptions for accounts you have already begun taking distributions from, allowing you to exclude the remaining assets in the account. Withdrawing funds from retirement accounts to pay for nursing home costs may trigger significant tax liabilities so be sure you know your state’s rules and have explored angles to protect your retirement accounts before you begin making withdrawals.
Since not all assets are counted for Medicaid purposes and some can be retained by your spouse, there may be significant opportunity to reposition your assets from countable to non-countable assets. This creates a significant planning opportunity for many people. We would recommend you consult a qualified elder law attorney in your state to determine whether you may be able to benefit from this type of planning.
Single Individuals: Once you qualify for Medicaid, you will generally still be required to pay a portion of your own nursing home costs if you have income. Most states only allow a single individual to retain $50 to $70 per month for your personal needs (known as the personal needs allowance) and you are generally required to pay the remainder of your income to Medicaid to help cover your nursing home costs. In a handful of states, the personal needs allowance is much higher, with a few allowing you to retain as much as $200 per month. In many cases, married couples are able to protect a much greater portion of their income. This is discussed in more detail in the next paragraph.
Married Couples: If you are married, you may be able to transfer some of your income to your spouse. Each state allows your spouse (known as the “community spouse”) to retain a minimum monthly income between $2,113.75 and $3,216, with most states setting the minimum right at $2,113.75. This is known as the minimum monthly maintenance needs allowance (“MMMNA”). If your community spouse has income below the MMMNA, you are typically allowed to transfer an amount of income to your spouse that will bring their combined income up to the MMMNA. In other words if you have $3,000 in monthly income and your community spouse has none, you may generally transfer $2,113.75 per month to your spouse while you’re in a nursing home. Remember that the community spouse is never required to contribute their income to pay for their spouse’s nursing home care and their income is never counted for purposes of the income limit, so if the community spouse has income over the MMMNA they are allowed to keep it, but in that situation they would simply be ineligible to receive additional income from their spouse in the nursing home.
In some situations, you may even be able to transfer more than your state’s MMMNA to your community spouse while you’re in a nursing home. Remember that you can never transfer income that would bring your spouse’s income above the federal maximum MMMNA of $3,216, so this loophole only applies if your state has a minimum MMMNA below $3,216. If your spouse’s “shelter” costs (which include your mortgage or rent, property taxes, home owner’s insurance, utility allowance and perhaps other housing related expenses) exceed 30% of the MMMNA in your state, you may increase your spouse’s monthly allowance by the amount of their shelter costs and this is known as the excess shelter allowance. In most states, this will require your spouse to have at least $635 in housing costs, which is a relatively low figure if you have a mortgage on your home. In certain situations, you may benefit from having a greater monthly mortgage payment on your home.
In many cases, you may be able to transfer additional income to your community spouse if you have other family members living in the home. You should check your state’s rules to see which family members would qualify and how much of an allowance they are entitled to. Note that the family allowance is not subject to the federal or state maximum MMMNA, so you may actually be able to transfer more than $3,216 per month to your spouse if you qualify.
Be very careful about making gifts if you expect to be admitted to a nursing home in the near future and apply for Medicaid. All states have a lookback period, which is almost always 60 months. If you or your spouse have made transfers for less than fair market value during this 60-month period prior to your application, the state will generally assess a penalty period before allowing you to receive Medicaid long term care. Typically the length of the penalty period is equal to the number of months determined by dividing (i) the value of gifts you and your spouse made during the lookback period; by (ii) the average cost per month of nursing home care in your state. In other words, if you and your spouse made $250,000 worth of gifts during the lookback period and the average cost of nursing home care in your state is $10,000, the state will assess a penalty period of 25 months and you will not be eligible for nursing home coverage during this period. This could be a major problem if the recipients of these gifts no longer have the resources or are unwilling to make them available to you for your nursing home care. There are certain limited situations where you may be able to make gifts that are not subject to these restrictions.
Unlike most government benefits, in many cases benefits you receive from Medicaid long term care are only temporary. If you receive nursing home coverage from Medicaid, the state is actually required to seek to collect any amounts paid for your nursing home or medical care from your estate following your death. This is known as estate recovery.
In a minority of states, the definition of “estate” is limited to include only your probate estate. This includes only property that passes through probate upon your death and excludes any property passing by beneficiary designation like retirement accounts, jointly held real estate, or other accounts with pay on death or transfer on death designations. In most states, they have expanded the definition of estate to include all probate and non-probate assets. In these states, the state can go after any property you held any form of ownership interest in prior to your death.
One exception to the estate recovery rules is that for married couples, the state may not go after your estate until after the death of your surviving spouse. There are other similar exceptions that may apply to recovery against your home if you have young children or other relatives living in the home at the time of your death.
In many states, Medicaid’s recovery against your estate is complicated by procedural issues such as statutes of limitations. For instance, in many states claims against an estate lapse if they are not filed within one year of the date of death. In theory, if your surviving spouse survives for one year, the statute of limitations would nullify any estate recovery. In response to this, many states have begun exempting estate recovery from the applicable statute of limitations and/or filing liens against property which have a longer window for collection. Due to the nuances of these rules, if you are a surviving spouse or heir and you receive a collection letter from Medicaid, you should consult a qualified elder law attorney before assuming you are legally required to pay it.
As mentioned above, the odds are if you are reading this article, (1) you do not have long term care insurance and (2) if you need it soon it will either be impossible to obtain or prohibitively expensive. Nevertheless, if you are planning ahead and are young and healthy enough to get a reasonable premium on a policy, insurance may be a good option for you. Even for that population, the premiums may still be $10,000 per year or more. One of the main advantages of long term care insurance is that if you buy a good policy, you may have coverage for a wide array of facilities, not just nursing homes. If you elect to purchase long term care insurance, be sure to buy enough coverage. At minimum you should purchase an amount of coverage equal to the average cost of nursing homes in your state adjusted for inflation through your remaining life expectancy. Also, read the policy carefully and make sure it doesn’t contain any major restrictions. Some policies contain restrictions mirroring the Medicare restrictions, such as requiring that you are hospitalized first before going into the nursing home in order to get coverage. This type of restriction often defeats the entire purchase of having insurance. First, if you were hospitalized, there is a good chance you end up in a skilled nursing facility and may be able to get all or a portion of the stay covered by Medicare. Second, most people end up in nursing home as a result of deterioration from aging or a chronic condition and not as the result of a hospital stay. This is not an area where you want to discount shop and find the cheapest policy regardless of its restrictions. If you do elect to buy long term care insurance, buy a policy that will actually protect you when the time comes.
There are two basic types of assistance provided to veterans by the Department of Veterans Affairs (“VA”): long-term care covered directly by the VA and monetary subsidies paid by the VA to veterans.
The VA generally provides long-term care to veterans who either have a service-connected disability or have any disability in addition to meeting an income and asset-based test. Veterans who qualify for direct long-term care may be eligible to receive long-term care in a veteran’s home, nursing home or assisted living community that is operated by the VA or a private facility that contracts with the VA. In addition, the VA covers home healthcare, adult day care and hospice care for qualified veterans under this program.
The eligibility standards are very particular and you should contact the VA’s Office of Geriatrics and Extended Care for more information if you believe you qualify. Veterans can apply for long-term care by completing an Application for Extended care Services and submitting it to the VA.
Veterans who do not qualify for long-term care may still qualify for subsidies or pension payments from the VA. Generally, to qualify for these programs, veterans must either have a service-connected disability or be over age 65, have served in the military during wartime and satisfy an income-based test. In some cases, benefits are also available to surviving family members of deceased veterans. Eligibility for these programs is more complex and the amount of the subsidies varies significantly. We would advise you to contact an Elder Law attorney who is familiar with Veterans Aid and Attendance planning.