Does Medicare Cover Nursing Homes?

For many families, nursing home costs put their assets at risk. Consequently, understanding coverage options is paramount in safeguarding one’s financial well-being while ensuring access to essential care.

This guide addresses common questions and explores the limitations of Medicare’s coverage and Medicaid’s role in long-term care.

[keytakeaways]

• Medicare does not cover the costs of long-term care nursing homes.
• Medicare Part A covers short-term care in a skilled nursing facility.
• Medicaid covers nursing homes for qualifying beneficiaries.
• The Veterans Administration covers nursing home care for qualifying veterans.

[/keytakeaways]

Nursing Home Costs

The national average cost of long-term care, or nursing home care, is $7,756 monthly for a semi-private room or $8,821 monthly for a private room. A skilled nursing facility providing a higher level of care can cost as much as $255 to $290 per day for a room (semi-private or private). [mfn referencenumber=2]genworth.com, “Cost of Care Survey“, Accessed December 29, 2021[/mfn]

Most Americans do not have a retirement fund supporting nursing home costs. Their only saving grace may be government assistance through Medicare or Medicaid.

Does Medicare Pay for Nursing Homes?

Nursing homes have different levels of care:

• Custodial Care (Personal Care)
• Skilled Nursing Care

Custodial care helps you with activities of daily living, such as bathing, dressing, bathroom assistance, and eating. It can also include personal needs that can be done safely or with the help of someone without professional training.

Although Medicare covers a stay in a skilled nursing facility for medically necessary services, it does not pay for full-time residence in a nursing home. For people who can’t afford to pay and don’t have long-term care insurance, there’s Medicaid.[mfn referencenumber=3]Medicare.gov, “Nursing home care“, Accessed November 18, 2021[/mfn]

Short-Term Skilled Nursing Care

Medicare Part A (hospital insurance) pays for short-term skilled nursing care as long as the following eligibility criteria have been met:[mfn referencenumber=4]Medicare.gov, “Skilled nursing facility (SNF) care”, Accessed November 18, 2021[/mfn]

• The person has Medicare Part A and days left in their benefit period.
• The person had a qualifying hospital stay.
• A doctor decides the person needs medical care in a skilled nursing facility.
• The skilled nursing facility is Medicare-certified.
• The person needs health care from a skilled nursing facility for a medical condition treated during a hospital stay – even if it wasn’t the reason for admittance.
• The person develops a medical condition while in the skilled nursing facility.

How Much Does Skilled Nursing Facility Care Cost?

Your costs depend on your eligible stay in a skilled nursing facility. The following copayments apply for each benefit period:

• Nothing for days 1 to 20.
• Up to $204 a day in 2024 for days 21 to 100.
• All costs for days 101 and beyond

Medicare Supplement Insurance (Medigap), retiree coverage, VA benefits, Medicaid, and other insurance may cover the copayments for days 21 to 100.

If you have a Medicare Advantage plan (Part C), your out-of-pocket costs (i.e., deductibles, coinsurance, copayments) depend on the plan. All Part C plans must provide the same hospital care and skilled nursing facility coverage as Original Medicare, however there out-of-pocket costs will vary, so consult with your plan.

How Medicaid Helps Pay for Nursing Homes

Medicaid is a federally-funded insurance program that can cover nursing home costs for individuals with a low income. People who do not have the financial means to pay for long-term nursing and are found to need that level of care may be able to use Medicaid services to cover these costs. Each state sets its eligibility requirements. The process involves reviewing each applicant’s assets.[mfn referencenumber=5]Medicaid.gov, “Medicaid, Accessed November 18, 2021[/mfn]

Those who lack Medicaid coverage eligibility when they need nursing home care may become eligible as their money runs out. With less money in the bank and minimal income, Medicaid can pick up the costs of nursing home care.[mfn referencenumber=6]Medicaid.gov, “Nursing Facilities“, Accessed November 18, 2021[/mfn]

When a Medicaid recipient dies, the government may recover the benefits provided to nursing home care from the estate, and it can garnish assets as far as five years back. Family members may find this to be devastating as it affects their inheritance.

There are ways to protect assets from nursing home expenses to keep this from happening.

Assets as Gifts

Giving loved ones your assets as gifts can help prevent them from being taken away after you die. The only downside is there may be tax ramifications associated with it.[mfn referencenumber=7]ers.usda.gov, “Federal Estate Taxes“, Accessed November 18, 2021[/mfn]

The annual gift tax exemption is $15,000 for 2018-2021 ($16,000 in 2022). This means that you can give up $15,000 per person without having to pay any taxes on the gifts.[mfn referencenumber=8]ers.usda.gov, “Frequently Asked Questions on Gift Taxes“, Accessed November 18, 2021[/mfn]

Using Irrevocable Trusts

Irrevocable trusts are an excellent alternative to giving assets as gifts. When assets are put into irrevocable trusts, they no longer belong to you because you name an independent trustee. While you may not own those assets, you can use them while you’re still alive. This way, if you need them, you can use them. When you die, the assets are safe from being taken away because you’re not the owner of them – the independent trustee is the owner.[mfn referencenumber=9]fdic.gov, “Financial Institution Employee’s Guide to Deposit Insurance“, Accessed November 18, 2021[/mfn]

The only way this may not work is that Medicaid can take assets that were yours five years before you died. This is why it’s important to set up an irrevocable trust as soon as you know you’re going into a nursing home because if you die after five years, those assets are safe.

Create a Life Estate

When you create a life estate, you keep the property until your death. Upon your death, it automatically transfers to someone you choose, so it can’t be taken unless it was done five years before you died.[mfn referencenumber=10]margolisbloom.com, “Planning for Life“, Accessed November 18, 2021[/mfn]

Long-Term Care Insurance

Long-Term Care Insurance offers individuals a proactive solution to address the financial challenges of nursing home care. This specialized insurance provides financial assistance to cover a range of long-term care services, including those offered in nursing homes.

By purchasing a long-term care insurance policy, individuals can safeguard their assets and alleviate the burden on their families, ensuring access to quality care without depleting savings or retirement funds. While premiums for long-term care insurance vary based on factors such as age, health status, and coverage options, the benefits of such coverage can be invaluable, offering peace of mind and financial security in uncertain future care needs.

Additionally, many long-term care insurance policies provide flexibility in choosing care settings. These policies allow individuals to receive care in their preferred environment, whether at home, in an assisted living facility, or a nursing home.

NOTE: Many insurance companies allow you to use your life insurance to pay for long-term care. Please reach out to your insurance provider for more information about what your life insurance policy covers.

The Importance of Acting Now

No one knows when anyone will pass, but there are ways to protect your assets if you die more than five years from now. The more time you wait, the less likely you’ll be able to protect them. That’s why you should consider the three options described above: give the gift of assets, use irrevocable trusts, or create a life estate. This way, no matter what happens with your finances when paying for nursing home care, you’ll be able to leave something behind to your loved ones.

For more information about Original Medicare, Medigap, and Medicare Advantage Plans, contact MedicareWire for a list of options. We would be happy to help you meet the financial demands that come along with growing older.

References:

1. National Association of Area Agencies on Aging. (n.d.). Find Your Local AAA. Retrieved from https://www.n4a.org/
2. Family Caregiver Alliance. (n.d.). Caregiver Resources by State. Retrieved from https://www.caregiver.org/caregiver-resources-by-state