Odds are high that someone in your family will need a nursing home sooner or later. Someone turning age 65 today has almost a 70% chance of needing some type of long-term care, and 20% of people will need it for longer than five years, according to LongTermCare.gov. The average cost of nursing home care is so high that the cost of that care can financially cripple a family. But there are steps you can take -- whether a nursing home is needed now, next month or next decade -- to minimize the financial strain of nursing home costs.
There are many ways to cover the costs of long-term care, including savings, investments, assets, long-term care insurance, state LTC Partnership programs, the Federal LTC Insurance Program and tax advantages. Care Conversations, an initiative led by the American Health Care Association, the National Center for Assisted Living and America's Skilled Nursing Caregivers, offer a helpful list of these private and public payment sources in greater detail.
Planning for Long-Term Care
Medicare does not provide an all-inclusive long-term care component. If certain conditions are met, Medicare offers limited coverage (up to 100 days per benefit period) for some beneficiaries. Since Medicare does not cover long-term care, the program does not pay for assisted living costs, though it may cover certain services, such as home health or outpatient therapy benefits for assisted living residents. Additional information can be found on Care Conversations.
Ideally, financial planning for long-term care should occur long before the need arises, says Wendy Boglioli, a spokesperson for insurer Genworth Financial. Long-term care insurance, Medigap and employer-provided or private health insurance plans can offset the cost of long-term care. But if these policies aren't in place before a major health event occurs, they are usually no longer available to consumers.
If your family's facing imminent need for nursing care and doesn't have an insurance plan for it in place, there are still options to help defray the costs. Make no mistake: Those costs can be staggering. In 2018, a private room cost an average of $8,365 a month, or more than $100,000 annually, according to the Cost of Care Survey 2018 by Genworth Financial. A semi-private room ran $7,441 a month, or $89,292 per year. And the average nursing home stay is 835 days, or more than two years, according to the government's latest National Nursing Home Survey.
Costs widely vary from person to person, both because of geographical difference in rates and because each resident's length of stay differs. While nearly 1 in 10 residents age 75 to 84 stays in a nursing home for five or more years, nearly 3 in 10 residents in that age group stay less than 100 days, the maximum duration covered by Medicare, according to the American Association for Long-Term Care Insurance. Convalescent nursing home care, which follows a major surgery or other hospitalization, is typically short-term and can be covered by Medicare.
"Even if you or your loved one doesn't need care right now, but you think it may be coming, at least look at the costs now and in five years to gauge what the hit will be," Boglioli says.
Seniors and their families facing a near-term need for a nursing home should first determine whether Medicare will cover at least a portion of the stay. The Medicare program provides coverage for rehabilitation -- but not long-term care. Medicare will pick up the tab for up to 100 days of care in a skilled nursing facility each benefit period. A benefit period is how Medicare measures the length of stay in a hospital or skilled nursing facility.
Medicare can also help if a long-term nursing home situation looks inevitable but isn't immediately necessary. For as long as the individual is able to stay at home, Medicare can be tapped for up to 35 hours per week of home health services. Medicare covers home health services like intermittent skilled nursing care, physical therapy, speech-language pathology and occupational therapy for up to 60 days at a time, called an "episode of care."
To secure these funds, individuals must be living at home -- not in a nursing home or other long-term care facility -- must have their physician approve a plan of care and must use a Medicare-certified agency. If you require help only with personal care, such as meal preparation, bathing, using the bathroom and dressing, you do not qualify for the Medicare home health benefit. A government-published guide offers details on which home health services Medicare covers.
The U.S. News Best Nursing Homes rankings indicate which nursing homes in each state accept Medicare.
If an individual lacks enough savings to cover the cost of a nursing home -- or if the cost of a protracted stay exhausts their assets -- they can become eligible for assistance from Medicaid. State Medicaid programs are required to cover nursing home care, says Caroline Haarmann, associate vice president, Medicaid Reimbursement and Research, American Health Care Association. "To qualify for these services, a person would have to meet their state's level of care criteria and financial eligibility requirements," she says. "Eligibility for Medicaid LTC is complex, as there is often more than one 'eligibility pathway' that allow a person to qualify for these services. Some of these are options the state can choose, while others are mandatory." In addition, depending on how a person qualifies for nursing home care in Medicaid, the state may determine that the beneficiary must contribute towards the cost of their care.
To qualify for Medicaid, applicants must have minimal assets -- no more than $2,000 in cash and cash equivalents such as bonds and IRAs. For married couples, the spouse staying at home may have assets worth an additional $132,900, the annually adjusted Social Security cap for 2019. While some seniors might be tempted to make large financial gifts to their children or grandchildren in order to hasten qualification for Medicaid, doing so within the five years prior to applying for the program could disqualify them from receiving its benefits.
Before applying for Medicaid, seniors who own their home also need to consider the fate of the property. Under federal law, a home is exempt from the asset limits described above, but if the owner dies while receiving Medicaid nursing home benefits, the government can take the house. Families that want to avoid losing a treasured home, therefore, might choose to forgo Medicaid, especially if the applicant's life expectancy is short and relatives have the means to pay anticipated costs out of pocket.
A senior may be able to keep his or her home in the family either by adding a child's name to the deed at least five years before applying for Medicaid or by setting up an asset-protection trust before applying. This type of trust enables a person or couple to transfer some type of property, such as a home or cash-like assets, to another person to hold and manage for their benefit, says Gabriel Heiser, a Nashville-based lawyer specializing in nursing home law and author of "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets." He recommends hiring a lawyer to help with the process. "This is not a do-it-yourself project," he says.
One way to find a qualified lawyer is to call your local bar association and find out which attorneys are teaching seminars on Medicaid planning to other attorneys. The attorney also must be licensed in the same state as the person needing Medicaid assistance because Medicaid laws vary from state to state.
Veterans Administration Aid and Attendance
According to VeteranAId.org, the A&A Pension can provide up to $1,794 per month to a veteran, $1,153 per month to a surviving spouse, or $2,127 per month to a couple. A veteran filing with a sick spouse is eligible for up to $1,410 per month. Like Social Security, this pension is dependable and is paid directly to you by the Department of the Treasury. This benefit can be used for in-home care, board and care, assisted living communities and private-pay nursing homes.
"Industry professionals consult the Community Care Program, the Department of Veterans Affairs' new network of licensed health care providers, as well as Veterans Care Agreements," says Dana Halvorson, senior director, Not for Profit and Constituent Services at AHCA. "VCAs are a new type of agreement included in the VA MISSION Act (of 2018)." Learn more about VCAs at the VA website.
Cost of Nursing Home vs. Assisted Living
Rachel Reeves, director of communications, National Center for Assisted Living, says that assisted living is primarily paid for by individuals' private or personal funds, such as LTC insurance or personal assets. Medicare does not cover long-term supports and services. Medicaid varies by state, and how the program is set up in each state determines how residents can use Medicaid to help pay for LTC in home and community-based settings, such as assisted living communities. "About 1 in 6 assisted living residents relies on Medicaid for their daily care, many of whom spend down their personal assets and rely on Medicaid in order to remain in their assisted living home," she says.
While assisted living care has a lower price tag than skilled nursing/nursing home care, it's important to understand the difference between the settings. Traditionally, assisted living does not offer 24/7 skilled nursing care like nursing homes. "Residents typically need less assistance with daily activities and are more independent than nursing home residents," Reeves says. The NCAL website offers some helpful resources on paying for care.
Negotiating Long-Term Care Costs
Most nursing homes won't lower their rates, which are keyed to the payment levels offered by Medicare and Medicaid. Still, there's sometimes room to negotiate when it comes to long-term nursing care costs. "Sometimes, rather than accept a lower Medicaid rate, a facility will agree to take a lower private pay rate, which is still higher than the Medicaid rate but lower than published private pay rates," says Howard Krooks, past president of the National Academy of Elder Law Attorneys.
By contrast, assisted living facilities, which don't take Medicare or Medicaid, and home health agencies often face steep competition, so consumers shouldn't be shy about talking prices with these organizations. An assisted living facility with a high vacancy rate or no waiting list may be more willing to negotiate a monthly rate, according to Genworth. If you're considering a home health agency, you may be able to secure a lower hourly or daily rate if you indicate that you're shopping around for the best price.
Relocating the Patient
If a senior who needs long-term care has children, grandchildren or other relatives residing in a city or state where nursing homes are less expensive, moving the patient could be a good option, Krooks says. A move might not only reduce the cost of care, but also make it easier for relatives to check in on the resident. Those deciding whether to move an elderly relative should consider the individual's health and whether moving away from doctors who have an established relationship with the senior could harm his or her care.
Moving an elderly relative to a new location solely to find cheaper care might backfire if it leaves the patient far from family. Relatives could face higher travel expenses when visiting their loved one, offsetting any family savings.
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