How to Pay for a Nursing Home: Resources and Advice

Nursing homes — sometimes called skilled nursing facilities or convalescent homes — offer the highest level of care to aging adults. Many nursing home residents have chronic, debilitating physical or mental health conditions and require round-the-clock supervision.

Nursing homes provide more specialized resources than assisted living or memory care communities, and services are typically administered by licensed professionals. These services may include wound care, feeding assistance, injections, and physical therapy. In addition to meeting medical needs, nursing home staff also provide help with activities of daily living (ADLs), such as bathing and grooming, and create opportunities to promote social interaction.

Because nursing homes provide such a high level of care, they tend to cost more than other senior care types. As of 2021, the average cost of a shared room in a nursing home was $7,908 a month, or about $260 a day.^[01] The elevated costs may require families to choose a mix-and-match approach to pay for care, where they use personal funds along with program-supplied funding.

The most common payment methods for nursing homes include government health care programs like Medicare and Medicaid, private pay options such as savings and retirement funds, and individual insurance plans.

Many seniors rely on federal and state programs like Medicare, Medicaid, and veterans benefits to cover nursing home costs. These essential programs aim to help aging adults of all social and economic backgrounds supplement the rising costs of care.

Medicare

Nursing homes often offer short-term inpatient rehab in addition to longer-term senior housing and care. Medicare, a federal program that provides health coverage to seniors age 65 and older, covers short-term stays, but it doesn’t cover long-term care. While this is helpful for older adults recovering from an injury or other health event, it’s not a lifelong solution.

“Medicare pays full coverage for the first 20 days and partial payment for days 21 to 100,” said Michael Leitson, former director at the American Health Care Association. “After day 100, they don’t pay anything.”

Learn more about Medicare’s coverage and some additional benefits of the program.

Medicaid

Medicaid is a state and federal program that covers medical costs for people with limited income or resources. Unlike Medicare, Medicaid pays for extended nursing home care if a senior qualifies based on income and financial assets. Eligibility requirements differ by state, so it’s helpful to review the American Council on Aging’s free Medicaid eligibility test to determine if your loved one qualifies for financial assistance for long-term care.

Most, but not all, nursing homes accept Medicaid. To learn more about how to pay for nursing home care with Medicaid benefits, contact your state’s Medicaid office.

VA benefits

The U.S. Department of Veterans Affairs does provide senior care to veterans who require long-term medical assistance. Senior living covered by the VA is often determined by a senior’s individual health care needs and may include nursing home costs. Veterans and their spouses must already be signed up for VA health care and meet enrollment and eligibility requirements based on income, disability level, and location. In some cases, eligible veterans may qualify to live in VA nursing homes.

Read related article:When Is It Time for a Nursing Home? 6 Questions to Ask Yourself

Let our care assessment guide you

As of 2021, the average cost for a private room in a nursing home increased to $108,405^[01] per year — and with rising costs, many families pay for nursing homes using personal resources in addition to state and federal programs. Consider the following options, and talk to your loved one about their savings and funds.

Savings. Personal savings, or out-of-pocket payments, are the primary way seniors fund nursing home care, according to the National Institute on Aging.^[02]

Pensions. A pension is a sum of money paid monthly by a retiree’s former employer. Pension amounts are generally based on position, years of service, and age at retirement.

Retirement income. Retirement income can include social security benefits, benefits from annuities, retirement or profit-sharing plans, insurance contracts, or IRAs. Retirement income is often taxable. Speak with an accountant about potential tax breaks and credits for using retirement income to pay for nursing home care.

Stocks. Stock portfolios can be sold to pay for nursing home care. Speak with your loved one’s portfolio advisor to determine the best course of action.

Home sale.Selling a house to pay for senior care is common. In fact, the average age of a home seller in 2020 was 60, according to the National Association of Realtors.^[03]

Assistance from family. Who pays for nursing home care if an elderly loved one hasn’t saved or planned in advance? That responsibility often falls to family members. Financial discussions can be difficult, especially when multiple family members will be paying for nursing home care jointly.

Bridge loans. These quickly available, short-term loans can be used to pay for a move to a skilled nursing facility or nursing home while assets are being liquidated or while a home is being sold.

Talk with a Senior Living Advisor

Does insurance cover nursing home costs? It’s hard to provide a clear answer to that often-asked question. In most cases, private insurance plans will cover some nursing home care. However, every senior’s policy will be different and will likely only pay for certain health-related services and amenities.

If your loved one has planned in advance and knows what their policy covers, they may be able to pay for nursing home care with an insurance policy. However, new policies often can’t be purchased once a senior reaches a certain age.

These three types of insurance can help fund senior care:

Long-term care insurance. If your relative purchased a long-term care insurance plan, there’s a good chance you can receive funds to cover nursing home care costs. Most nursing homes are categorized as custodial care, and long-term care insurance is designed to pay for custodial care as well as personal care. However, policies and benefits vary by plan.

Life insurance. Using life insurance to finance long-term care is one way to pay for a nursing home. Seniors can either sell the policy to a third party at market value or surrender their life insurance policy at cash value. Unfortunately, what seniors can expect to get in cash value is typically less than what they’ve invested over the years.

Private health insurance. Depending on the policy, some private insurance plans will cover the cost of medical care in a nursing home. When choosing a facility, ask the sales director if it’s possible to divide costs between medical care — administering medication, physical therapy, and injections — and personal care, such as activities, dining plans, and housekeeping. Health insurance may cover the former.

Read related article:A Guide to Choosing a Nursing Home