While one-third of older adults may never need long-term care services, many people may need the extra support, such as care from a nursing home.
According to the U.S. Department of Health & Human Services’ Administration on Aging, the average 65 year old has an almost 70% chance of needing some type of long-term care at some point, and 20% will need such care for more than five years.
With those odds, you’ll need to account for how you’ll pay for a nursing home.
“People often don’t think that they’ll need nursing home care, and they assume that Medicare or private health care insurance will cover it,” says Dr. Charles Crecelius, a geriatrician and medical director of post-acute care with BJC Medical Group in the greater St. Louis area. “This can be a costly mistake.”
We’ll explore practical steps, government programs and financial options to ensure your loved ones get the care they need.
Nursing Homes vs. Assisted Living Communities
There are many options out there for older adults who need care or assistance.
Nursing homes
Nursing homes offer both long-term, round-the-clock custodial (also referred to as nonmedical) care and skilled nursing care. Skilled care can include specialized therapy and services only licensed professionals can provide, such as catheter management. In many cases, a stay in a nursing home follows a period of hospitalization.
Assisted living communities
Assisted living communities may be a more suitable choice for seniors who have fewer acute care needs.
“Residents typically need less assistance with daily activities and are more independent than nursing home residents,” explains LaShuan Bethea, executive director of the National Center for Assisted Living in Washington, D.C.
These communities help with:
— Bathing and personal hygiene
— Toileting
— Meal preparation
— Medication management
Assisted living also typically costs less than a nursing home facility. According to Genworth Financial’s 2023 Cost of Care Survey (the most recent data available), assisted living costs average about $5,300 per month.
[READ: Activities of Daily Living for Seniors.]
How Much Do Nursing Homes Cost?
Nursing home care can be expensive. According to Genworth Financial, the median cost of nursing home rooms is:
— $8,669 per month for a semi-private room
— $9,733 per month for a private room
Factors that determine the cost of care in nursing homes include:
— Level of care needed. Generally, the higher the level of care, the higher the cost. If you or your loved one needs help with daily activities of living, such as medication management, toileting and getting in and out of bed, your monthly nursing home fee may be lower. Specialized care, however, comes with a heftier price tag.
— Type of facility. As mentioned, assisted living facilities tend to cost less than nursing homes due the level of care required. Independent living communities, designed for active older adults who may not need care assistance, also run less than nursing homes.
— Geographic location. Nursing home costs vary by state. For example, in cities with a higher cost of living, such as Boston and San Francisco, the median cost of an assisted living community is significantly higher than St. Louis and San Antonio.
Top five most expensive metro areas
| Metro Area | State | Private room monthly median nursing home cost | Semi-private room monthly media nursing home costs |
| San Jose | California | $15,589 | $11,863 |
| Hartford | Connecticut | $15,170 | $13,764 |
| Boston | Massachusetts | $14,402 | $13,155 |
| Sacramento | California | $14,129 | $10,646 |
| San Francisco | California | $14,068 | $11,566 |
Five least expensive metro areas
| Metro Area | State | Private room monthly median nursing home cost | Semi-private room monthly media nursing home costs |
| New Orleans | Louisiana | $6,388 | $5,931 |
| St. Louis | Missouri | $6,737 | $5,627 |
| San Antonio | Texas | $6,935 | $5,232 |
| Birmingham | Alabama | $7,118 | $6,768 |
| Oklahoma City | Oklahoma | $7,391 | $5,551 |
[READ: Assisted Living vs. Home Care: What’s the Difference?]
How to Pay for Nursing Home Care
The annual cost for a private room in a nursing home can cost about $116,800 on average. The good news is there are a few options for paying for senior care and nursing homes, including:
— Savings and investments
— Long-term care insurance
— Veterans Affairs Aid and Attendance
— Medicare
— Medicaid
— Federal and state long-term care insurance programs
Savings and investments
If you are fortunate to have savings or investments that you can use to pay for a nursing home out of pocket, it is important to know the pros and cons. There are some complicated tax rules, so it is best to seek guidance from your accountant or another expert.
If you have an individual retirement account, you can use this money to pay for long-term care. However, you may have to pay taxes on withdrawals.
— Roth IRA. If you have a Roth IRA, you don’t have to pay taxes on any money withdrawn after age 59 ½ because the money you deposit in this account has already been taxed. Keep in mind, though, that the money must have been in the account for at least five years, and you must meet the age requirement. You can also take out contributions you made to this account before 59 ½ without tax penalties, but you can’t take any of the investment gains.
— Traditional IRA. The rules are different for a traditional IRA, which involves pre-taxed money. When you withdraw money from such an account, both the investment and any gains are taxed at your current income tax rate. There also is a 10% penalty if you withdraw any money before age 59 ½. However, there are some exceptions to this penalty, and one is unreimbursed medical expenses.
— Other investments. Stocks, property or other items may also be used to pay for long-term care. Again, it’s best to check with an accountant or tax expert before you take any action.
— Savings. If you spend your savings on long-term care, some related expenses may be tax-deductible, particularly if you or a spouse or dependent are in the nursing home for medical reasons, such as treatment for or recovery from an illness. However, the total allowable medical expenses must be reduced by 7.5% of your adjusted gross income.
[READ Understanding the Different Elder Care Options]
Long-term care insurance
Signing up for long-term care insurance before you actually need long-term care is one way to help defray costs if and when you do. Long-term care insurance is used to cover care in settings like a nursing home or an individual’s home in their own community.
However, this option can be pricey. For instance, a 55-year-old man can expect to pay an annual premium of about $3,500 for a $165,000 policy. The cost for women is higher (because women tend to live longer on average) at $6,200. A couple can expect to spend about $8,575 annually for a combined policy, according to 2023 figures from the American Association for Long-Term Care Insurance.
Of course, the older you are when you purchase a policy, the more expensive it will be. Certain serious medical conditions — such as muscular dystrophy and cystic fibrosis — can also make it difficult, if not impossible, to purchase a policy.
“It’s important to know before you get ill or need long-term care for some other reason what you’re paying for and what to expect,” Crecelius says.
When trying to navigate how to pay for longer term care or a nursing home stay, you should seek guidance or information from an insurance expert or financial professional.
At the same time, an independent insurance broker, someone who is not affiliated with any particular insurer, can help you find a plan that might work for you. Some insurers, for instance, have started offering hybrid insurance plans that include a long-term care rider within a permanent life insurance plan.
Veterans Affairs Aid and Attendance
The VA Aid and Attendance pension can provide a monthly pension, with 2024 rates of up to $2,300 for a veteran, $1,478 for a surviving spouse or $2,7,27 for a couple. You must meet eligibility requirements to collect these benefits and they can vary depending on your situation. As with Social Security, this pension is dependable and is paid directly to you by the Department of the Treasury.
Navigating the specifics of VA benefits related to long-term care can be challenging. The American Health Care Association suggests going to the VA website for details about general benefits and to the VA Geriatrics and Extended Care page for information about benefits and costs for services in residential settings, such as assisted living communities and nursing homes.
Medicare
Medicare does not cover long-term care housing, but it provides coverage for certain aspects of the care you’d receive in nursing homes, such as rehabilitation.
“Medicare does provide coverage for care in nursing homes, but it is subject to certain limitations and conditions,” adds Diane Omdahl, Wisconsin-based president and co-founder of the Medicare consulting firm 65 Incorporated.
Medicare covers the first 20 days of care at the facility at 100%. For days 21-100, Omdahl says, the daily copayment is $204. Coverage ends after day 100.
To qualify for Medicare coverage for nursing home care, 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
— Must use a Medicare-certified provider
— Must need continuous care after a minimum of three days in a hospital
— Must use a facility certified by Medicare as a 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 for 60 days of home health services, such as:
— Intermittent skilled nursing care
— Speech-language pathology
— Occupational therapy
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.
The U.S. News Best Nursing Homes rankings indicate which nursing homes in each state accept Medicare.
Medicaid
If you’ve burned through your Medicare benefits and exhausted your savings, Medicaid — a state-administered health insurance program for low-income individuals — may be able to help. However, it’s important to note that not all nursing homes accept Medicaid.
“If you believe this will be needed, it is important to ask this when making a decision between facilities,” says Kate Granigan, president of the board of directors with Aging Life Care Association and chief executive officer at LifeCare Advocates in Newton, Massachusetts.
Even if you do qualify for Medicaid, you may be asked to contribute toward the cost of care, depending on how the state determines eligibility and benefits.
A Medicaid lawyer can help you navigate the process; 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.
Federal or state insurance programs
State-based Long-Term Care Partnership Programs can help protect the assets of individuals using Medicaid coverage to pay for long-term care services. Most states offer these supplemental programs, such as the Indiana Long-Term Care Insurance Program and the Arizona Long-Term Care System, so you may not have to spend all your resources to qualify for Medicaid.
Negotiating Long-Term Care Costs
Most nursing homes won’t lower their rates, but it’s always worth asking if prices can be negotiated.
For example:
— A facility might agree to take a lower private-pay rate instead of an even lower Medicaid rate.
— A facility with vacancies or no waiting list might be willing to negotiate a lower monthly rate to fill a bed.
— A home health agency may agree to a lower hourly or daily rate if they know you’re shopping around for the best price.
The Bottom Line
Nursing home care can help individuals in certain circumstances, but it can be expensive. There are a variety of ways to pay for it, but in all cases, it’s best to be proactive by planning ahead and consulting with an Aging Life Care Manager in your area to help you wade through your options and to better understand what you can afford.
More from U.S. News
How to Pay for a Nursing Home With No Money
Does Medicaid Pay for Assisted Living: What Is Covered and What’s Not
Assisted Living vs. Home Care: What’s the Difference?
Nursing Home Costs and How to Pay originally appeared on usnews.com
Update 07/17/24: This story was previously published at an earlier date and has been updated with new information.
