Choosing a nursing home is a big decision for seniors and their families. Nothing is more important than receiving the highest quality of care available. But – it can be costly. According to a report by Consumer Affairs, the national average cost of nursing home care is between $7,500 and $9,000 per month. That’s around $105,000 per year!
Planning ahead financially for the possibility of long-term care can make any transition go a little smoother. Of course, sometimes we forget to plan until we are faced with major life or health changes. Regardless of the circumstances, you have several possibilities that can help pay if and when it’s time for a nursing home.
Medicare notoriously does not pay for long-term care. However, it is possible to use Medicare for costs associated with some types of medically necessary care received within nursing homes.
Check what assistance your Medicare plan has available on Medicare.gov. If you have Medicare Part D, prescriptions will be covered. Also, a Medicare Advantage Plan might help pay if the nursing home you choose has a contract with the plan.
In limited circumstances, Medicare will pay for nursing home costs in full if a doctor recommends a short-term stay in a facility for medically necessary treatment.
Medicaid is a joint federal and state program. For low-income seniors, it can be a payment option for nursing home care!
Your chosen nursing home must Medicaid-certified. be Though eligibility varies by state, it is based on income and personal assets. It’s possible for a senior to own too many assets to qualify and must “spend down” resources before Medicaid can be utilized.
As a general rule of thumb, remember that Medicaid never pays first for services covered by Medicare. Medicaid can be used as payment after Medicare, other insurances, and personal assets are exhausted.
Whether you self-pay or receive employer-sponsored health insurance, chances are your policy won’t outright pay for a nursing home. However, it is possible to have a portion of the services covered.
Check your insurance policy. Though plans do not typically pay for long-term care, some policies will allow coverage for individual medical services. When shopping for a nursing home, ask administrators if your bill can be divided up by custodial care, medical care, and room and board. Health insurance almost never pays for personal care (the help one receives for eating, bathing, and dressing) or living expenses. But – sometimes health insurance will pay for skilled nursing or other types of medically necessary services received in a nursing home, like injections or therapies.
Life insurance is fundamentally a contract between yourself and an insurance company, where you agree to pay a premium in exchange for a death benefit. Most commonly, the benefit that’s paid to beneficiaries after your passing is used for funeral arrangements or debt payment. However, should a policyholder see fit, life insurance can be used in a few different ways to supplement paying nursing home costs.
Take out a life insurance loan. – If your policy has a cash value (as with permanent or whole life insurance), you can borrow from it. Policy loans do not affect your credit and they are tax-free, making them a good method for quick cash. The loan will need to be repaid and with interest. However, rates will vary depending on your insurance company. Failure to repay may result in the policy lapsing.
Permanent and whole life insurance may be surrendered for cash value. – This means when you cancel your policy, the insurance company will write a check for any cash accumulated. This can be an attractive option for fast money, but it is important to note there are several downsides to this method:
Sell your policy. – “Life settlement” is when you sell your life insurance policy to a third party for cash. This can be to a private buyer or a life settlement company and may be accompanied by fees. Those fees will more than likely affect the how much you’re paid.
Simply put, an asset is any resource you own that has the potential to make money. Home equity is one of the most valuable assets an individual can own. It’s defined as your home’s appraisal, minus your loan balance. Home equity and other assets could be used for quick cash in a few different ways.
Sell your home. – The idea is simple enough: sell the property, then use profits to pay for care. However, it is important to keep in mind that selling one’s home may affect Medicaid eligibility. Check Medicaid.gov to learn more about Medicaid eligibility in your state.
Rent your home. – Another simple solution, but oftentimes added burden. Renting a home can ensure a steady stream of income, however in most rental situations, since you’re the landlord, you may incur additional costs such as utilities or repairs. Also, you may not be able to stay directly involved if you’re in nursing care. In fact, a family member may be handling maintenance or any other issues.
Take out a home equity loan. – Fundamentally a second mortgage, a home equity loan turns equity into actual cash. Obtaining such a loan is fairly straightforward. Your built-up equity serves as collateral for the lender. The loan will usually be on a fixed rate and paid back monthly. When considering this method, first speak with a financial advisor, as this may not be a viable option for everyone.
Sell other assets. – Investments, inventory, and even personal belongings can be assets to consider utilizing. It could be as easy as placing a ‘for sale’ sign on the front window of your car! However, speak with family members or a financial advisor to help decide what to sell and how to start.
If you’re trying to sell your home to pay nursing home costs, but need immediate care, a bridge loan can be a temporary solution.
A bridge loan is gap financing for times when the money needed is coming – just not fast enough. This type of loan can be applied to care cost while waiting for your home to sell. Once the home is sold, your loan can be paid back. However, interest rates are usually higher on these short-term loans and many lenders require the money paid back in one lump sum.
Who says you have to take out a loan or sell your assets to afford long-term care? If you have personal savings or a retirement plan, that may be all the money you need! To plan ahead, speak with your financial advisor or seek out expert advice to ensure your investments are working for you.
Long-term care insurance can help pay for care received in your home, a nursing home, an assisted living facility, or even adult daycare centers.
Usually, policies state that you become eligible for benefits when you’re unable to perform at least two of six “activities of daily living.” These ADLs are as follows: bathing, toileting, dressing, eating, caring for incontinence, and transferring (mobility). Each lender is different. So, do your research to ensure you’re getting the best coverage for your money. It is also important to note that long-term care insurance may exclude medical assistance for any issues related to alcohol or drug addictions.
According to AARP, it is best to purchase long-term care insurance between the ages of 60 and 65 – no younger. This way, you aren’t paying a premium over many years for insurance you might never need; instead, you’re purchasing it at a time when long-term care is statistically more plausible, yet you are young enough that premiums will be affordable. Though the average cost and payout of long-term care insurance will vary by lender and policy, you may expect an annual premium of around $2,000 with a benefit of around $165,000.
Veterans who receive VA health care benefits can apply for long-term care services.
The VA will cover the cost of many services under standard health benefits. Visit va.gov to see the full list of long-term care services available and to apply for assistance. Veterans may be eligible for Community Nursing Homes, which are residential care centers and skilled nursing facilities, paid for by VA benefits.
Visit va.gov’s Geriatrics and Extended Care page for more information.
An annuity is essentially a contract between an individual and an insurance company in which the person gives a sum of money that the company then invests. In turn, the annuitant is guaranteed monthly payments. An annuity has limited options for helping with nursing home costs.
Annuities promise a continued stream of income. If you have an annuity, and it’s enough money per month, the income can be used to pay care costs. Alternatively, you can sell your annuity to free up money fast.
Paying for nursing home care doesn’t have to be a burden on you or your loved ones. Plan ahead and revisit your options as circumstances change. If you need more help, then start with these resources:
Originally published January 15, 2024