Your dad has been in rehab after a stroke, and the social worker says he won't be able to go home. He'll need a nursing home for the long term. In the same conversation, someone mentions that Medicare coverage is ending soon. Suddenly you're asking a question you never planned for: how will we pay for this?
You aren't alone, and there are real answers. Long-term nursing home care is paid for by a combination of sources: your parent's own savings and income, long-term care insurance if they have it, VA benefits for some veterans, and Medicaid for people who qualify2. Medicare plays only a short role. This guide walks through each source in plain language so you can make a plan, not a panicked decision. If you're still comparing settings, see assisted living vs. nursing home.
The main ways families pay for a nursing home
- Private funds. Savings, pensions, Social Security and other income, or the sale of a home or other assets.
- Long-term care insurance. Pays a daily or monthly benefit for covered care, after a waiting period, up to the policy's limits.
- Medicare. Short-term skilled nursing and rehab only, under strict rules1.
- Medicaid. The largest payer of long-term nursing home care for people who meet eligibility rules2.
- VA benefits. Nursing home care or pension benefits for some veterans and surviving spouses6.
Many families use more than one. A common path is a short Medicare-covered rehab stay, then a period of paying privately, then Medicaid once savings are spent down. Knowing that path ahead of time lets you protect what can be protected and avoid mistakes that delay coverage.
What Medicare covers, and when it stops
Medicare covers care in a skilled nursing facility only after an inpatient hospital stay of at least three days, and only while your parent needs daily skilled nursing or therapy1. It can cover up to 100 days in a benefit period, with full coverage for the first 20 days and a daily coinsurance after that. Coverage ends as soon as skilled care is no longer needed, which is often well before day 100. Planning five or more years ahead may include a Medicaid asset protection trust. If one spouse stays at home, see spousal impoverishment rules.
Medicare doesn't pay for long-term custodial care, meaning help with bathing, dressing, eating and other daily activities when that is the main need7. Time spent under observation status in the hospital doesn't count toward the three days. Read when Medicare stops paying for a nursing home and Medicare observation status so the end of coverage doesn't catch you off guard.
How Medicaid pays for nursing home care
Medicaid covers long-term nursing home care for people who need that level of care and have limited income and assets2. Each state runs its own program within federal rules, so the exact limits vary. In general, your parent must:
- Need a nursing home level of care, based on a state assessment.
- Meet the state's income rules. Some states allow people with higher income to qualify through a special trust or a medically needy spend-down.
- Have countable assets under the state limit, which is usually low for a single person.
- Be a state resident and a U.S. citizen or qualified immigrant.
Some assets usually don't count, such as the home in many cases, one vehicle, personal belongings, and certain burial funds. Your state Medicaid agency can tell you the current limits. See how to apply for Medicaid for an elderly parent for the application steps and documents.
What happens to Social Security and other income
Families are often surprised that a parent on Medicaid in a nursing home still contributes most of their income toward care. After Medicaid starts, the state figures a monthly amount, often called patient liability or share of cost, that your parent pays to the nursing home3. Medicaid pays the rest.
Federal rules let your parent keep a personal needs allowance for things like clothing, haircuts and phone calls. The state also allows deductions for some health insurance premiums and, when there is a spouse or dependent at home, an allowance for them3. Social Security keeps coming to your parent, and the representative payee or agent under a power of attorney makes the monthly payment to the home.
Protecting a spouse who stays at home
When one spouse needs a nursing home and the other stays home, federal spousal impoverishment rules keep the spouse at home from being left without money4. The at-home spouse can keep a share of the couple's countable assets and may receive part of the nursing home spouse's income if their own income is low4.
These amounts change each year and states apply them a little differently. Because the stakes are high, many couples speak with an elder law attorney before applying. Our guide to Medicaid spend-down explains what assets count and how couples reach the limits.
The look-back period and penalty periods
When your parent applies for nursing home Medicaid, the state reviews financial records for the previous five years. Gifts or sales below fair market value during that time can cause a penalty period, a stretch of time when Medicaid won't pay for nursing home care even though your parent otherwise qualifies5. The penalty is based on the value transferred.
Some transfers are exempt, such as transfers to a spouse, to a disabled child, or of the home to certain family members, like a caregiver child who lived there and provided care for two years5. Don't move money or change a deed without advice. Read the Medicaid look-back period for details.
Paying before Medicaid, or without it
Many residents pay privately for months or years, and some never need Medicaid. Ways families stretch private funds include:
- Use long-term care insurance first. Call the insurer early, ask about the waiting period and benefit limits, and send the claim forms right away.
- Review life insurance. Some policies have long-term care riders or can be used in other ways. Talk with the insurer or a financial adviser.
- Decide about the house. Renting or selling the home can help pay for care, but it can affect Medicaid eligibility. Get advice first.
- Check tax deductions. Nursing home care for medical reasons may count as a deductible medical expense. Ask a tax professional.
- Choose a home that accepts Medicaid. If your parent may run out of money, choose a home certified for Medicaid so they can stay when they switch.
Ask the admissions office whether the home has Medicaid beds and what happens when a private-pay resident becomes eligible. A home certified for Medicaid can't discharge a resident just because they applied for Medicaid and are waiting for a decision8. See nursing home eviction.
Other help to know about
- VA benefits. Covered in the callout below.
- PACE. For some people who qualify for a nursing home level of care but can live in the community, PACE combines medical and long-term care9.
- Medicare Savings Programs and Extra Help. Can lower Medicare premiums and drug costs, freeing income for care.
- Free counseling. State Health Insurance Assistance Programs explain Medicare and Medicaid at no charge10, and the Eldercare Locator connects you with local aging services11.
Be careful what you sign at admission
A nursing home can't require a family member to personally guarantee payment as a condition of admission8. You can sign as your parent's representative to manage their money for care without promising to pay from your own pocket. Some states also have filial responsibility laws, which are rarely used but worth knowing about. Read every page, and ask questions about anything that says "responsible party." Our guide to nursing home residents' rights covers what federal law guarantees.
Talking about money as a family
Money conversations are hard, especially when a parent is ill or grieving the loss of independence. Try to include your parent in decisions as much as they are able, and be honest about what their savings and income can cover. Agree on one person to handle bills and paperwork, and share updates with siblings so no one feels left out or surprised.
Keep a simple folder or shared document with account numbers, insurance policies, Medicaid letters and nursing home statements. When questions come up months later, that record saves hours of searching and a lot of stress. If tension builds, a social worker or family meeting at the nursing home can help everyone focus on your parent's care. See talking to parents about senior living and caregiver burnout.
A step-by-step plan for families
- Find out where Medicare stands. Ask the facility how long skilled care is expected and how you'll be told when it ends.
- Gather the financial picture. Income, bank accounts, insurance, property and five years of records.
- Check legal papers. Make sure someone has power of attorney. See power of attorney for an elderly parent.
- Talk to your state Medicaid office. Learn the current limits and how long applications take.
- Get advice for complex cases. An elder law attorney can help with a spouse at home, a house or past gifts.
- Plan the house. Learn about Medicaid estate recovery before deciding what to do with the home, and read can a nursing home take your house.
Choosing the right home matters as much as paying for it. See how to choose a nursing home and how to check inspection reports.
