Nursing home care is the most extensive care available outside of a hospital. A nursing home usually provides:
- 24-hour nursing and emergency care;
- Room and board;
- Personal care (i.e. bathing, dressing, bathroom help, etc.);
- Medical monitoring and assistance from a registered nurse;
- Physical and/or occupational therapy; and
- Social activities.
Care at this level can be very expensive, but costs for nursing home care can vary dramatically depending on location, accommodations, and the level of care needed by the resident.
For example, the Genworth 2014 Cost of Care Survey shows that the median monthly cost for a semi-private room in a nursing home was $212, with a minimum of $94 and a maximum of $800. Comparable costs for a private nursing home room were $240, with a low of $104 and a maximum if $954.
Based on the 2014 survey data, the median annual cost for a semi-private room in a nursing home is $77,380, and for a private room the median annual cost is $87,600.
The Genworth data also shows the dramatic state-by-state variation in annual costs for a semi-private room, with Alaska showing the highest average costs at $237,250, followed by Connecticut at $142,168, Hawaii at $121,545, and Massachusetts at $126,290.
At the other end, average annual nursing home costs in Texas were the lowest at $50,735, followed by Oklahoma and Missouri at $52, 925 and Louisiana at $55,480.
These costs will inevitably increase, as they have over the past few years. Costs for nursing home care in a semi-private room grew by 2.62% from 2013 to 2014, and by 4.35% for a private room.
The rate of future increases will depend on the location of the nursing home, local property values, labor costs for skilled health care workers in the area, and food and equipment costs, all of which can vary considerably. Local costs also are affected by number of facilities in an area and the demand for and availability of care.
What is included in the monthly charge?
What is and is not covered in the basic monthly fee will vary from home to home and setting to setting. Generally, the fixed rate covers residential – basic room and board – skilled nursing, and medication services. But you should know ahead of time, and get it in a written contract, what is included and what is not. Otherwise, the monthly bill may come as a surprise.
You need to ask about special nutritional needs, medications, laundry services, hair care, nail clipping, laboratory costs, special outings, transportation to dentist or medical specialists, and a host of other services and benefits that might be considered extras and billed accordingly. Specialized Alzheimer’s and dementia care may be considered an add-on to routine monthly costs.
Some nursing homes require a deposit for private care patients, especially if demand is high in an area and the facility has a waiting list. You need to know what that deposit covers and whether, and when, it will be refunded.
Who pays… and how?
Once you grasp how expensive nursing home care is, you need to figure out who is going to pay for it, and how.
For long-term or custodial care, you will get little help from either Medicare or most private insurance. Coverage depends on the kind of care that is required and is generally time limited. Private insurance coverage varies according to specific plans, and Medicare (for those who are eligible) pays for nursing home care for up to 100 days, but only under specified circumstances and conditions:
- A hospital stay of three consecutive days and within a short time, usually 30 days, after leaving the hospital and skilled care is needed for the condition that required hospitalization. Among conditions that may qualify are a hip fracture, a stroke, or injuries from an accident;
- The physician must certify that the patient requires skilled care, including nursing, physical, occupational, speech or respiratory therapies;
- The patient requires skilled services that can only be provided in an in-patient nursing home and must be provided regularly, at least five or six times a week;
- The skilled nursing facility must be Medicare certified.
When those conditions are met, Medicare will cover all nursing home charges for the first 20 days and, after a daily deductible is met, the costs for days 21 to 100. The amount of the deductible is set annually. Some Medigap policies and employer retiree health plans will cover the daily deductible. If you have a Medicare Advantage plan, be sure the nursing home is a participating provider in order to qualify for cost coverage.
Many private insurance plans that do cover long-term care follow the same Medicare rules.
Other ways to pay…
Except for the post-100 day post-hospital coverage, Medicare and most private health insurance plans will not pay for long-term or custodial care in a skilled nursing facility. Therefore most coverage is provided by:
- Private funds. Given the high costs of long-term care, individual savings can be depleted quickly.
- If your parent has a long-term care insurance policy, the costs of some nursing home and long-term care services may be eligible for reimbursement, depending on the policy. This is private insurance that must be purchased and in effect before somebody needs long-term care.
- Veterans may qualify for skilled nursing services through the Veteran’s Administration. Veterans with service-related disabilities are eligible. Other groups may qualify, including veterans not able to pay for needed services, but veterans should check with the VA to see if they are eligible.
- Medicaid, a joint federal/state program, pays for long-term nursing home care for those who are eligible. Eligibility rules vary by state, but all require spending down to a set limit to become eligible. Sometimes people become Medicaid eligible after depleting their own funds for long-term care. You need to have assurance ahead of time from the nursing home, in writing, that your parent will not be evicted if he or she becomes Medicaid eligible and can no longer pay with private funds.
- Some insurance companies now offer a combined life/long-term care policy, hoping to attract those who fear their investment will be lost if they don’t need long-term care. With this combination, the insured stands to receive at least some benefit, either for long-term care or as a death benefit for a designated beneficiary.
- Some life insurance policies allow you to take a tax -free advance on the policy while still alive. Depending on the policy, this accelerated death benefit (or “Living Benefit” as it is sometimes called) is available if a person has been diagnosed with a life-threatening illness, is terminally ill, or will be permanently confined to a nursing home.
- A life insurance policy can be sold for its present value to raise cash, or the policy can be sold to a third party, with proceeds used to pay for long-term care costs. This is possible in cases of terminal illness. The company that purchases the policy continues to pay premiums and gets the full value of the policy when the policyholder dies.
Still more ways to pay…
Medicaid does not require the sale of a home for eligibility. However, federal law requires states to recover all long-term care expenditures from the estate when a beneficiary dies, which may force the sale of a home.
You can take advantage of the equity in a home to help pay bills either by taking a home equity loan or a reverse mortgage. In both cases, terms and rules vary by jurisdiction and financial institution, so it pays to shop around.
You can also set up an irrevocable charitable remainder trust to pay for long-term care. With these trusts, you make a sizable tax-free donation to the charity, which, in turn, pays the long-term care bills and keeps the remainder when the donor dies. Again, exactly how this is done depends on the charity and the way the trust is set up.