How To Pay For a Nursing Home

Nursing Home Care can be more costly than a Hospital stay. Thankfully, in America we have two main programs to help pay for Nursing Home Care.

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Nursing Home Care can be more costly than a Hospital stay. Thankfully, in America we have two main programs to help pay for Nursing Home Care.

Medicare and Medicaid programs are the main types of funding for Nursing Home Care in America. Medicare and Medicaid are exclusive to one another, but may act as complementary sources for Seniors who enter a Nursing Home. Managed Care is also a top payor source for Nursing Home Care.

Medicare is a program in which beneficiaries pay toward throughout their working careers. Once the individual reaches age 65, he or she may become eligible for Medicare Benefits Part A and Part B. These two main silos of the Medicare benefit pay for the big pieces of the pie during a Nursing Home stay, however there are limitations to these benefits. Moreover, Medicare was not designed to give ongoing coverage in a Post-Acute setting like a Nursing Home. Medicaid can act as a viable payor source in a Nursing Home for Long-Term care. Medicaid was designed as an entitlement program for the impoverished and indigent populations, and has many more eligibility standards depending on what state you may live in. No matter your age or healthcare needs, knowing the mechanics of both programs will help you understand how insurance drives care and services nationwide, and how our society as a whole benefits.

As a Skilled Nursing Administrator and Healthcare Executive for over eight years, I have an intimate understanding of how each program can benefit our Seniors and indigent populations when both programs are effectively used as designed. Through hundreds of benefit consults and encounters with Seniors in the Nursing Home, I came to realize the big misconceptions Seniors had about each program. I took up such an interest in these programs as well as other insurance products available today, that I further obtained a Life & Health Insurance Agent License which extensively covers both Medicare and Medicaid programs. Without the Senior and the Seniors families well-educated on these two programs, it often hinders healthcare decision making in the moments it matters most.

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The Mechanics of Medicare

In the context of Nursing Home coverage, the mechanics of Medicare must be understood by those who are beneficiaries. First, to be a recipient of Medicare benefits one must become Eligible. Eligibility has two main considerations:  a) Your age, and b) Did you work enough throughout your career to qualify for Medicare benefits, referred to by Medicare as working credits. The Age requirement is simple. One must turn 65 to elect benefits, with only a few outlying exceptions after age 62. Working Credits, the next eligibility gait, refers to the quarters of work (3 months) you must have paid into Medicare during your working career. You must have 40 working credits - 120 months, or 10 years - of working credits to tap into your Medicare benefits. Simply put, it is a pay-to-play program. Assuming you are a beneficiary already, the only way to be admitted to a Nursing Home is via a 3-midnight hospital stay at an in-patient status.

To simulate how these two programs may cover Nursing Home care, we will follow “Ms. Polly”, a hypothetical Senior Citizen, through a Nursing Home stay and you will experience how the coverages may work.

Ms. Polly spent the past three midnights in a local hospital inpatient room. Polly broke her hip and femur during a fall at home, sustaining a closed head injury as well. The doctors perform surgery and order therapy, and 5 days later determine that a Skilled Nursing stay would be the best route for recovery. Polly enters the Nursing Home under her Medicare A benefit; she has 100 Medicare Part A days; only days 1-20 are entirely covered 100 percent by Medicare and beginning on Day 21, Polly would incur a copay predetermined each year by Medicare which is approximately $176 per day as of 2020.

Polly receives Physical Therapy, Occupational Therapy, and Speech Therapy at various intervals six days per week for 14 days. She has now used 14 of her first 20 days that are paid in full. Polly returns home on day 15 with Home Health services that she utilizes for another 21 days. These Home Health visits are covered under Medicare Part B which is a separate silo of Medicare benefits.

The scenario doesn’t entirely end here for Ms. Polly. To protect Medicare from overutilization, Medicare has a 60-day spell of wellness clause. If Ms. Polly spends the next 60 consecutive days not utilizing any Skilled Medicare benefits,  her 100-day benefit period begins anew. Conversely, if Ms. Polly has complications after coming home and returns to the hospital on day 47 of the 60-day spell of wellness, the clock stops 13 days short of receiving a new benefit period and Ms. Polly remains in the original benefit period with 86 out of her 100 days left. Days 16-20 will be paid in full, days 21 through 100 will have a copay. This scenario is not intended to provide any professional advice or consultation regarding Medicare. You should seek out the most recent Medicare Program information by visiting

The Mechanics of Medicaid

Medicaid Programs differ from state to state, however each State still must adhere to certain federal standards set forth by Health and Human Services in how the program is administered. If states adhere to these administrative guidelines, they can request a dollar-for-dollar Federal match to help offset state costs. Ironically, Medicaid incentivizes States to spend more in Medicaid dollars by offering a 2 to 1 matching of funds spent. For example, If a state spends 50 million annually, they can then request 25 million in Federal Match. Conversely, if states that manage their Medicaid dollars spend only 40 million annually, they can only obtain up to 20 million in a Federal Match. I think it’s important to point out how Medicaid’s framework does not financially incentivize states to efficiently administer Medicaid dollars, they pay their 2 to 1 match regardless of each state's spending.

States must offer coverage to certain high-risk populations, or those individuals that have certain ailments, including adolescents with certain comorbidities. As stated earlier, this program was designed as a safety net for impoverished and/or disabled persons to still receive appropriate care and services. In the context of a Nursing Home, Medicaid is used to fund Intermediate Care, otherwise called Long-Term Care. When a Senior needs Medicaid, generally two conditions must be met during the application process. First, the individual must be financially eligible which typically means an asset limit of $2,000 or less. Second, there is usually a clinical assessment to determine if the resident is ill enough to receive Long-Term funding.

Let’s check back in on the hypothetical scenario involving Ms. Polly, our Senior who recently received care at a local Nursing Home under Medicare. Ms. Polly has now been home for 4-6 months and is gradually declining. She applies for Medicaid services and gets approved for Home And Community Based Services, or “HCBS”, to help her Age in Place which is one service tier of Medicaid. Ms. Polly then has another health setback with her heart and is admitted into the hospital for 5 midnights. It was a moderate stroke, leaving her with permanent damage to the left side of her body, as well as memory and cognition deficits.

She is transferred back to the local Nursing Home with ordered Skilled Therapy and Nursing services. The facility care team notices that Ms. Polly has not made much progress, and has not reached any of her therapy goals. Polly cannot eat by herself and needs her medications crushed and her food softened due to the stroke, as well as maximum assistance with daily living activities. Ms. Polly now applies for Institutional Long Term Care - a separate silo of Medicaid that will pay Nursing Homes to house and care for Ms. Polly. The state can either approve or deny her coverage based on state-specific criteria for financial and clinical qualifications.Once approved, Ms. Polly’s Medicaid benefits will be routinely reviewed by a Case Worker at the discretion of the State Medicaid Office.

Other Payor Sources for Nursing Homes

Some Seniors pay privately for room & board if, when applying for Medicaid, there are substantial liquid assets and Medicaid determines them to be ineligible - remember, the program is mainly designed for the impoverished which Medicaid defines as having over $2,000 or more in cash or assets. However, if a Private Pay resident meets qualifications, he or she could still tap into Medicare Part B benefits for routine Therapy benefits if determined appropriate. It is also important to note that, once approved for Medicaid, the beneficiaries’ social security income may be reappropriated to the Skilled Nursing Facility in the form of a patient liability.

Another financing tool is a Long-Term Care policy. These policies have options to receive services and care from Home, however there usually are Convalescent and Long-Term Care benefits in many of these policies. According to the American Association for LTC Insurance, annual policy premium amounts have steadily risen from 2016 - 2021 by approximately $1,000 and there has been a higher decline rate among those who apply for these policies. These types of coverages make up only a tiny portion of Nursing Home reimbursement nationally.

Medicaid Block Grants

The reason there has been so much explanation into the federal and state matching with Medicaid Funding is to explain the newest concept in entitlement frameworking called Medicaid Block Grants. A Medicaid Block Grant framework would change how states manage their Medicaid dollars. Essentially, these Block Grants are based on funding a Maximum dollar amount, per capita, for each state beneficiary. The state would then have more flexibility on how to administer these funds to its population. Remember, Federal matching is at 50% no matter what the particular state spends. With Block Grants, states now get a max amount “per covered body” in exchange for more flexibility in how to administer the Medicaid dollars.

There is much debate over Medicaid Block Grants. Many skeptics say states will slash the number of eligibles under its Medicaid Block program to come in at or under budget, while proponents of Block Grants argue that States with proven track records of efficiently managing Medicaid dollars should have more flexibility to meet regional and demographic needs instead of federal bureaucracies. Tennessee recently gained the first approval nationally for a Block Grant Waiver in 2019 and will be rolling out some version of a Block Grant system in 2021.

One thing remains evident in my opinion:  For each state, Medicaid must evolve in lock-step with population health needs and the increased acuity seen in our Nursing Homes or the Ms. Polly’s of tomorrow will be left to rely on an ineffective payor source, and critical institutions like our Nursing Homes may face bankruptcy at an alarming rate due to ineffective funding.

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