When Medicare stops paying for nursing home care, what’s next?

Medicare coverage for nursing home care is subject to specific limitations and requirements. Medicare Part A may cover skilled nursing facility (SNF) care that is medically necessary, such as changing sterile dressings, but it generally does not cover services that help with daily living activities like dressing, meal preparation or bathing. To qualify for Medicare coverage in a skilled nursing facility, several conditions must be met:

• The patient must have had a qualifying hospital stay of at least three consecutive days, not counting the day of discharge.
• The patient must be admitted to a Medicare-certified skilled nursing facility within 30 days of the hospital discharge.
• The patient must require skilled care on a daily basis, such as skilled nursing services, physical therapy or other rehabilitation services.

Medicare Part A may cover up to 100 days of skilled nursing facility care per benefit period. However, it's important to note that Medicare only pays in full for the first 20 days. From day 21 to day 100, patients are responsible for a daily coinsurance payment ($204 in 2024). After 100 days, Medicare no longer covers the cost of nursing home care, and patients must explore alternative payment options.

The financial burden of nursing home care after Medicare coverage ends can be substantial, often catching families off guard if they haven't adequately prepared. As of 2024, the national median cost for a semi-private room in a nursing home was approximately $8,669 per month, which translates to an annual expense of around $104,000. For those seeking more privacy, a private room comes with an even steeper price tag, averaging $9,733 monthly or about $117,000 per year.

These costs, however, are not uniform across the United States. Geographic location plays a significant role in determining the expense of nursing home care. Generally, facilities in the Northeast tend to be more costly, while those in the Southeast offer somewhat more affordable options. Beyond location, the type of room and the level of care required also influence the overall cost. Individuals with complex medical needs or those requiring specialized services may face higher expenses.

When Medicare's limited coverage for skilled nursing care concludes, individuals and their families must consider alternative payment options. Many turn to their personal savings and assets to cover these substantial costs out-of-pocket. Those fortunate enough to have foreseen this need might rely on long-term care insurance policies to shoulder some or all of the financial burden. For veterans, benefits through the Department of Veterans Affairs may provide some relief.

However, it's crucial to recognize that Medicaid serves as the primary payer for long-term nursing home care in the United States. In fact, studies show that about 61% of nursing home residents relied on Medicaid to cover their care costs. This option becomes available once individuals have depleted their personal resources and meet specific income and asset requirements, which vary by state.

Given the potential for nursing home care to rapidly deplete one's life savings, proactive planning is essential.

Indeed, the end of Medicare coverage for nursing home care often marks the beginning of a challenging financial journey for many families. By understanding the potential costs, exploring various payment options, and planning ahead, individuals can better prepare for this eventuality. While the financial impact can be significant, a well-thought-out strategy can help manage these costs and ensure continued access to necessary care.

When Medicare stops paying for nursing home care, individuals and their families must consider alternative payment options to ensure continued care. Here are some of the most common options:

• Out-of-pocket payment. Individuals may choose to pay for nursing home care using personal savings, retirement funds or family contributions. This option can be financially challenging for many, as nursing home care is costly.
• Medicaid. Medicaid is a joint federal and state program that can provide coverage for long-term care in nursing homes for those who meet specific income and asset criteria. Eligibility requirements vary by state, and there is typically a five-year look-back period to assess assets and financial transactions.
• Long-term care insurance. If an individual has a long-term care insurance policy, it may cover some or all of the costs associated with nursing home care after Medicare coverage ends.
• Veterans benefits. Eligible veterans may qualify for long-term care benefits through the Department of Veterans Affairs.
• Reverse mortgages or life insurance policies. Some individuals may consider using these financial tools to fund their nursing home care, although it's essential to carefully evaluate the implications of these options.
• Immediate or Medicaid-compliant annuities. They can be used to convert countable assets into an income stream. These annuities, when properly structured, can protect assets for a community spouse, provide funds for care during the Medicaid application process and potentially accelerate Medicaid eligibility, but they must meet specific criteria such as being irrevocable, actuarially sound and often naming the state as a beneficiary.

One often overlooked but potentially valuable option to pay for nursing home care is the use of immediate or Medicaid-compliant annuities. These financial tools can serve as a lifeline for those needing long-term care financing, especially when trying to qualify for Medicaid assistance.

Immediate annuities, at their core, are contracts with insurance companies. The purchaser pays a lump sum in advance and in return receives a series of payments over a specified period or for life. Medicaid-compliant annuities are a specific type of immediate annuity designed to meet Medicaid's strict criteria. They must be irrevocable, meaning once purchased, they can't be canceled or cashed out. The payout period must align with the owner's life expectancy, and in most cases, the state Medicaid agency must be named as the primary beneficiary for at least the amount of Medicaid benefits paid. Additionally, these annuities must provide equal payments without any balloon payments.

The strategic use of these annuities in nursing home care planning revolves around their ability to convert countable assets into an income stream. This conversion can be crucial for individuals looking to qualify for Medicaid, which has strict asset limits. By reducing countable assets, an individual may meet Medicaid's financial eligibility criteria sooner.

For married couples, these annuities can be particularly beneficial. They offer a way to protect the community spouse – the one not requiring nursing home care – from impoverishment. The annuity can provide a steady income stream for the community spouse while allowing the institutionalized spouse to qualify for Medicaid.

Consider the case of John and Mary. John needs nursing home care costing $8,000 monthly, but the couple's $200,000 in savings puts them over Medicaid's asset limit. By purchasing a Medicaid-compliant annuity with $150,000 of their savings, they can create a monthly income of $3,000 for Mary over a set period. The remaining $50,000 can be spent on John's care until he reaches Medicaid's asset limit. At that point, John can apply for Medicaid to cover his nursing home costs, while Mary retains her annuity income to support herself at home.

However, it's crucial to approach this strategy with caution and professional guidance. Timing is critical – these annuities must be purchased before applying for Medicaid to avoid penalties. Moreover, Medicaid rules vary by state, so a strategy that works in one location may not be applicable in another. The irrevocable nature of these annuities means that once purchased, you can't change your mind or access the lump sum.

Medicaid plays a significant role in covering nursing home care costs when Medicare coverage ends. Unlike Medicare, which has limited coverage for skilled nursing care, Medicaid can provide long-term coverage for nursing home care for those who meet eligibility requirements. Here are some key differences between Medicaid and Medicare coverage for nursing home care:

• Eligibility. Medicaid is a means-tested program, meaning eligibility is based on income and assets. Medicare, on the other hand, is generally available to all individuals 65 and older or those with certain disabilities, regardless of income.
• Duration of coverage. While Medicare coverage for nursing home care is limited to a maximum of 100 days per benefit period, Medicaid can provide ongoing coverage as long as the individual remains eligible and requires nursing home care.
• Types of care covered. Medicaid covers both skilled nursing care and custodial care (assistance with daily living activities), while Medicare primarily covers skilled nursing care and rehabilitation services.
• Cost-sharing. With Medicaid, individuals may be required to contribute a portion of their income toward the cost of care, known as the "patient pay amount" or "share of cost." Medicare, in contrast, covers the full cost for the first 20 days and requires a daily copayment for days 21-100.
• Asset considerations. Medicaid has strict asset limits, and there are penalties for transferring assets within the five-year look-back period. Medicare does not have asset restrictions for coverage.

It's important to note that not all nursing homes accept Medicaid, so it's crucial to research facilities that participate in the Medicaid program if this is a potential payment option.

When Medicare stops paying for nursing home care, residents and their families may face concerns about potential discharge from the facility. However, it's crucial to understand that nursing homes cannot simply evict residents when their payment source changes. The discharge process is governed by specific regulations designed to protect residents' rights and ensure their safety.

Nursing homes are required to provide written notice at least 30 days prior to any planned discharge, explaining the reasons for the discharge and informing residents of their right to appeal the decision. This notice period allows residents and their families time to explore alternative payment options or care arrangements. Additionally, facilities are obligated to develop a safe and orderly discharge plan, which includes arranging for appropriate post-discharge care and services to ensure continuity of care.

In some cases, nursing homes may allow residents to remain in the facility while their Medicaid application is pending, although not all facilities accept Medicaid-pending residents. If a resident believes that a discharge decision is inappropriate or unsafe, they have the right to appeal the decision through established channels.

If discharge becomes necessary, the nursing home should assist in exploring alternative care options, such as assisted living facilities, home health care or family caregiver support. Throughout this process, it's essential for residents and their families to be aware of their rights and to maintain open communication with the nursing home administration about options for continued care when Medicare coverage ends.

If a nursing home attempts to discharge a resident improperly, the resident or their family can file a complaint with their state's long-term care ombudsman or the state survey agency. These agencies can investigate the situation and intervene if necessary.

It's important to note that while a nursing home cannot discharge a resident to an unsafe situation, they may transfer the resident to another appropriate health care setting if they can no longer meet the resident's needs. This could include a hospital, another nursing home or a specialized care facility.

Ultimately, while the end of Medicare coverage can create challenges, it doesn't give nursing homes the right to discharge residents without ensuring they have a safe place to go. Residents and their families should be aware of their rights and the resources available to them if they face an improper discharge situation.

The end of Medicare coverage for nursing home care presents significant challenges for individuals and their families, both financially and logistically. While the financial impact can be substantial, with annual costs often exceeding $100,000, there are multiple strategies available to manage this transition effectively. From exploring Medicaid eligibility to considering long-term care insurance or utilizing Medicaid-compliant annuities, the key is to start planning early. Don't wait until Medicare coverage ends to explore your options. By taking action now, you can ensure that quality care remains accessible for your loved ones, even after Medicare coverage ends, while also protecting your family's financial future.