As our loved ones age, different care needs will begin to arise. Whether a loved one is injured, has an illness, or is facing physical or mental changes due to age, they may need more dedicated care in the form of assisted living or a nursing home. Paying for long-term care can be stressful, but having a clear financial picture can help. It’s important to understand the payment options available, whether there are forms of financial assistance available to help with the cost, and ways to save additional money when making care decisions.

Key Takeaways

Nursing homes can be extremely costly. However, there are many avenues to pay for them, beyond private funds, that are important to understand.
Health insurance won’t normally cover extended nursing home care. Long-term care insurance and leveraging a whole life insurance policy may be helpful, though.
A senior's home equity is a valuable resource. In some cases, a reverse mortgage or bridge loan may help fund their care.
There are benefits available that may help. VA benefits and Medicaid may both offer coverage to those who are eligible for their programs.

Care options

For a senior adult who needs more dedicated care, there are a range of options available. These care types include at-home care, assisted living facilities, nursing homes, and more. Understanding the level of care your loved one actually needs is a crucial first step.

At-home care refers to keeping a senior loved one at home but providing care there. This may include home visits from home health aides, nurses, or physical therapists, as well as safety modifications to the home itself.
Assisted living facilities enable seniors to live as independently as possible in a safe community with access to the personal care that they need.
Nursing homes provide round-the-clock supervision, assistance with activities of daily living (ADLs), and skilled nursing care for loved ones with more intensive care needs.

Paying for nursing home care

If a nursing home is the best option for your parent, you will need to figure out how to pay for their care. According to the most recent Genworth Cost of Care Survey, the average yearly cost of a private room in a nursing home was $108,405 in 2021.^[01]

While paying out of pocket may be an option for some, few families can cover the entire cost of nursing home care this way. Understanding various payment options, beyond private funds such as social security benefits, can help make this cost seem more feasible.

Long-term care insurance

Unlike health insurance, long-term care insurance will usually cover nursing home care. However, this will depend on a few factors, such as whether the premium payments are up to date and the policy’s terms. There may also be stipulations in place for what triggers coverage, such as how many activities of daily living your loved one can do without assistance. If your loved one already purchased a policy, contact the insurer to help clarify what can and cannot be covered.

Life insurance

While not everyone may have preplanned and taken out a long-term care insurance policy, many people do have life insurance policies. Depending on the type of life insurance policy your loved one has, they may be eligible to borrow against or withdraw a portion (or all) of what is called the cash value of the policy.

Another option is converting a life insurance policy into a long-term care benefit plan. This is also referred to as a life settlement and involves selling the policy to a third party, which assumes responsibility for paying the policy’s premiums. Payments are usually made directly from the benefit account to care providers. While not every life insurance policy has a cash value, some can still be converted to a long-term care benefit plan. This often depends on the amount of a policy’s death benefit, so you may need to contact the insurer to determine what options are available.

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Medicare

Medicare does not cover long-term care.^[02] Medicare only covers short-term nursing home care needed to help a beneficiary recover from an illness or injury. Certain conditions for coverage must be met.

If your parent has a Medicare Advantage plan, there may be some coverage for nursing home care. However, this is usually only available if the nursing home has an existing contract with the plan, so it is best to check with the insurer.^[02]

Please note, Medicare Part D will still cover prescriptions even if someone is living in a nursing home.

Medicaid

Medicaid, a state and federal insurance program meant to assist people with low-incomes cover medical care, can often help cover some (or all) of the cost of a nursing home. However, there are some stipulations. Medicaid will only cover nursing home care when the nursing home has been licensed and certified as a Medicaid Nursing Facility.^[03]

In order to be eligible for long-term care Medicaid, your loved one must meet level-of-care requirements and must not exceed the income or asset limits for their state. Additionally, there are some aspects that may not be covered, such as a private room rather than a shared room and nonmedical dietary restrictions that require specially prepared food.

It is also important to note that federal laws require the recovery of a Medicaid recipient’s assets after they pass away to repay the cost of their care. This varies by state but can include assets such as their house and vehicle.

Veterans benefits

If your loved one is a veteran, then they may be eligible for long-term care through the Department of Veterans Affairs (VA). Your loved one must be enrolled in VA health care benefits, and the VA will need to determine that they need nursing home care.^[04] A copay may still be required in some cases.

In addition to VA health care, your loved one may also be eligible for VA pension payments. This is a monthly payment for wartime veterans who meet certain financial and age/disability requirements (or their surviving spouses). Additional financial assistance may be available to certain veterans through the Aid and Attendance (A&A) benefit. While these payments will likely not cover the entire cost of your loved one’s care, they can help.

In order to qualify for the Aid and Attendance benefit, a veteran who already receives the VA pension must also:

Live in a nursing home due to the loss of mental or physical abilities related to a disability
Need help to perform daily activities
Be confined to their bed or need to spend a significant amount of time in bed due to illness

Using home equity to pay for nursing home care

While insurance and medical benefits may cover some or all of the cost of a nursing home, there are also other options to pay for care. These include using home equity, which can be done in a few different ways. You and your loved one should discuss the following options with a financial advisor before pursuing any of them.

Selling the home

To quickly gain money, selling your loved one’s home might be the first solution to come to mind. While selling a home can help fund their care, it may not be the best solution. Depending on the market, a home may take a while to sell or sell at at a price lower than its valuation. Additionally, because of tax consequences, the sale proceeds may be less than expected or needed.

Talk with a Senior Care Advisor

Our advisors help 300,000 families each year find the right senior care for their loved ones.

Reverse mortgages

Reverse mortgages allow homeowners to borrow against the equity of their house.^[06] Reverse mortgages don’t go into repayment until the last borrower passes away or no longer resides in the home. While the house itself is often used as the repayment, if heirs are able to pay back the loan using other sources, then they can keep the house.

There are, unfortunately, many predatory scams that target the elderly. It’s best to compare loan options offered by reputable lenders and discuss them with a financial advisor before acting.

Bridge loans

Bridge loans can serve as a way of securing money quickly while waiting for a home to sell.^[07] Essentially, this type of loan acts to cover a cost until payment can be secured. For example, the bank would loan a sum based on the expected selling price of your loved one’s home, and would expect repayment once the house is eventually sold.

While bridge loans can be a good solution, banks tend to be highly selective about whom they extend these loans to. Additionally, bridge loans usually have relatively short terms of six to 12 months and often have higher interest rates and fees.

Other ways to reduce nursing home costs

In addition to understanding ways to pay for a nursing home, there are other ways to lessen the cost where possible.

Consider location. Depending on where your loved one lives, it may make sense to move them to a nursing facility closer to you or another family member. For example, a private room in Madison, Wisconsin, averages $114,610 annually, while one in New York City averages $158, 775 annually. ^[01]
Choose a room wisely. If you loved one feels comfortable sharing a room, and it isn’t medically necessary for them to have a private room, it may make financial sense for them to choose a semi-private room instead.
Look at multiple options for the right nursing facility. Having someone trusted and knowledgeable to guide you through the process can help ensure that you find a facility you and your loved one feel confident in.

Next Steps

When a parent or senior loved one is going through mental and physical changes, it can be an emotional and stressful time. Choosing the right nursing home can be overwhelming as you look for a facility that will be comfortable for your loved one, provide quality care, and fit their budget. Talking to a Senior Care Advisor can help. They can guide you through the process of finding the right care option for your loved one, connect you with local providers, and recommend payment solutions.

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References

Genworth. (2022, June 02). Cost of Care Survey.
Medicare. Health care & prescriptions in a nursing home.
Medicaid. Nursing facilities.
U.S. Department of Veterans Affairs. (2022, October 12). VA nursing homes, assisted living, and home health care.
U.S. Department of Veterans Affairs. (2022, October 12). VA Aid and Attendance benefits and Housebound allowance.
Consumer Financial Protection Bureau. (2022, July 11). What is a reverse mortgage?
Caginalp, R. (2022, October 24). Bridge Loans: What are they and how do they work? Bankrate.

Meet the Author

Chloe Clark

Chloe Clark is a copywriter for OurParents. She has an MFA in Creative Writing, with a background in education and publishing. She has over a decade’s experience in writing for print publications and websites.

Reviewed byJames Schier

The information contained in this article is for informational purposes only and is not intended to constitute medical, legal or financial advice or create a professional relationship between A Place for Mom (of which OurParents is a trademark) and the reader. Always seek the advice of your health care provider, attorney or financial advisor with respect to any particular matter and do not act or refrain from acting on the basis of anything you have read on this site. Links to third-party websites are only for the convenience of the reader; A Place for Mom does not recommend or endorse the contents of the third-party sites.

How to Pay for Nursing Home Costs: A Brief Guide