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Medicare does not pay most costs of nursing home care. But there are alternative ways to pay much of these expenses, which reached a median of $105,850 annually in 2020 for a private room, according to a survey by Genworth, a provider of long-term care insurance.
A third of people who are 65 in 2021 might never need long-term care, according to the U.S. Administration on Aging. But 20% of this age group will need such custodial care for five years or longer. So it makes sense to start planning early, while you can still act to improve your late-life circumstances.
Medicare doesn’t cover most long-term nursing home care
Nonmedical custodial care in a nursing home — like help with eating and bathing — is not covered by Medicare. However, Medicare may pay for short-term skilled care in a nursing home if it's deemed medically necessary because of an injury or illness.
But Medicare Part A does cover professional medical care provided in a skilled nursing facility (not to be confused with a nursing home), a time-limited benefit available when medically necessary for recovery and rehabilitation after a hospital stay. There are substantial limits to this Medicare coverage, chiefly a 20% copay for days 21 through 100, and no coverage beyond 100 days.
For people who are medically and financially able to age in place, Medicare does fully cover many home health care services, such as occasional skilled nursing. Medicare also covers 80% of some other costs, from physical therapy to durable medical equipment, such as wheelchairs.
Medicare Advantage (an alternative to Original Medicare offered by private insurers) also generally does not cover long-term custodial care, but plans may include supplemental coverage to assist with some home health care costs. If you have Medicare Advantage, check your plan for details on coverage.
Medicaid covers some nursing home costs, for those who qualify
Medicaid covers some costs of long-term custodial nursing home care and home health care for individuals with little savings and income. People who exhaust their financial resources while in a nursing home often eventually qualify for Medicaid.
Because it's a joint federal and state program, Medicaid benefits vary. Contact your state’s Medicaid office for coverage details.
Even if you financially qualify for Medicaid, there may be copays for some services that you’ll need in long-term care. Especially when it comes to nursing home coverage, it’s important to understand the differences between Medicare and Medicaid.
Long-term care insurance is an option for some
Long-term care insurance can work as a way to pay for nursing home care if you can afford the hefty premiums for years or even decades into retirement. This insurance can cover much of the expense of custodial care in a nursing home, assisted living facility or your home.
Be sure to read the fine print on any long-term care policy you consider — and seek advice from a professional who doesn't stand to gain from your insurance purchase. After years of paying premiums, some people with long-term care policies have faced large and unanticipated rate increases.
Some can afford to pay out of savings
People who have accumulated significant wealth may be able to pay out of pocket $100,000 or more annually for nursing home care for five years or more. But that’s not most of us.
Planning to pay for nursing home care means confronting complex, unpredictable and potentially enormous costs, not to mention your own mortality. With all these challenges, you owe it to yourself to speak with a professional about how long-term custodial care figures into your overall financial plan. The sooner you get started, the better.