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    Payment for nursing home care is a complicated matter.  There are many variables that affect who pays and how much they pay.  It is not possible to describe all the circumstances factoring into the payment process because they involve differences in an individual’s finances, the facility’s fees, insurance reimbursement rates, and other supplemental funding sources.

    The attempt here is to provide an overview of payment sources and things to consider when facing the cost of long term care.  Often the responsible party will not know the final cost and who will pay what until meeting with the admission coordinator at the chosen facility.



                                        PAGE CONTENTS

              ∆  It is all about money.

              ∆  Chargeable items and services.

              ∆  Payment for services.

              ∆  Paying out of pocket.

              ∆  Private insurance as the payor.

              ∆  Medicare’s limitations.

              ∆  Medicaid as the payor.

              ∆  Other sources of payment

              ∆  Quality of care and the payment source.

It is all about money.

    The  frustrating question, “It’s all about the money, isn’t it?”, has often been expressed by family members.  In many ways the answer is yes.  The facility has a multitude of expenses that must be paid and owners expect a return on their investment.  Even nonprofit facilities must meet their operating cost and put some aside for a rainy day and periodic refurbishing or equipment replacement.  Being a nonprofit means there are no stockholders expecting a dividend but in most cases, there are also no charitable donations to support operating expenses.

   To put the daily cost of nursing home care into prospective it helps to compare the cost to a medium priced hotel room.  After the daily charge for the room, other services and amenities provided by a hotel are an extra expense. Food and beverages, personal laundry, barber services, and telephone use are always an extra expense and most likely pricey compared to the same services purchased outside the hotel.  New or higher hotel fees are often added for such basics as parking, swimming pool, exercise room, meeting rooms, computer connections, and other items that can be identified as revenue sources.

    For a daily cost near that of a hotel room, the nursing home  per diem includes 24 hour general nursing care, meals and snacks, activities and recreation, social services, drug dispensing, medical records, personal assistance in the activities of daily living, and a planned care process designed to meet the medical needs of the resident.  The value of complex nursing services alone may exceed the cost of a hotel room.  Nursing home management and staff must work within the expectations of users who view the health care costs as outrageous to provide far more than a hotel does at the same or similar prices.

    In many ways the variety of care processes and amenities in the nursing home are limited by the market.  If those paying for services refuse to pay for the type and levels of care desired by the public, then the providers must limit themselves to what they can sell in the health care market.  Government and private insurance plans and those who pay out of pocket exert significant influence over the services and amenities a nursing home can provide.  The few high end facilities able to operate as we all would like nursing homes to do so can be afforded only by the very wealthy and do not accept Medicare and Medicaid or any other discounted payment sources.

    For those using long term care, it is necessary to understand and accept that financial limits have created and control the nature of nursing homes today.  The pricing system and range of services may seem distorted and convoluted while putting the heaviest burden on those who can afford to pay out of pocket.

  Chargeable items and services.

    Chargeable items and their prices vary from facility to facility and payor source to payor source.  Medicare and Medicaid pay an all inclusive rate for specific services and care related items.  Long term care and other forms of medical insurance also clearly define the costs they will cover. The resident is liable for all costs not covered by government or private insurance.

   Medicare/Medicaid certified facilities must inform each resident or their personal representative of all chargeable items and services available in the facility including any billable items not covered under Medicare or by the facility’s per diem rate and their prices in writing before or at the time of admission and periodically during the resident’s stay. The facility may charge any amount for services furnished to non-Medicaid residents as long as notification requirements are met.  An updated notice is required when changes are made in the items and services covered by Medicaid or by the resident.

    Each resident who is entitled to Medicaid benefits must be notified in writing at the time of admission or when the resident becomes eligible for Medicaid of the items and services included in facility services under the State plan for which the resident may not be charged.

     The State is not required to offer additional services on behalf of a Medicaid resident other than services provided for in the State plan.  A nursing facility may charge a resident who is eligible for Medicaid for items and services the resident has requested and received that are not specified in the State plan as included in the term “nursing facility services” so long as the facility gives proper notice of the availability and cost of these services to residents and does not condition the resident’s admission or continued stay on the request for and receipt of such additional services.

    The actual expenses for the resident must be determined individually based upon the payor source and the optional services offered by the facility and requested by that resident.  For the self financed resident, items and services not covered by that base rate or per diem will be provided at their expense.  Those covered by private insurance, Medicare, or Medicaid will be responsible for any charges beyond that covered in that payor’s contract with the facility.

    What may or may not be charged to the resident during a Medicare/Medicaid covered stay is defined in §483.10(c)(8), Limitations on charges to personal funds.  This description of acceptable charges is written in response to personal money a resident may have on deposit in the facility trust fund but applies to all residents.  Trust funds are held in a bonded bank account managed by the facility which can, on the authority of the resident, provide cash to the resident or make payments to the facility or to others.

    The regulation §483.10(c)(8) Limitations on Charges to Personal Funds, F162 under the section §483.10(c) Protection of Resident Funds with supportive guidelines, may be found at:

  Payment for services.

    A nursing home is not required to accept an admission without a clearly identified source of payment for services.  They have the right to decline admission when they are unlikely to be paid or paid enough for the resident’s care.  Nursing homes may require both a primary and a secondary payment source before approving admission.  The most common combination of a primary and secondary source would be a person qualifying for Medicare and as the secondary source, Medicaid, private insurance, or payment out of pocket by the individual.

   When someone other than the new resident is completing the paperwork for admission, they will be confronted with a financial agreement to sign. They may be a guardian, have financial power of attorney, or be in some other way empowered to function as the resident’s financially responsible party. The facility may require an individual who has legal access to a resident’s income or available resources to sign a contract to pay for facility care. This agreement is often thought to be a personal commitment guaranteeing payment from the signer’s assets but this is not the case. Although the paperwork may be an agreement to pay the cost of services, it is not cosigning for a debt or a guarantee to pay from their personal assets.  It is an agreement to act as payment agent utilizing the resident’s financial resources only.

   A licensed nursing home may choose not to certify beds for Medicare or Medicaid and decline an admission because either of these would be the only source of payment for services.  A facility with certified beds must accept payment by Medicare and/or Medicaid when the resident’s cost are covered by either of these two sources.  The facility must have and respect a policy that residents or potential residents are not required to waive their rights to Medicare or Medicaid nor will they be required to make oral or written assurance that they are not eligible for or will not apply for Medicare or Medicaid benefits. Rules are in place that specifically address activities by a nursing home that may be used to get around those set  reimbursement levels.

    In the case of a person eligible for Medicaid, a nursing facility must not charge, solicit, accept, or receive, any gift, money, donation, or other consideration as a precondition of admission, expedited admission, or continued stay in the facility beyond any amount otherwise required to be paid under the State plan.  The facility is prohibited from requiring a third party guarantee or cosigner for payment as a condition of admission, expedited admission, or continued stay in the facility.

        Section 4: Paying for Nursing Home Care and Other Health Costs in the publication Your Guide to Choosing a Nursing Home from CMS discusses how to pay for nursing home care. It can be found at:

Paying out of pocket.

    The resident or family member paying for nursing home expenses themselves will pay the highest rate of all for long term health care.

Medicare and Medicaid, the source of payment for the majority of long term care residents in most facilities, set their own reimbursement rates.  Medicaid requires that no one pay less than they do. Private insurance companies negotiate the lowest payment possible payment in contracts with nursing homes.  With the major customers of certified facilities setting their own rates, the facility must seek revenue from those paying privately to cover the cost of doing business and achieve a profit.  The mythical $10 charge for an aspirin is not just from greed.  It comes from the need to make up for the limited income from payment contracts with Medicare/Medicaid and private insurance companies.

    The facility may require full financial disclosure from private pay applicants.  Experience leads the nursing home to plan for the day the resident exhaust their personal assets. They want to know how long the resident will be able to pay out of pocket before they must apply to Medicaid.

    See the marketing or admissions person at one or more local nursing facilities to get a feel for what nursing home care will cost out of pocket.  They can provide the billable item information required in the section Chargeable items and services. above and help estimate what the monthly cost will be.  Bring a list of the prospective resident’s medications and dosage so they can get an estimate of medication cost from their pharmacy.  Purchasing drugs through their pharmacy is preferred because there are many complications to the resident buying their own medications.  Using the facility pharmacy may be the most realistic source, but will not necessarily offer the lowest cost.  The facility’s pharmacy policy and procedure will determine the status of self-purchased medication.

Private insurance as the payor.

    There are a variety of private insurance plans paying all or parts of the cost of long term health care. Traditional health insurance was not designed to pay the cost of long term nursing care so many types of health insurance will not do so.  To be sure, read the policy carefully or get a knowledgable person to translate it to you to identify any part of that insurance that may support some part of the nursing home related expenses.  Coverage that would normally cover hospital stays may also cover the cost of recovery time and therapy in a nursing facility.

    Long term care insurance is available but may be cost prohibitive, have pre-existing condition limitations, and not be available to those already in or about to need nursing home care. The cost of long term care insurance may deplete personal assets as quick or quicker than the expense of self payed nursing care.

   Talk to the marketing or admission person at nearby nursing homes about your present or prospective long term care insurance provider. From their experience with various private insurance companies, they can help you clarify what will and will not be paid for by the insurance company.

   As profit making business, insurance companies are hard negotiators with nursing facilities and limit their cost exposure to the basics of long term care leaving some items for the individual to pay.  They want to limit their liability to only the bare bones of care.  It is important to understand what those bare bones are.

       The publication, A Shoppers Guide to Long-Term Care Insurance, can be ordered free from the National Association of Insurance Commissioners at: 


  Medicare’s limitations.

    Medicare is often seen as an unlimited government medical benefit but it is not.  At the admission of their love one to a nursing home, families who think all expenses will be covered by Medicare are confronted with the restrictions of what is a good health care plan but one with boundaries and limitations.

  A nursing home resident only qualifies for Medicare under very specific conditions for limited periods of service  and there are a number of parts to the program.  Part A is called a hospital insurance and Part B a medical insurance.  The Medicare Advantage plan, which is like an HMO or PPO, combines parts A and B and usually the drug plan, Part D.  In addition there is a related private insurance called Medigap which is a Medicare supplement policy.  Parts A, B, and D cover some or all long term care expenses under certain conditions and for specific periods.  Medicare Part A covers skilled nursing care for a maximum of 100 days with the last 80 days requiring a co-pay by the resident.

    Explaining how Medicare can cover some or all of nursing home care is too complicated to attempt here.  The Centers for Medicare & Medicaid Services mails an annual handbook, Medicare & You, to those who have Medicare.  The 135 page book describes the various parts of Medicare and includes a significant amount of helpful information for planning and managing costs.  Specially helpful is state specific information on Medigap, Medicare Advantage, and Part D providers in your state.

    There is an on-line version of the Medicare & You which does not include the important state specific insurance provider information.  If you do not have the state specific guide, check with others in your community who are on Medicare to borrow their book and copy the listings and satisfaction ratings for the insurance plans available to you. The on-line version is available through the web link below.

    Often end of life care can be provided for a resident in the nursing home as a patient of hospice.  The facility is paid the per diem rate for custodial care with hospice providing the skilled level of care.  The facility is treated as the resident’s home.  This arrangement can work very well in a community without a residential hospice or for families unable to care for a loved one at home.  Medicare may be able to provide some financial support for this level of care.  The guide, Medicare Hospice Benefits is available at the website below to help you understand the program’s support and limitations.

    State Health Insurance Assistance Programs  or (SHIP) were originally established to address the confusion caused by the increase in choices of Medicare supplemental insurance, or Medigap. The program has greatly expanded so that today trained counselors offer information, counseling and assistance to Medicare beneficiaries on a wide range of Medicare and Medicaid, and Medigap matters, including, enrollment in Medicare prescription drug plans, Medicare Advantage options, long-term care insurance, claims and billing problem resolution, information and referral on public benefit programs for those with limited income and assets, and other health insurance benefit information.  SHIPs also support efforts to inform Medicare beneficiaries about fraud and abuse.  This service should be able to help you identify private Medicare related insurance providers and learn the satisfaction ratings given by those who have used them. Use the link below to identify a program in your state.

    For the nursing home, Medicare is attractive because it is an excellent source of revenue. Those having their cost covered by Medicare must have had at least a three day stay in a hospital and be admitted to the facility with medical need(s) for skilled nursing and/or therapy care.  Medicare payment level is based upon the care needs of the resident. The more complicated the necessary clinical and therapeutic care, the higher the daily reimbursement to the facility.

    New admissions with knee or hip replacements or other conditions requiring recovery therapy are very attractive to nursing homes for the high income and short term of their stay.  Those residents occupy a bed for a limited term producing high income as they recover and then return home.  The empty bed they leave is an opportunity for another short term high reimbursement admission.

  Those quick turnover Medicare residents are limited in number.  Many admitted under Medicare with the need for high levels care will stay on in the facility for custodial care which is not supported by Medicare.  Those who no longer qualify for skilled care or have depleted their Medicare covered days must provide another source of payment. This is why in the admissions process most facilities require the identification of a secondary payment source.

Health Insurance and Assistance Partnership SHIP Contact Information by State

Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare.

State Pharmaceutical Assistance Programs

Medicare Hospice Benefits

Medicare & You

∆  Medicaid as the payor.

    Medicaid is a combined State and Federal program paying for some or all the cost of those who do not have the assets or insurance to cover their own stay in a nursing home.  The program is not just for long term care but covers a variety of people and health care situations.  As a state operated program, the goals are similar in the various states but the who, what, where, when, and why of the benefits differ from state to state.  The program goes under other names in some states such as Medi-Cal in California and Mass-Health in Massachusetts.

    Medicaid is the payor for approximately 70% of all nursing home residents.  Eligibility is based upon the nursing home resident’s income and financial resources.  It is inaccurate to think that one must spend down all their personal assets or become impoverished to qualify.  There are conditions that protect the resident and family members from cashing in everything to pay for long term care.

   Medicaid rules are very complex, change from time to time, and are different from state to state.  The states may set the rules in such a way as to limit their cost exposure creating a situation where all who need the program are not enrolled.  It is a program that has the potential to grow far beyond a state’s ability to cover the cost.

    The expenses covered by Medicaid programs may include semi-private room and board, doctor’s services, limited prescription and OTC drugs, hospitalization, laboratory tests, X-rays, physical therapy, medical equipment, dental needs, hearing aids, eyeglasses, and other reasonable medical expenses.

    Using Medicaid as a means of payment is often seen as the loss of everything a person has acquired in their lifetime or the loss of an inheritance for a spouse and/or children due to the need to exhaust one’s financial resources.  For the spouse, this is not necessarily true due to the spousal impoverishment rules but it may eliminate an inheritance for family members.  Homes are protected for spouses, under certain conditions for others, and for the resident if there is a possibility they will be able to return home.  Shared savings may also be protected for the other party.  Spousal impoverishment rules protect the home for the spouse still living there, certain amounts of the couple’s funds, and a portion of the resident’s income for support of the spouse.

    Medicaid only covers that part of the nursing home expense not paid for from the resident’s own income.  The individual must first make payment, the resident liability, from income sources such as Social Security with Medicaid paying the remainder.  A small amount of their income, usually less than $100, is set aside each month for the resident’s personal use.  Those personal funds may be held in trust by the facility to be used for anything the resident chooses.

     Giving away money or transferring property for less than market value to family members and others is often seen as a way to avoid using assets to pay for nursing home care.   Doing so is treading on shaky legal ground.  There are look back time limits that allow gifts in the past to be seen as an effort to avoid using the assets to pay for care.  Before considering such a move, review your plans with an attorney.  Trying to avoid the use of personal assets for nursing home care may not be the best thing to do.

    Utilizing Medicaid to pay for nursing home care is complicated and based upon individual circumstances.  The marketing or admissions coordinator in most nursing homes is a good place to start gathering information.  They will have some answers for you but will most likely refer you to the local agency administering Medicaid.  The final answers of cost and qualification for Medicaid come from representative of the state agency administrating the program in your location.

    The websites below will provide more introductory information and help you establish the questions you need to ask the nursing home staff or local Medicaid representative.

Medicaid: From Wikipedia

Medicaid: State by State Descriptions & Plans

    The state specific publication Getting Medicaid to Pay for Nursing Home Costs by the Legal Aid Society of Middle Tennessee and the Cumberlands  provides and excellent overview of one state’s Medicaid program.  It may answer some questions and give you an idea of what to ask about the Medicaid program in your state.  It can be found at: 


∆  Quality of care and the payment source.

    The quality of care provided to residents is sometimes thought to be based upon the payment source.  That is, a resident covered by Medicaid, the lowest rate of reimbursement for services to a nursing home, would receive less or poorer care than a resident paying a higher rate from their own funds.  This is not true. A certified nursing home is required to establish and follow identical policies and practices for the transfer, discharge, and provision of services for all residents regardless of payment source.

∆  Other sources of payment.

   Some veterans qualify for nursing home care and outpatient long term care options through the Veterans Administration.  There are also state operated veteran’s nursing homes. These possibilities should be investigated for any veteran requiring extended nursing care.

    Family members admitting a loved one will often not be aware of other insurance, retirement benefits, memberships, or income sources that may assist in the payment of nursing home care. It may be necessary to question your family member in detail and do some research in their home and files to make sure there is not some other financial source available to assist.  Although it might seem futile to pursue other payment sources, you never know what you might find.

   The websites below will provide useful information for veterans needing long term care assistance from the VA.

Geriatrics and Extended Care: Department of Veterans Affairs.

List of State Veterans Nursing Homes

Nursing Home Care for Veterans

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