Paying for Nursing Home Care: Bridging the Benefits of Medicare, Medigap & Medicaid

Last updated: December 30, 2022

 

Introduction: Paying for Nursing Home Care & Important Considerations

Until the need for nursing home care arises, many persons do not stop to consider who pays for this type of care. According to Genworth’s Cost of Care Survey 2021, the average nationwide cost of nursing facility care is $7,908 / month. With this exorbitant cost, most persons cannot afford to pay out-of-pocket. So, who pays for this type of care and for how long? Medicare? Supplemental Insurance? Advantage Plans? Medicaid?

 Medicare will only pay for short-term skilled nursing facility care (medical care), while Medicaid will pay for long-term custodial care (non-medical care).

Medicare provides health coverage for more than 63 million Americans. Medicare, however, will only pay for short-term skilled nursing care. So, what happens if Mom broke her hip, is recovering in skilled nursing, but her Medicare coverage is running out and she still needs care? Who pays for her continued stay? What if Dad had a stroke, no longer requires skilled nursing care, and cannot live independently? Who pays then? What about the times when Medicare won’t cover the cost of skilled nursing care because certain criteria, such as a 3-day qualifying hospital stay is not met or one is not expected to recover from their injury or illness? Who pays then? Adding further concern for many persons who receive Medicare coverage of skilled nursing care is the hefty daily coinsurance (the patient’s share of cost is $200 / day) for most days of skilled nursing care. Is there financial help for this?

When considering who pays for nursing home care, one must think of the length of time one will reside in the nursing home. Because Medicare varies the amount they will pay based on the length of time, other payers do as well. There are 3 periods of time; 1-20 days, 20-100 days, over 100 days.

Medicaid offers another option for paying for nursing care. In addition to paying 100% for skilled nursing care, Medicaid will pay for non-medical, long-term nursing home care. While Medicaid will pay indefinitely as long as there is a need, coverage is only provided for persons with limited financial means. For some persons, the continuum from Medicare coverage of skilled nursing care to Medicaid coverage is fairly straightforward. For persons who have income and assets greater than the allowable limits, it is a more complicated process, but not an impossible one.

In addition to discussing Medicare and Medicaid-funded nursing home care in this article, we will address the benefits of supplement insurance policies and how they are related to paying for nursing care. These plans, which include Medigap, Medicare Advantage plans, and employer-sponsored retiree health plans, can save seniors thousands of dollars. This is because they pick up some of the costs Medicare does not.

 

Quick Chart: Who Pays for Nursing Home Care?

 

Who Pays for Nursing Home Care? (Updated Dec. 2022)
Types of Coverage Held by Nursing Home Resident Days 1 – 20 in a Nursing Home Days 21 – 100 in a Nursing Home After 100 Days in a Nursing Home, Who Pays?
Medicare Only (No Supplemental Insurance) Medicare Pays 100% of Skilled Nursing Medicare Beneficiary Pays the $200 / Day Coinsurance Private Pay or Long-Term Care Insurance
Medicare with Medigap Policy* Medicare Pays 100% of Skilled Nursing Medigap Policy Pays the $200 / Day Coinsurance Private Pay or Long-Term Care Insurance

 

Medicare with Medicaid Medicare Pays 100% of Skilled Nursing Medicaid Pays the $200 / Day Coinsurance Medicaid
Medicare with Employer-Sponsored Retiree Health Coverage Medicare Pays 100% of Skilled Nursing Who Pays the $200 / Day Coinsurance & What Portion Varies Based on the Employer-Sponsored Plan Private Pay or Long-Term Care Insurance
Medicare Advantage Plan Medicare Pays 100% of Skilled Nursing Who Pays the $200 / Day Coinsurance & What Portion Varies Based on the Medicare Advantage Plan Private Pay or Long-Term Care Insurance
Medicare Advantage Plan with Employer-Sponsored Retiree Health Coverage Medicare Pays 100% of Skilled Nursing Who Pays the $200 / Day Coinsurance & What Portion Varies Based on the Employer-Sponsored Plan Private Pay or Long-Term Care Insurance

 

Medicare Advantage Plan with Medicaid Medicare Pays 100% of Skilled Nursing Medicaid Pays the $200 / Day Coinsurance Medicaid
Medicaid Medicaid pays 100% of Skilled Nursing / custodial care Medicaid pays 100% of Skilled Nursing / custodial care Medicaid
* Because most Medigap policies cover 100% of the coinsurance for skilled nursing facility care, this table assumes as much.

 

Medicare (Part A) Coverage of Nursing Home Care

Medicare will only pay for short-term skilled nursing care. This is intensive medical care for persons who are in the process of recovering from an illness or injury. Examples include stroke recovery, rehabilitation after breaking a hip, and wound care following an operation.

Medicare Part A (hospital insurance) will cover up to 100 days of skilled nursing facility care per benefit period for persons who meet the eligibility criteria. Medicare will pay 100% of the cost for the first 20 days. In 2023, for days 21 – 100, the Medicare beneficiary must pay a coinsurance of $200 / day. This is their “share of cost”, or in other words, it is an out-of-pocket expense for which they are responsible. A benefit period starts the day a Medicare beneficiary is admitted to the hospital or skilled nursing facility. The benefit period ends after 60 consecutive days with no need for hospitalization or skilled nursing care. A Medicare beneficiary is permitted unlimited benefit periods.

Medicare (Part A) Coverage of Skilled Nursing Care Only
Days 1 – 20 Days 21 – 100 After 100 Days
Medicare pays 100% The Medicare Beneficiary Pays $200 / Day The Medicare Beneficiary is Responsible for 100% of the Cost
 Nursing Homes vs. Skilled Nursing Facilities: While these terms are often used interchangeably or “nursing homes” used as a catch-all, nursing homes (NHs) and skilled nursing facilities (SNFs) are not the same. In SNFs, registered nurses provide medically necessary care, generally on a short-term basis, for persons recovering from injury or illness. In nursing homes, licensed practical nurses and nurse aides provide care for persons with lesser medical needs on a long-term basis. Often, NH residents require assistance with daily living activities, such as mobility, transitioning, dressing, and bathing, due to a chronic condition or the natural process of aging. A SNF can be a standalone facility or part of a hospital or nursing home. Medicare only provides SNF care. Since many persons are not aware of the differences between skilled nursing facilities and nursing homes, and many persons searching for Medicare and Medicaid-funded care are actually looking for long-term nursing home care, we do sometimes use “nursing home”, as a catch-all in this article.

 

Qualifying for Medicare’s Short-Term Skilled Nursing Facility Care

To be eligible for Medicare, one must be 65 years old or older, or under 65 and disabled. More on Medicare eligibility.

For Medicare to pay for skilled nursing care, the following eligibility criteria must be met:

– One must have Medicare Part A (hospital insurance).
– One must have a 3-day qualifying hospital stay (more below in the next section).
– One must be admitted to a skilled nursing facility within 30 days of the 3-day qualifying hospital stay. Care must be required for the same condition that required treatment during the 3-day hospitalization or for another condition that developed while receiving skilled nursing for the original condition treated during hospitalization.
– A physician has determined skilled nursing care is required on a daily basis.
– Skilled nursing care is provided in a Medicare-certified facility.

 

Understanding the 3-Day Qualifying Hospital Stay Rule

The 3-day qualifying hospital stay for Medicare skilled nursing facility coverage is sometimes misunderstood, and therefore, the days are counted wrong. This can cause Medicare to deny coverage of skilled nursing facility care! To meet the 3-day qualifying hospital stay criteria, one must have an inpatient hospital stay of 3 consecutive days. While the day of hospital admission is counted, time spent in the emergency room, outpatient observation days, and the day of hospital discharge are not counted towards the 3-day qualifying stay.

Persons cannot simply decide they require nursing care due to aging conditions, plan for a 3-day qualifying hospital stay, and receive Medicare-funded nursing facility care. To be a qualifying hospital stay, the 3-day stay must be “medically necessary”. Medicare defines this as “health care services or supplies needed to diagnose or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine”. It is our interpretation that if care is needed to save one’s life or is required for one to get better or remain stable, it is “medically necessary”. Examples include heart attack, stroke, fall, chronic obstructive pulmonary disease (COPD), heart failure, shock, and pneumonia.

Skilled nursing facility care is considered an extension of one’s 3-day qualifying hospital stay. As such, a physician must determine that ongoing skilled nursing care is required following hospital discharge.

 Covid-19 Option to Waive the 3-Day Qualifying Hospital Stay: Due to the current Covid-19 Public Health Emergency (PHE), it may be possible to receive Medicare-funded skilled nursing care without a 3-day qualifying hospital stay. Skilled nursing facilities have the option to waive this requirement. When the PHE ends, facilities will no longer have this option. Currently, it is set to expire on 04/11/23.

 

 

Medicaid Coverage of Skilled Nursing Care & Custodial Care

While Medicaid will pay for skilled nursing care, what sets Medicaid apart from Medicare is that Medicaid will also pay for custodial care in nursing homes. This is non-skilled / non-medical care for persons who have a chronic (ongoing) condition and are not expected to recover. Specific medical treatments are not needed, but these individuals cannot live independently due to a need for assistance with Activities of Daily Living (ADLs). ADLs include activities such as bathing, dressing, eating, mobility, transitioning, and toiletry. Elderly persons commonly require custodial care due to the natural process of aging, but so do persons who do not fully recover from an injury or serious medical emergency. Persons with Alzheimer’s disease or a related dementia also frequently require this type of care as the disease progresses and cognitive decline increases.

Medicaid will pay for skilled nursing care / custodial care indefinitely as long as eligibility criteria continues to be met.

Medicaid Coverage of Skilled Nursing Care & Custodial Care
Days 1 – 20 Days 21 – 100 After 100 Days
Medicaid Pays 100% Medicaid Pays 100% Medicaid Pays 100%

As a side note, persons who are simultaneously enrolled in Medicare and Medicaid are called dual eligible. In addition to serving as a supplement plan to Medicare, Medicaid may cover 100% of nursing home care for persons whose Medicare skilled nursing coverage has ended, or who do not qualify for Medicare skilled nursing coverage.

 

Qualifying for Long-Term Nursing Home Medicaid

Medicaid is a needs based program for persons with limited financial means. For Medicaid-funded nursing home care, the following eligibility criteria must be met:

– One must have limited income and assets. While the exact limits vary based on the state, generally speaking, in 2023, one must have income under $2,742 / month and assets under $2,000. See state-specific financial eligibility criteria.
– One must require a Nursing Facility Level of Care (NFLOC). This is defined differently based on the state, but often equates to a need for assistance with Activities of Daily Living, such as bathing, dressing, eating, mobility, and toiletry.
– One must reside in a Medicaid-certified nursing home.

 Persons over the financial eligibility criteria can implement Medicaid planning strategies to qualify for Medicaid-funded nursing home care. More.

 

Medicare Advantage Coverage of Skilled Nursing Care

Medicare Advantage (MA) Plans will cover short-term skilled nursing care for persons who meet Medicare’s criteria for such care. These plans offer an alternative way for Medicare beneficiaries to receive their Medicare benefits. To explain further, Medicare beneficiaries can receive their benefits one of two ways.

The first way is through Original Medicare, which is the traditional Medicare program available via the federal government. It consists of Medicare Part A (hospital insurance) and Medicare Part B (medical insurance). The second way is through a Medicare Advantage Plan, also called Medicare Part C. Through Medicare Part C plans, Medicare Part A and Part B are received, and commonly Medicare Part D (prescription drugs). Supplemental benefits, such as vision and dental, and sometimes home and community based services to help prevent and delay nursing home admissions, are also provided.

Medicare Advantage Coverage of Skilled Nursing Care Only
Days 1 – 20 Days 21 – 100 After 100 Days
 Medicare Pays 100% Who Pays the $200 / Day Coinsurance & What Portion Varies Based on the Medicare Advantage Plan The Medicare Advantage Beneficiary is Responsible for 100% of the Cost

 

Qualifying for a Medicare Advantage Plan

To qualify for a MA Plan, the following eligibility criteria must be met:

– One must have Medicare Part A (hospital insurance).
– One must have Medicare Part B (medical insurance).
– One must live in the geographic region in which the plan covers.

Medicare Advantage Plans are sold by private health insurance companies. Some plans charge a monthly premium, while others do not. The amount of deductibles, copayments, and coinsurance vary by plan, and therefore, one should carefully consider plans before choosing one. The federal government offers a tool to find and compare Medicare Advantage Plans.

 

Supplement Insurance (Employer-Sponsored Retiree & Medigap) Coverage of Skilled Nursing Care

Medicare supplement insurance works together with Medicare and protects Medicare beneficiaries from high out-of-pocket costs. These plans could cover all, or a portion, of the coinsurance fee for skilled nursing care.

Employer-Sponsored Retiree Health Insurance is a group health plan provided by a former employer. Based on the plan, it may or may not cover Medicare’s skilled nursing coinsurance. Before deciding to rely on this type of plan for Medicare supplement insurance, persons should familiarize themselves with their current plan.

Medigap is an option for persons who choose to receive their Medicare benefits through Original Medicare (as opposed to a Medicare Advantage Plan). These plans are sold by private health insurance companies. While these plans charge a monthly premium, the price varies widely based on the plan. While most Medigap Plans will cover 100% of Medicare’s coinsurance for skilled nursing care, not all do. Therefore, when choosing a plan, persons need to be clear on what coverage is provided.

Supplement Insurance Coverage of Skilled Nursing Care
Days 1 – 20 Days 21 – 100 After 100 Days
Medicare Pays Who Pays the $200 / Day Coinsurance & What Portion Varies Based on the Supplement Insurance Plan The Medicare Beneficiary is Responsible for 100% of the Cost

 

Qualifying for a Medigap Plan

To qualify for a Medigap Plan, persons must meet the following requirements:

– One must have Medicare Part A (hospital insurance).
– One must have Medicare Part B (medical insurance).
– One must live in the state in which the Medigap Plan is available.

Medigap has an open enrollment period of 6 months that begins the month one is 65 years old (or older) and their Medicare Part B coverage is effective. During this period, seniors can choose any Medigap Plan available in one’s state of residence. They cannot be denied coverage, or charged a higher premium, because of health issues. Persons who wish to purchase a Medigap Plan after the enrollment period may be charged a higher premium or denied coverage.

The federal government offers a tool to find and compare Medigap Plans.

 

Common Questions

1) Do I Have to Pay Medicare’s Coinsurance Costs Out of Pocket?

No, Medicare beneficiaries do not necessarily have to pay Medicare’s coinsurance fee of $200 / day (in 2023) for days 21 – 100 of skilled nursing care. Persons who have Original Medicare often fill in the gaps of Medicare coverage, including coinsurance costs, with Medicare supplement insurance, such as Medigap, insurance through a former employer, and Medicaid. While persons who receive their Medicare benefits via a Medicare Advantage (MA) Plan are prohibited from purchasing a Medigap policy, the amount they must pay for coinsurance varies based on the specific MA Plan.

 

2) What if I Do Not Have a Supplement Insurance Policy?

Persons who do not have a Medicare supplement insurance plan may have to pay Medicare’s daily coinsurance out-of-pocket. Long-term care insurance will often pay a portion, or all of the cost, but these policies are usually very costly and are generally purchased before the need for such care arises. While Medicaid technically serves as a Medicare supplement insurance policy, it may be overlooked as such. Therefore, if one is not currently on Medicaid, they should apply for Medicaid.

 Veterans may be eligible to receive nursing home care via the Department of Veterans Affairs (VA). Learn more here.

 

3) What if I Disagree with Medicare Skilled Nursing Facility Coverage Ending?

Coverage is Ending Because the Skilled Nursing Facility Believes Medical Care is No Longer Reasonable, Necessary, or Care Required is Non-Medicaid (Custodial)
When a facility intends to “discharge” a resident from skilled nursing, a written “Notice of Medicare Non-Coverage” (NOMNC) is issued. The NOMNC states that one’s Medicare coverage is ending. A facility will send this statement when they believe Medicare will no longer pay for skilled nursing care. Some nursing homes, however, incorrectly assume if one is not making progress towards recovery, Medicare will no longer pay. This is not necessarily true if skilled care is required to maintain one’s health status or slow deterioration.

The skilled nursing facility resident should receive the NOMNC, at a minimum, 2 days prior to Medicare coverage ending. If one does not agree with this decision, they should file an expedited appeal immediately to a Quality Improvement Organization (QIO). The NOMNC will contain directions on how to do this. A skilled nursing facility resident cannot be forced to leave when there is a pending appeal. The QIO should make a decision no more than 2 days after one’s coverage ends. There is no charge for care while waiting for the decision, but if QIO denies coverage, the resident is responsible for all costs after coverage ending. Note that there are also further levels of appeal.

Coverage is Ending Because the Individual Has No More Skilled Nursing Benefit Days Left
One may receive a written notice of coverage ending, but this is not required. However, the skilled nursing facility will charge for every day one remains in the facility without Medicare coverage. There is no appeal process since Medicare provides a limited number of coverage days and all of these days have been used.

 

4) Medicare Will No Longer Pay, but Nursing Home Care is Still Needed. Now What?

Private pay is one option. Nursing home care, however, is extremely expensive. Most persons cannot afford to pay privately, or cannot afford to do so for long.

Long-term care insurance is another option, but again, one that is not available to many persons. The cost of such a policy is very high, and if one does not already have long-term care insurance, it is very unlikely an insurance company would sell them one with the current need of nursing home care.

For persons who are “dual eligible” (enrolled in both Medicare and Medicaid), Medicaid will pay for nursing home care for persons who meet all of Medicaid’s criteria for nursing home care.

Persons who are not enrolled in Medicaid, can apply. As long as a Medicaid application is pending, a nursing home resident cannot be forced to leave. It is not recommended that a relative or friend pay for care during this time. If approved for Medicaid coverage, Medicaid will pay for care from the date of one’s application. It may also pay for any days between Medicare coverage ending and one applying for Medicaid. It is possible to have retroactive Medicaid coverage for up to 3 months prior to Medicaid application. This means if one meets all Medicaid’s eligibility criteria during this period, Medicaid may pay for nursing home care during this time.

 

5) Do I Need to Change Homes if I Go From Medicare-Funded to Medicaid-Funded Nursing Care?

One does not usually have to switch homes if care becomes Medicaid-funded rather than paid for by Medicare. Most facilities that accept Medicare also accept Medicaid. Furthermore, many facilities offer both short-term skilled nursing facility care and long-term nursing home care.

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