Approximately 1.4 million Americans resided in one of the country’s 15,000 nursing homes in 2014, according to the National Center for Health Statistics.  Nursing home care is expensive.  On average, nursing home residents pay $83,000 a year (although costs vary greatly) to cover costs associated with the care they receive, and costs are increasing about 4% each year.

The majority of nursing home residents begin paying those costs out of pocket or through Medicare.  Unfortunately, Medicare doesn’t cover long-term nursing home costs, and for most of those who pay out of pocket, resources, like personal savings and stocks, eventually dry up.  Many residents then become eligible for Medicaid.  Currently, about 70% cover nursing home costs through Medicaid.

You Get What You Pay For

Quality of care varies greatly from one nursing home to another, and many have a pattern of egregiously bad care, abuse and neglect.  According to the 2014 Nursing Home Report Card, 90% of nursing homes that year were cited for deficiencies in violation of state or federal law.  Violations ranged from fire hazards to inadequate food preparation to poor staffing.  Of these violations, 20% involved neglect, abuse or mistreatment.  Violations have increased in recent years, primarily due to the increased prevalence of for-profit nursing homes.

The Corporatization of Nursing Homes

Since the 1970s, there has been a shift from non-profit to for-profit nursing homes, a pattern which some have referred to as “corporatization” of nursing homes, hospitals and other health care facilities.  Generally, for-profit nursing homes receive the bulk of their revenues from Medicare and Medicaid, which means their budget for providing care is fixed, and that compromises the level of care they provide.  As Rich McIver, a senior care attorney, puts it:

“Because a nursing home’s revenue is fixed by the year’s Medicare and Medicaid reimbursement rate, they can only increase their profits by reducing their costs, which means cutting on the quality of the care they provide.” 

What this means for you and your loved one is that you need to carefully research each facility before signing on the dotted line, and you need to take advantage of all financial resources available to ensure you can afford the best care possible.

How to Pay for Expensive Nursing Homes

Here are several of the financial resources you need to consider to help pay for nursing home care:

  • Savings and other personal resources:  personal financial resources include savings accounts, private health insurance (some of which pays for long-term care), and home equity, among others.  If you have a life insurance policy, you might be able to sell it to a third party for cash in what is known as a life settlement or a viatical settlement.  The difference between the two has to do with the insured’s life expectancy.  Viatical settlements are generally appropriate for individuals diagnosed as terminally ill.
  • Medicaid:  you need to check the rules which apply to your state to see if you qualify for Medicaid, as well as with the nursing home to see if it accepts Medicaid payments.  However, Medicaid payments are not sufficient to afford an expensive nursing home, and residents of those facilities who are eligible for Medicaid will need to make up the difference from other resources.
  • Long-Term Care Insurance:  long-term care insurance policies vary greatly in terms of the services they cover.  Some policies cover a wide range of services, from assisted living to home care to adult day care, while others cover only long-term care.  It’s important to carefully research a long-term policy and the services it covers before you purchase it.

Conclusion

The decision to enter a nursing home is usually both difficult and confusing.  You want the best care possible, but you also have to consider what you can afford.  You can make the transition a little easier by ensuring that you take advantage of all the financial resources, both personal and governmental, available to you.  Take the time to do your research so you can make an informed decision.