Ways To Cover Nursing Home Expenses
Although a significant portion of older individuals might never require long-term care, a large number will need additional assistance, possibly including nursing home care. Data from the U.S. Department of Health & Human Services indicates that around 70% of individuals aged 65 can expect to need some form of long-term care during their lives, with about 20% needing it for more than five years. Figuring out how to finance this care can be a major challenge for many families.
Often, people don’t anticipate needing nursing home care and mistakenly believe that Medicare or their private health insurance will cover these costs. In the following sections, we’ll examine the ways families manage the expenses associated with nursing homes and other long-term care choices, aiming to help you ensure your family member receives the necessary care.
The cost of staying in a private room at a nursing home can average around $127,750 annually, although the exact amount varies based on location, facility type, and the level of care required. Good thing that there are various ways to handle these expenses. Options include using government programs like Medicaid and Medicare, long-term care insurance (both private and government-funded), personal savings or investments, and benefits available to veterans. These resources can help ease the financial burden of long-term senior care.
Medicare
Medicare doesn’t pay for long-term stays in nursing homes, but it does help with certain medical services provided during short-term rehabilitation. For example, if you need skilled nursing care after a hospital stay, Medicare will fully cover the first 20 days in a qualified facility. From day 21 through day 100, you’ll have to pay a daily fee ($209.50 in 2025). After 100 days, Medicare coverage stops.
To be eligible for this short-term coverage, a few conditions must be met: you must be living at home when care begins (not already in a long-term care setting), have a care plan approved by your doctor, use a provider that accepts Medicare, and need ongoing care following at least a three-day hospital stay. The nursing facility itself must also be Medicare-certified.
If moving into a nursing home isn’t immediately necessary, Medicare may cover limited home health care instead. This includes up to 35 hours per week for a period of 60 days, as long as the care is medically necessary. Services might include skilled nursing, physical or occupational therapy, and speech-language therapy. However, if you only need help with daily tasks like bathing, dressing, or preparing meals, Medicare will not cover that type of assistance.
Medicaid
Most people in nursing homes don’t pay for care directly; instead, they rely on Medicaid, a government health program for individuals with low income. As of 2024, Medicaid was the main source of funding for 63% of nursing home residents, far more than Medicare, which supported just 13%. The remaining residents either used private insurance or paid from their own savings.
Getting approved for Medicaid can be complex. Applicants often need to reduce their assets to qualify, a process known as “spending down,” which involves strict rules and a lot of paperwork. Even after qualifying, some individuals may still have to pay part of the care costs, depending on how their state calculates eligibility and benefits.
Another challenge is that not every nursing home takes Medicaid, so it’s crucial to confirm in advance whether a facility accepts it. Additionally, options may be limited once you’re fully dependent on Medicaid, and you may not have much choice in where you’re placed. For guidance through this process, it’s wise to consult a Medicaid planning attorney who is licensed in the same state as the person seeking care.
Government-Backed Insurance Options for Long-Term Care
Many states offer special insurance programs that work alongside Medicaid to help cover the cost of long-term care without requiring individuals to use up all their personal savings. These programs, known as Long-Term Care Partnership Programs, are designed to protect some of your assets while still allowing you to qualify for Medicaid. By participating in one of these state-supported plans, you may be able to get the care you need while preserving more of your financial resources.
Considering Long-Term Care Insurance
Buying long-term care insurance before you actually need assistance can help reduce future expenses for services like nursing home care or in-home support. This type of insurance is designed to cover the costs associated with extended care due to aging, chronic illness, or disability.
That said, the premiums can be expensive. As of 2025, a 55-year-old man might pay around $1,750 each year for a policy worth $165,000, with the coverage increasing by 2% annually. For women, the cost is typically higher, approximately $2,855 per year, since they often live longer and are more likely to need care. Couples can expect to pay about $3,875 annually for a shared policy, based on data from the American Association for Long-Term Care Insurance.
The cost of long-term care insurance increases as you age, so buying a policy earlier in life is typically more affordable. Additionally, if you have serious health conditions like cystic fibrosis or muscular dystrophy, getting approved for coverage may be very difficult or not possible at all.
When planning how to cover the cost of long-term care or a nursing home stay, it’s a good idea to talk with a financial advisor or insurance specialist. An independent insurance broker—someone who works with multiple insurance companies rather than just one—can also be a valuable resource. They can help you explore different coverage options, including newer hybrid policies that combine long-term care benefits with permanent life insurance.
Veterans Assistance
Veterans and their spouses may qualify for monthly financial support through the VA Aid and Attendance pension, which helps cover the cost of long-term care. As of 2025, eligible veterans can receive up to $2,358 per month, surviving spouses may get up to $1,515, and two married veterans who both qualify can receive as much as $3,740 monthly. These payments come directly from the U.S. Treasury and can provide a reliable source of income.
However, eligibility rules can be complex and depend on individual circumstances. Understanding what you qualify for and how to apply can take time. For accurate and detailed information, it’s best to explore the official VA website, especially the section on Geriatrics and Extended Care, which outlines benefits and costs related to assisted living, nursing homes, and other residential care options.
Using Personal Savings and Investments
If you have enough personal savings or investments to cover nursing home expenses on your own, it’s important to carefully consider the financial impact. While this can give you more flexibility in choosing a facility, it may also involve complex tax implications. Consulting with a financial advisor or tax professional can help you avoid costly mistakes. For example, funds from an IRA can be used for long-term care costs, but keep in mind that withdrawing from an IRA might trigger income taxes, depending on your situation.
If you’re planning to use a Roth IRA to help pay for long-term care, you can generally take out money tax-free after age 59½, as long as the account has been open for at least five years. Since Roth contributions are already taxed, withdrawals after meeting these conditions won’t be taxed. You’re also allowed to withdraw the money you contributed (but not the earnings) before 59½ without penalty.
A traditional IRA works differently. Since the money in this account hasn’t been taxed yet, both the original contributions and any earnings will be taxed when withdrawn. If you take money out before turning 59½, you’ll usually face a 10% early withdrawal penalty, though there are some exceptions—such as using the funds for qualified medical expenses that weren’t reimbursed.
You can also use other assets, like real estate or stocks, to help cover long-term care. However, selling these may have tax consequences, so it’s a good idea to consult a financial or tax advisor first. When using personal savings to pay for care, certain medical expenses may be deductible on your taxes—especially if the care is for medical treatment or rehabilitation. Keep in mind that only expenses exceeding 7.5% of your adjusted gross income are eligible for this deduction.
Nursing Home or Not? Making the Right Call for Your Loved One
When considering long-term care for an aging loved one, many people immediately think of a nursing home. However, if you’re noticing signs that your elderly parent requires care, it’s important to know that this isn’t the only choice available. Actually, there are various levels of care for seniors, and your loved one might not require the continuous, intensive personal care provided in a skilled nursing facility or nursing home.
Instead, some older adults only need assistance with a few everyday tasks. In these situations, an assisted living community could be a more suitable and often more affordable way to address these less demanding needs. Typically, assisted living is considerably less costly than nursing home care. For instance, data from Genworth and CareScout indicates that the average monthly cost of assisted living is $5,900.
If someone doesn’t meet Medicaid requirements for long-term care in a nursing home, an assisted living facility might be a more suitable and affordable choice. While nursing homes can be helpful in specific situations, their costs are often high. To manage these expenses, it’s important to explore different payment options early on. Speaking with a local professional can provide clarity and help you make informed decisions based on your financial situation.
