No doubt about it, there is often a fine line between luxury and necessity.
That's especially true in the nursing home market, where the urgent need for good nursing home care for Americans of advanced age is blunted by the high cost of paying for it.
How much does nursing care cost? There are all sorts of figures, but the U.S. government estimates that the average annual cost of nursing home care is approximately $70,000, or about $6,000 per month. Read more about the costs of nursing homes here.
On average, people only spend about 2.5 years in a nursing home, although many people can stay in a nursing home facility for up to a decade or more.
Options: Private Funds or Federal Dollars
Most of the money needed to fund nursing home stays come from private sources, such as:
- long-term care insurance
- stock market investments
- selling a home
- retirement portfolios
Health insurance doesn't cover as much as you may think. Studies show that health care plans and Medicare account for 3% of the cost of nursing home care. Medicare will only pay for nursing home costs on a limited basis: 100% for the first 20 days and a co-pay up to 100 days. That's pretty much it.
Medicaid can really help pick up the slack, but you'll have to prove financial necessity first. As long as three key criteria are met: medical need, financial assets and annual income (you need an abundance of the first, a dearth of the second and a low number for the third) you'll probably qualify for Medicaid payments for nursing home care. But make no mistake, Medicaid is a needs-based program. To see if you qualify, visit the Medicaid web site at: http://www.cms.hhs.gov/MedicaidGenInfo/.
Long Term Care Insurance: A Great Option
Your best option? Long-term care insurance. Whatever Medicaid will cover, it won't cover everything. That's a big reason why preparing for nursing home costs years before you may need it is a great idea.
Exhibit "A" in planning to pay for nursing home costs is long-term care insurance. In a nutshell, long-term care insurance amounts to health care insurance that covers nursing home, skilled nursing, or assisted living facility, or in-home care costs for people over 65.
The math is straightforward on long-term care insurance versus paying for actual long-term care out of your own pocket: you can either pay a little now or a lot later. For example, a 65-year-old in good physical condition may pay a $1,000-$3,000 a year in long-term care insurance premiums. True, that's not chump change, but it's a lot less than paying up to $70,000 annually for long-term care.
Find Nursing Homes
When it comes to paying for nursing home care, no option is perfect. If you're in dire financial straits, aim for Medicaid. If you're under 65, aim for long-term care insurance. If you're "in-between" financially, aim for a combination of both. Our comprehensive national directory can help you Find Nursing Homes in your area.
Written by senior finance expert Brian O'Connell.