Does insurance cover nursing homes? Here's what you need to know

March 31, 2021

When looking to the future, it's impossible to predict if you or your loved one will require long-term facility care. But another major unknown for many is if the insurance they or their loved one carry will actually cover a nursing home. 

Though nursing homes are long-term residential facilities that are well-suited to older adults who require around-the-clock medical assistance, they do come with many fees. According to the latest Genworth Cost of Care Survey, the national median cost for a semi-private room in a nursing home in 2020 was $7,756 per month or $93,075 per year. And although the exact amount varies by state, the cost of nursing home care is high no matter where you live.  

Nursing home expenses a policy will — and will not — pay for 

If you're wondering which nursing home costs an insurance policy will pay for, the simple answer to this complicated question is ... it depends.  

According to Brian Barnes, president and CEO of Blakeford Senior Living in Nashville, Tennessee,  medical insurance and Medicare do not cover: 

  • Room and board.

  • Ancillary services (like radiology/diagnostic imaging or lab testing).

  • Ancillary supplies (like lab kits or medical devices).

Private long-term care insurance may provide some benefits for long-term care residents but coverage varies depending on the company and policy. 

 Travis Price, a Medicare and final expense insurance agent, advises that before researching your policy further, it’s important to understand the difference in types of care:

  • Custodial care: Care that assists with activities of daily living like eating, drinking, dressing and bathing. This is the type of care you’d normally see at a nursing home. 

  • Skilled care: Care that is inpatient rehabilitation or nursing care like intense physical or occupational therapy, wound care, or other specialized therapies.  

The key difference: Skilled care must be given by a licensed medical professional, like a registered nurse, respiratory therapist, physical therapist or speech pathologist, etc. “A person could initially go into skilled nursing care for rehab, for example, a stroke patient; but ultimately need ongoing long-term personal care that requires a nursing home due to lack of progress or improvement,” he says.

Different types of insurance

Depending on the insurer, you or your loved one might have different benefits. A brief overview: 

Medicaid

This federal plan provides nursing home or custodial benefits for lower-income individuals who qualify. “Medicaid covers 100% of the costs of a nursing home up to the daily limit,” says Price. “Daily limit qualifications are different depending on the state and plan.” 

Unlike assisted living facilities, nursing homes have a flat rate per day in costs and are all-inclusive for their services.

Medicare

This federal plan provides medical benefits to individuals 65 and older or for individuals that qualify for disability benefits if under age 65 and has parts A, B, and D:  

  • Medicare part A provides benefits for in-patient care or major medical care. Examples include hospital or skilled nursing facility stays. 

  • Medicare part B provides medical benefits for out-patient care. Examples include physician visits, physical/occupational/speech therapies, durable medical equipment and an annual flu vaccine shot. 

  • Medicare part D provides benefits for medications and prescription drugs. Medicare part C rolls Medicare parts A/B/D into one plan. “It provides similar benefits to traditional Medicare parts A/B/D and may even provide a benefit that traditional Medicare parts A/B don’t cover,” says Barnes. “Pay close attention to Medicare part C monthly premiums versus cost of actual care because these plans often have a very low premium but can cause significant out-of-pocket expenses if a person needs to use Medicare part C benefits.”

Medicare does not cover long-term custodial care, such as nursing homes. “It can cover a skilled nursing facility after a qualifying hospitalization,” says Price. “Skilled nursing care would fall under Part A if you have an inpatient hospitalization for at least three days and the doctor notes that it’s medically necessary.” 

Private medical insurance 

These types of plans usually provide benefits for services allowed or covered by Medicare but not paid in full by Medicare. Barnes explains that an example of this could be a Medicare part A skilled nursing coinsurance of $185.00 per day or the 20% of therapy charges under Medicare part B. However, private insurance coverage varies tremendously depending on the insurance company plan, he says. It also generally does not pay for long-term care benefits.

Long-term care insurance 

These policies can provide benefits for services and items not covered by Medicare or medical insurance. “This is the correct insurance type for people wanting to cover custodial care in a nursing home, home health care or adult day care,” says Price. “Plans are customized by needs, and the biggest customizable items are the elimination period and daily benefit amount.”

Here’s an example of how long-term care insurance (LTC) works, according to Price: Say Jane needs custodial care in a nursing home and has a long-term care policy with an elimination period of 60 days, a daily benefit of $400, and a limit of $400,000. 

Jane (or her guardian/conservator) pays for the first 60 days out of pocket. After 60 days, the insurance policy reimburses the daily cost of up to $400 per day until the $400,000 is exhausted. Once or if the benefit limit is exhausted, Jane would start paying again. 

Long-term care insurance must-knows

Consider the following pro-tips if you’re shopping for long-term care insurance.

LTC premiums are largely customized. They’ll be based on age, sex, health conditions at the time of application, benefits and length of elimination period that’s generally 30, 60 or 90 days. “Women pay more than men, older people pay more than those who are younger,” says Price. “Furthermore, LTC plans can and often do increase in premium as you age.”

Look into partnership plans. Price suggests seeing if your state offers "partnership plans," which are incentives from Medicaid to get long-term care insurance. 

“These states allow you to keep assets that you'd usually have to spend to get under the $2,000 in assets to qualify for Medicaid,” he says. “It's usually one dollar for every dollar that the LTC plan pays out that you get to keep and still qualify.” 

Think about a hybrid term life insurance plan that offers a LTC rider. “It works essentially the same as an LTC insurance plan, except the pool of money is the face amount of the policy ($100,000, for example),” he says. “The policy pays around 1-4% of the face amount every month in the event you have to go into long-term care after the elimination period, up to the face amount.”

Mike Hogan, life insurance expert and operations manager at Policygenius explains that a long-term care rider will cover some, or all, nursing home fees if an older adult is unable to perform at least two of the six Activities for Daily Living (ADLs). These include: 

  • Eating.

  • Bathing.

  • Getting dressed.

  • Walking.

  • Reliving bodily fluids.

  • Maintaining bladder continence.

“If you meet these requirements, the payout is taken from your policy’s death benefit and capped between 70-80%, which can be used toward a nursing home,” he says. “There are also some term life insurance policies that offer a living benefits rider, which provides additional protection if you’re diagnosed with a chronic or critical illness after securing coverage.” 

Ultimately, when it comes to paying for nursing home care with insurance, gaining clarity around all of your options will help you pinpoint the right path forward.

Tips and stories from parents and caregivers who’ve been there.

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