Nursing home financing
Long-term care can be expensive, and the methods of payment can be confusing. This information gives a general overview of the law in Illinois and answers some common questions you might have. If you have a specific question about your situation or about paying for long-term care in another state, contact an attorney.
Long-term care facility
A long-term care facility is a skilled nursing facility or an intermediate nursing facility licensed by the state of Illinois. It is not a supportive living facility, an assisted living facility or any other kind of shared housing arrangement. We will use “nursing home” and “long-term care facility” interchangeably in this section.
Learn more about nursing home facilities.
Nursing homes and private pay
Some people can pay their monthly nursing home costs from their savings, income or money they have received from selling their home or other assets. This is called “private pay.” Each nursing home has a set daily fee for “private pay” residents which should be stated in the nursing home contract. Nursing homes are not allowed to require that a family member or another person guarantee the payment of the fees; however, another person can voluntarily agree to be responsible for payment. Read carefully when signing a nursing home contract so that you know what you agree to. Do not sign the contract if it makes someone besides the resident responsible for payment and that is not your agreement. The contract should state both the services that are covered by the daily cost and the services that are not covered. Many residents start off as a private pay resident but require assistance with payment later when their funds run out.
When does Medicare pay for nursing home care?
In some circumstances, Medicare (Part A) will pay for up to 100 days of care in a skilled nursing home for each “spell of illness.” A “spell of illness” begins on the first day a person receives hospital-level care and ends 60 days after the last day they received inpatient hospital care or skilled care in a nursing facility. The resident will still have to pay the deductible and coinsurance amounts. Usually, coinsurance is $0 for the first 20 days and $161 a day for days 21 through 100.
Medicare pays for the nursing home care only after a patient has spent at least three days in a row as an inpatient in the hospital. Patients receiving observation services at a hospital are considered outpatients; therefore, time spent as an outpatient does not apply to the 3-day requirement.
Medicare’s definition of skilled care (the nursing home care they will pay for) is the level of care that includes services which can be performed only by, or under the direct supervision of, skilled nursing or therapy.
Medicaid and nursing homes
Medicaid is a joint State and Federal program, administered by the Illinois Department of Healthcare and Family Services (HFS), which pays for care in skilled nursing facilities and intermediate care facilities. A physician must confirm that the resident needs this level of care, and the resident must be eligible for Medicaid benefits based on their income and assets. The resident is required to file a detailed application setting forth all assets and income and provide certain documents to verify his/her finances. Then eligibility can be determined.
Do all nursing homes accept Medicaid?
No. Many facilities are certified to accept Medicaid patients. However, others choose not to take Medicaid because the amount paid to a facility per day for care is lower than the amount paid by private pay residents. The nursing home you choose will keep a resident whose funding source switches from private pay or Medicare to Medicaid, if this may occur in your situation. Many residents find it traumatic to be moved from one nursing home to another once they have settled into a routine and become familiar with the staff.
Although state and federal laws prohibit discrimination against Medicaid recipients, a nursing home that accepts Medicaid recipients can limit the number of Medicaid available beds, or place. Therefore even though you have been assured that the facility takes Medicaid, there may not be a Medicaid bed available if the resident eventually needs Medicaid. If you know that a Medicaid bed will be required in the future, give the nursing home plenty of warning so that they can plan to have a bed available.
What expenses does Medicaid cover?
Medicaid covers all expenses of nursing home care including room and board, supervision and oversight, laundry, housekeeping services, and the equipment and supplies required to provide the care needed. The resident should not be charged for items such as:
- Wheelchairs, walkers or other medical equipment
- Medical supplies
- Towels, mattress covers or cushions
- Hearing aid batteries
- Shampoo, deodorant, razors, toothbrushes and other personal care items
- Aspirin, vitamins and some non-prescription drugs
This is not a complete list of covered items. If you have a question about what is or is not covered by Medicaid, you can call your long-term care ombudsman or your area agency on aging. Your nursing home contract should also specify the items for which you will be required to pay extra. They may include such things as beauty services, telephone, and cable charges.
Who may be eligible to receive long-term care Medicaid?
If you are a resident of the state of Illinois, a citizen of the United States (or a certain qualified alien) and have assets and income below the allowable limits, you may be eligible for long-term care Medicaid.
An asset is any cash, personal or real property that a person owns. If you have the right, authority or power to sell and use that asset, you own it.
Income includes all money coming in whether earned or unearned and includes social security, pensions, and veteran benefits.
How are assets counted when applying for medical assistance?
All assets owned by an individual and their spouse, if they have one, must be reported on the application for assistance. Medicaid is based upon financial need; therefore, all assets that are not exempt must be used to pay for an individual’s care before Medicaid begins. “Exempt assets" are those that do not need to be liquidated and spent before a nursing home resident is eligible.
Examples of exempt assets include:
- The resident’s home if he/she plans on returning to it or a spouse or dependent child resides there;
- Clothing, furnishings and household goods
- One car if used by resident, spouse or dependent
- $2,000 total in all other assets, such as bank accounts, certificates of deposit
- $1,500 in cash value of life insurance policies and burial funds
- Burial plot and equipment
- Certain trust funds (ask an attorney for advice on whether a fund is exempt)
While most of your other assets must be used before you will be eligible for Medicaid, you may not make yourself eligible by giving away or disposing of your assets without receiving fair market value in return.
What happens when one spouse lives in a nursing home, and the other does not?
The eligibility rules for married couples allow the spouse not applying for services to keep some nonexempt assets and income. These special rules are called "spousal impoverishment" rules or protections. The rules allow the couple to keep some income and assets so that the spouse in the community is not placed into poverty.
What nonexempt assets may a spouse keep?
The spouse that doesn’t need care may keep up to $109,560 in nonexempt assets jointly or solely owned by either spouse. That maximum amount may increase from time to time. Ownership of the assets must be transferred solely to the spouse who lives in the community within one year of the date of the application for medical assistance, or they will be considered available for payment of the nursing home care the following year.
All nonexempt assets owned by either spouse over $109,560 are considered available to pay for nursing home services.
Example: Sam is a resident of a nursing home. His spouse, Mary remains in their home. Sam's only assets is a $35,000 certificate of deposit. Mary's only assets is a $10,000 certificate of deposit. Sam and Mary also have $5,000 is their joint savings account. They have no other assets. Mary's assets are below the spousal asset allowance of $109,560. Therefore, Sam may give his $35,000 certificate of deposit and his interest in their joint savings account to Mary. After the transfer, Mary will still have less than the $109,560 limit. However, Sam must transfer his assets to Mary. All the assets must be held in her name.
At what point in time are assets valued for Medicaid purposes?
The number of assets is valued at the time of the eligibility determination. However, all transfers of assets (and income) made within 60 months (5 years) before the date of application will be reviewed by the state. A transfer occurs when a person buys, sells, or gives away real or personal assets, or changes the way assets are held.
A nursing home resident who transferred assets within five years of the date of the Medicaid application and did not receive the fair market value of the assets in return may have a penalty period. The resident will not be eligible to receive Medicaid during the penalty period. The length of the penalty period depends on the fair market value of the asset and the private pay cost of the nursing home. Fair market value is the value of the asset on the open market at the time of the transfer.
Example: If Helen transfers the title to her home to a granddaughter as a gift two years before applying to long-term care Medicaid, she may be ineligible to receive Medicaid for a period. The amount of ineligible time will depend on the private pay cost of the nursing home and the fair market value of the home she gave to her granddaughter. If the nursing home charges $6,000 a month as private pay and the fair market value of the home was $60,000, the penalty period will be for 10 months. If Helen is otherwise eligible for Medicaid on the date she entered the nursing home; she will not receive assistance for the first 10 months she resides there.
Are there any allowable transfers?
Yes, there are some allowable transfers for less than the fair market value that will not affect eligibility including the following:
- An applicant’s home transferred to certain people
- Charitable gifts and gifts to family members may be made which are consistent with such gifts in the past
- Involuntary transfers due to bankruptcy, theft, elder abuse, the death of a spouse, or because the person was mentally unable to handle their affairs.
An applicant’s home may be transferred to:
- A spouse
- A dependent, blind or disabled adult child
- A sibling with an equity interest in the home who lived in the home for at least one year before the date the applicant entered the nursing home
- A child who had lived in the home continuously for at least 2 years before the parent’s admission to the nursing home, if the child provided care which prevented an earlier nursing home admission
Be aware that payment to a family member or friend for providing accommodation, care or services for the nursing home resident will be considered a non-allowable transfer unless it is supported by written documentation made before the housing, care or services were provided.
Example: Mary lived with her daughter for 4 years preceding her admission into a nursing home. Mary made checks out to the daughter in varying amounts from $100 to $500 at different times throughout those 4 years. The total amount of the checks was $6,000. There was no written documentation specifying the reason Mary was giving the checks to her daughter. Despite testimony from Mary and her daughter that Mary provided the checks to assist with household expenses, a $6,000 penalty period was imposed.
How much income may a nursing home resident keep?
A nursing home resident receiving Medicaid may keep $30 of their income per month (veteran receiving veteran benefits may keep $90), and the remaining income must be paid to the nursing home.
In some situations, deductions may be made from the income going to the nursing home including deductions for:
- Dependent children,
- Maintaining a home if the resident expects to return home within six months and there is no community spouse,
- Medicare and other health insurance premiums;
- Incurred medical expenses
- Community spouse
How much income may a community spouse keep?
A spouse in the community may keep his/her sole income. If the community spouse’s income is less than $2,739 per month, then the nursing home spouse can provide part or all of their income to bring the community spouse’s income up to the $2,739 limit.
Example: A nursing home resident’s monthly income includes $1,000 from Social Security and a private pension of $500. The community spouse's monthly income is $600. The community spouse may keep the resident’s entire $1,500 income because the two incomes combined total $2,100, which is below the $2,739 limit.
Does HFS seek reimbursement?
There are two ways that The Department of Healthcare and Family Services (HFS) may try to recover money it has paid for nursing home care. It can claim the probate estate of a deceased Medicaid recipient or the deceased Medicaid recipient’s spouse. HFS can also file a lien on real estate owned by a person who has been a resident of a nursing home for at least 120 days. The lien can be enforced when there is a transfer of the assets, the resident dies, or fraud is detected.
Veterans’ assistance and nursing homes
Veterans may qualify for VA health care benefits or a Wartime Veterans pension which can be used to assist with payment for nursing home care. Also, there are 4 Veterans Nursing homes in Illinois that serve only veterans, and that have a low cap on the monthly cost of services. Information about these programs can be obtained from the VA regional benefits office; www.illinois.gov/veterans/homes; or www.usawarvet.org.
Updated: March 2018