How to choose the right coverage for a nursing home stay

When families begin exploring nursing home options for a loved one, the conversation often centers on location, amenities, and quality of care. Exactly where the focus of those conversations should be. But there's another critical piece of the puzzle that deserves equal attention: understanding what your health insurance will and won't cover. Many families who are new to nursing homes just assume their health insurance covers the cost. The financial reality of long-term care can be surprising, and being prepared means knowing exactly what is covered.

The Medicare Part A misconception

Many people assume that Medicare Part A, which covers hospital stays ,will also cover an extended nursing home stay. The reality is more nuanced. Part A does provide coverage for skilled nursing facility (SNF) care, but only under specific conditions.

First, for Medicare to cover the SNF care, the beneficiary must have a qualifying inpatient hospital stay of three or more consecutive days, then they can get transferred to the SNF for additional care. The first 20 days are covered completely by Part A. Then, your loved one will be charged a daily coinsurance amount for days 21-100. If more time is still needed in the SNF after day 100, payment is completely out of pocket for the stay.

The key here for Part A is the “skilled” in skilled nursing. When many of us think of nursing home care, it’s actually more likely custodial care. Help with daily living like bathing, dressing, and eating is not what skilled nursing is designed to provide. Skilled nursing would require a potential need for physical therapy, wound care, catheter and IV maintenance, or vitals monitoring along with the daily living support. If that level of care isn’t needed, then Part A will not help out.

What about Medicare Part B?

Medicare Part B comes into play differently in nursing home settings. While it won't cover the room and board or custodial care costs, Part B does cover the visits to the doctor your loved one will need while living in the nursing home, durable medical equipment like wheelchairs or walkers, outpatient care, and preventative services. So while Part B is still needed during the stay at the nursing home, it will not cover the cost of living there.

Medicare Advantage plans: Benefits and limitations

Traditional Medicare Advantage (MA) plans work similarly to Original Medicare when it comes to nursing home coverage. They must cover at minimum what Original Medicare covers, including the same skilled nursing facility benefits from Part A with the same limitations. However, some MA plans offer a lower coinsurance for SNFs or allow the beneficiary to stay longer. Beneficiaries with chronic conditions will also be able to still enjoy their wellness programs while staying in the facility, which can make something like diabetes easier to manage during the stay. Prescriptions will certainly be needed in a nursing home, and drug coverage is often baked into many Medicare Advantage plans.

When shopping around for a nursing home, verify the facility accepts your loved one’s specific Medicare Advantage plan. Network restrictions and prescription drug access can become a significant issue if neglected, and travelling to an in-network doctor or a new facility might not be a great option later on.

Institutional Special Needs Plans(I-SNPs) can help

I-SNPs are a type of Medicare Advantage plan specifically designed for people living in long-term care facilities. These plans can be valuable because they have similar (if not identical) benefits to a Medicare Advantage plan, plus care coordination. This can be invaluable to beneficiaries needing additional support. A nurse practitioner will work to coordinate the care received between the primary care physician (PCP) and the staff at the nursing home.

To qualify for an I-SNP, beneficiaries must already be in or planning to live in a nursing home within the next 90 days. Moving into the facility triggers a Special Enrollment Period, in which your loved one can choose to switch to a plan that fits them better, potentially an I-SNP.

But then what about the cost of the nursing home?

Here's where many families face a harsh reality. Skilled nursing coverage will probably run out, and the elderly family member will still need ongoing custodial care. The choices are slim: pay out of pocket or rely on Medicaid (after spending down assets). This is precisely where long-term care insurance can step in.

Long-term care insurance is designed to cover what Medicare doesn't:

• Extended custodial care: Assistance with activities of daily living for months or years
• Room and board: The actual cost of residing in the facility
• Home health care: If your loved one receives care at home before or instead of facility care
• Flexible benefit periods: Policies typically cover 2-5 years, with some offering lifetime benefits

For many, the conversation about long-term care insurance should happen well before nursing home care is needed. While it is not out of the question to get long term care later on, the ideal time is when you are in your 50s or early 60s, healthy, and can secure affordable premiums.

Covering the care before the nursinghome stay

So if long term care insurance isn’t an option, another route would be to control costs before the need for the nursing home stay, so those funds can be saved for the cost of living in the nursing home. While these products won't cover nursing home stays directly, they can free up cash that would have been spent in the interim:

Hospital Indemnity Insurance pays a fixed amount for hospital stays. Since qualifying for Medicare's SNF coverage requires a 3-day hospital stay, having a way to cover that Part A deductible (and then some) can be accomplished through a hospital indemnity plan. It can help cover:

• Hospital deductibles and coinsurance
• Extra expenses during hospitalization
• Out-of-pocket costs that might otherwise deplete savings for nursing home care

And the best part is, the benefits are paid out directly to beneficiaries, so if the policy covers more than the hospital stay, that money can go towards anything, including a nursing home.

Critical Illness Insurance provides a lump-sum payment upon diagnosis of serious conditions like stroke, heart attack, or cancer. This money can be used for:

• Immediate care needs
• Home modifications, if trying to delay nursing home placement
• Supplementing other coverage during the transition to long-term care
• Covering the gap when Medicare skilled nursing benefits end

These aren't substitutes for long-term care insurance, and they won’t pay for nursing home care. But they can provide financial breathing room during the health crisis that preceded the nursing home placement, or help ready a loved one to age in place in their home after a life-altering illness.

Preparing before the need arises

When making a decision about nursing home preparation, there’s a lot to think about:

For those under 65: This is the prime window for securing long-term care insurance. Young, healthy people likely qualify for coverage while premiums are quite manageable. Pair this conversation with discussions about critical illness coverage, which can protect from catastrophe if a serious illness strikes before retirement.

For Medicare-eligibles: Review your current coverage options .Does your Medigap plan cover the Part A coinsurance for skilled nursing? Would an I-SNP be worth considering if facility care seems likely? Is there still time to secure long-term care insurance?

For those facing immediate placement: Focus on maximizing current benefits. Ensure your loved one understands the 3-day hospital stay requirement. Verify the chosen facility accepts specific Medicare Advantage plans if applicable. Once the senior in question moves in, use an SEP to determine whether a new plan, like an I-SNP, might offer better coordinated care. If long-term care insurance isn’t at play, help them understand the Medicaid planning timeline.

It’s not too late

Nursing home care is expensive, often costing $7,000-$10,000 per month or more. Medicare's coverage is limited and temporary. Medicare Advantage and I-SNPs offer some advantages but don't fundamentally change the long-term picture. The products that truly protect families, like long-term care insurance, supported by hospital indemnity and critical illness coverage, must be secured well before they're needed.

If you are reading this for yourself or a loved one, then you are on the right track. You understand the real costs of aging and the tools available to protect financial security. Sit down with an agent and have these conversations early. The families who plan ahead will be glad they did when the time comes.