Where the money comes from

Nursing homes are paid by three main sources: Medicare (federal insurance for people 65 and older), Medicaid (joint federal-state insurance for low-income people), and private pay (the resident or their family paying out of pocket). Most nursing homes accept all three, though some accept only private pay or only Medicare and Medicaid. The source of payment determines how much the home receives per day, what services are covered, and how long the stay can last.

The payment method also affects what you pay. If you use Medicare, you pay nothing for the first 20 days and a set copay for days 21 through 100. If you use Medicaid, you typically pay a small monthly amount (usually $30 to $50) and Medicaid covers the rest. If you pay privately, you pay the full daily rate, which varies widely by location and facility type.

Key Takeaways

  • Medicare pays for skilled nursing care after a hospital stay, but only for up to 100 days per benefit period, with no payment for the first 20 days.
  • Medicaid pays for long-term care with no time limit, but requires the resident to have limited income and assets, and the amount Medicaid pays per day varies by state.
  • Private pay means you or your family pay the nursing home directly; daily rates range from $200 to $500 or more depending on location and care level.
  • Many people start with Medicare, exhaust those 100 days, then switch to Medicaid if they meet the income and asset limits.
  • The nursing home's payment rate does not change based on the resident's medical needs — the rate is the same whether you need minimal help or round-the-clock care.

How Medicare pays for nursing home care

Medicare covers a nursing home stay only after you have spent at least three consecutive nights in a hospital. This is called a may have access to hospital stay. The stay must be for the same condition or a related condition that sent you to the hospital. If you go to a nursing home for a different reason — for example, you fall at home and break your hip, but you were never hospitalized — Medicare will not pay.

Once you may have access to, Medicare pays the full cost of the nursing home for the first 20 days. From day 21 through day 100, you pay a copay (in 2024, this is $194.50 per day, though the amount changes yearly) and Medicare pays the rest. After day 100 in a single benefit period, Medicare stops paying entirely. A new benefit period begins 60 days after you leave the nursing home or hospital, so you cannot straightforward wait a few weeks and restart Medicare coverage at the same facility.

Medicare only covers skilled nursing care — care that requires a nurse or therapist, such as wound care, physical therapy, or medication management. It does not cover custodial care, which is help with daily activities like bathing, dressing, or eating. If the nursing home determines you no longer need skilled care, Medicare stops paying, even if you have days left in your 100-day window.

How Medicaid pays for nursing home care

Medicaid is the main payer for long-term nursing home stays. Unlike Medicare, Medicaid has no time limit — it can pay for years or decades. However, Medicaid only pays if your income and assets fall below your state's limits. The income limit is usually around $2,500 per month, though it varies by state. The asset limit is typically $2,000 for a single person, though some states allow a spouse to keep more.

When you explore for Medicaid nursing home coverage, the state looks back five years to see if you gave away money or assets to become poor enough to may have access to. This is called the look-back period. If you transferred assets without receiving fair value in return, Medicaid may impose a penalty period during which it will not pay. The penalty length depends on how much you transferred and your state's rules.

Medicaid pays the nursing home a set daily rate, which the state determines. This rate varies widely — from around $150 per day in some states to $400 or more in others. The nursing home must accept this rate; it cannot charge the resident more. You typically pay a small monthly amount (your state sets this, usually $30 to $50) from your income, and Medicaid covers the rest.

Private pay and out-of-pocket costs

If you pay privately, you or your family pay the nursing home directly. Private pay rates are set by the facility and vary based on location, the level of care needed, and the room type (private versus shared). In urban areas and states with high costs of living, private pay can exceed $500 per day. In rural areas, it may be $200 to $300 per day. These rates typically cover room, board, and basic care, but not all services.

Private pay residents often face additional charges for services that Medicare or Medicaid would cover at no extra cost. These may include physical therapy, certain medications, wound care supplies, or specialized equipment. Ask the nursing home for a full list of what is included in the daily rate and what costs extra before you move in.

Many families start with private pay because it is faster — you can move in within days. Others use private pay temporarily while waiting for Medicaid approval, which can take weeks or months. Some people use private pay for the first 100 days while Medicare covers the cost, then switch to Medicaid when Medicare runs out.

What happens when one payment source ends

The most common transition is from Medicare to Medicaid. When your 100 Medicare-covered days end, the nursing home must notify you in writing. If you meet your state's Medicaid income and asset limits, you can move to Medicaid coverage. The nursing home will help you start the Medicaid process, though you must provide the paperwork and information.

If you do not meet Medicaid limits, you must either pay privately or leave the facility. Some people spend down their assets — paying for care out of pocket until their assets fall below the Medicaid limit — then explore. This is legal, but it is permanent; once you spend the money, it is gone. Talk to an elder law attorney or a Medicaid planner before you do this, because the rules are complex and mistakes can cost thousands.

If you are on private pay and run out of money, you can explore for Medicaid at any time. However, Medicaid will look back five years at your finances, so if you transferred assets to family members or spent money in ways the state considers improper, you may face a penalty period. During this period, Medicaid will not pay, even though you now meet the income and asset limits.

How nursing homes decide which residents to admit

Nursing homes are businesses and must balance their finances. Some facilities prefer private pay residents because the payment is more reliable and often higher than Medicaid rates. Others depend on Medicaid because most of their residents are on it. A few facilities accept only private pay or only Medicaid.

When you inquire about admission, tell the nursing home how you plan to pay. If you say you will use Medicare for 100 days then switch to Medicaid, the home needs to know it will receive a lower daily rate after day 100. Some homes will not admit you under these terms. Others will, but may pressure you to leave when the transition approaches. This is illegal in most states, but it happens. Before you move in, get the admission agreement in writing and ask specifically whether the home will keep you on Medicaid after Medicare ends.

Understanding daily rates and what they cover

The daily rate a nursing home receives — whether from Medicare, Medicaid, or private pay — is a flat amount per day. It does not increase if you need more care or decrease if you need less. A resident requiring 24-hour monitoring and a resident who is mostly independent pay the same daily rate at the same facility.

This flat rate covers room, meals, basic nursing care, and activities. It typically does not cover specialized services like physical therapy (though Medicare may cover this separately), certain medications, medical equipment, or services like haircuts or transportation. Ask the nursing home to itemize what the daily rate includes and what costs extra. Request this in writing so you have a record.

The daily rate also does not cover the nursing home's profit. Nursing homes are often for-profit businesses. The rate they receive from Medicare, Medicaid, or private pay must cover staff salaries, utilities, food, maintenance, insurance, and administrative costs, plus generate a margin for the owner. This is why some nursing homes are well-staffed and well-maintained while others are understaffed and run down — the payment rate, combined with how the owner chooses to spend it, determines the quality of care.

Frequently Asked Questions

Can a nursing home refuse to admit me because I plan to use Medicaid after Medicare runs out?

No, this is illegal under federal law. However, some homes will admit you and then pressure you to leave when the transition approaches. Before you move in, get written confirmation that the home accepts Medicaid and will continue your care after Medicare ends. If a home refuses to admit you because you plan to use Medicaid, report it to your state's long-term care ombudsman.

What if I run out of money while I am in a nursing home?

You can explore for Medicaid at any time. The nursing home cannot evict you while your Medicaid process is pending, though this rule varies slightly by state. Once Medicaid approves you, it will pay the home going forward. However, Medicaid will look back five years at how you spent your money, so if you transferred assets improperly, you may face a penalty period during which Medicaid will not pay.

Do I have to use Medicare if I am may be able to access?

No. You can choose to pay privately instead. Some people do this because they want to stay at a facility that does not accept Medicare, or because they want to preserve their Medicare days for a future stay. However, once you use your Medicare days, they are gone for that benefit period, so think carefully before you decline.

Can a nursing home charge me more than the Medicaid rate?

No. If you are on Medicaid, the nursing home must accept the state's Medicaid rate as payment in full. It cannot charge you the difference between the Medicaid rate and the private pay rate. It can charge you for services not covered by Medicaid, such as a private room upgrade or certain therapies, but only if you agree in writing beforehand.

What happens to my Medicare days if I leave the nursing home and come back?

Your unused days are gone. If you use 30 of your 100 Medicare days, leave, and return within 60 days, you have 70 days left. If you return after 60 days, a new benefit period begins and you get a fresh 100 days. This is why some people stay in a nursing home longer than they need to — they want to use up their Medicare days before they lose them.