How to pay for a nursing home with no money: A guide

Paying for long-term care is often one of the most difficult things for people to plan for, given that it’s so far away and has so many unknowns. Yet, it’s something that 70% of people who reach age 65 will need at some point in their life.

It can be very helpful to take a look at the different types of long-term care, their costs, and ways to pay for it, even if you’re a younger person. Knowledge is power, after all, and familiarizing yourself with the abundance of ways to pay for assisted living and nursing home care — even with no money — can help ease your fears so you can truly enjoy your golden years. 

Understanding the costs of nursing home care

It’s true that long-term care can be expensive. However, there are different types of services that fall under this umbrella, and some cost less than others. One good tool you can use to get a better estimate of your potential costs based on your area and the type of care you need is Genworth Financial’s Cost of Care Survey. 

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According to Genworth, here is the nationwide median cost breakdown for various types of long-term care, in 2021 dollars:

• Home health aide services five days per week, eight hours per day: $56,160
• Homemaker services five days per week, eight hours per day: $54,080
• Adult day care services five days per week: $20,28
• Assisted living one year, private room: $54,000
• Nursing home one year, semi-private room: $94,900
• Nursing home one year, private room: $108,405

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Many other factors can influence the cost as well, such as the quality of the care provider, whether you need additional memory care services, premium amenities like on-site salons and restaurants, etc. 

Ways to cover long-term care costs

Putting together a plan to pay for long-term care costs is like creating a painting: each person will draw from multiple sources to create a holistic picture that will look different from that of everyone else. Here are the different options you may have available:

Medicaid

Pros

• No age limitations
• No limit on coverage length
• Monthly personal needs allowance
• Covers all eligible long-term care costs

Cons

• Programs vary by state
• May only cover basic facilities
• Potential waitlists for coverage
• Asset and income limitations apply
• Not accepted by many care providers

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Medicaid makes up the single most popular way to pay for long-term care, accounting for about 44% of all long-term care funding in 2021, according to a Congressional Research Service (CRS) report. There is no cost for coverage, you may receive a small monthly personal expense allowance of up to $200, and it’ll pay for your long-term care for as long as you need it; but there are significant downsides. 

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Medicaid is generally limited to people with less than $2,000 in assets and earning under $2,742 per month, which requires many people to “spend down” their lifetime accumulated wealth in order to qualify. Medicaid programs vary by state, and you may face a waitlist of up to two years before becoming eligible for coverage. Up to 10% to 20% of facilities don’t accept Medicaid, and when they do, coverage is typically limited to very basic options such as non-private rooms. 

Medicare

Pros

• Affordable premiums
• No copayment for the first 20 days
• Medical expense coverage included

Cons

• Not accepted by all facilities
• Only covers short-term nursing home stays
• $204 daily copayment between days 21–100
• Must be 65 or older or have certain disabilities
• Doesn’t cover homemaker service or adult day care

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Medicare makes up the next rung of coverage, providing about 20% of long-term care funds in 2021. It will cover costs for things like nursing homes that most people consider to be  “long-term care,” but the reality is that it’s meant for short-term care needs only or as a bridge to more permanent funding options. Medicare only covers stays in eligible nursing homes for up to 100 days — after that, it no longer pays for any expenses. 

Retirement savings and investments

Pros

• Compound growth over time
• Total control over care options
• No limit on how much you can save
• May deduct certain contributions from income
• More flexibility to maximize value of other funding sources

Cons

• Not an option for everyone 
• Requires a lot of advance planning
• Required Minimum Distributions for certain accounts
• May disqualify you from certain asset-limited funding options

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Out-of-pocket funds — including retirement savings and investments — provided about 14% of all long-term care funds in 2021. Americans had a median retirement account value of $86,900 in 2022, according to a recent Federal report. 

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Drawing on your own savings for long-term care gives you the ultimate say over your long-term care options, and it may also provide flexibility for maximizing other benefits, such as paying out-of-pocket for care until you’re age 70 when you receive maximum Social Security benefits for life. 

Long-term care insurance

Pros

• Benefits are not taxable
• May cover full cost of care
• May deduct premiums from income
• Policy options for inflation protection
• More flexibility to maximize value of other funding sources

Cons

• Expensive premiums
• Requires a medical exam
• Premiums may change over time
• Annual and lifetime limits on benefits
• Coverage only begins after elimination period
• Can’t buy a policy if you’re already in long-term care

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Nearly 8% of long-term care funding in 2021 was provided by long-term care insurance, a product created specifically for this purpose. Policies can be complex and expensive — annual premiums can range from $900 to $9,575 depending on various factors — but it does guarantee the funds you need as long as you’re eligible for coverage. This can be especially important if you don’t have enough retirement savings, or to tide you over until you’re eligible for other long-term care payment options such as Medicaid. 

Social Security Retirement, Disability, and Supplemental Security

Pros

• Payments last for life
• Inflation-adjusted payments
• Benefits may be available to surviving spouses and dependents

Cons

• Modest monthly income
• Benefits reduced for those under 70
• Asset and income limitations may apply
• Must be 62 or older or have certain disabilities
• High denial rate for disability benefits and supplemental security

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Most people know about Social Security, but it’s actually composed of three separate programs: Old-Age and Survivors Insurance, Disability Insurance, and Supplemental Security. There are many rules and restrictions that come with each of these programs, and the benefit amounts are not high, averaging $21,552 per year for old-age benefits — roughly only $7,000 above the poverty threshold. However, they can form an important base to pay for partial long-term care costs for the remainder of your life. 

Family contributions and support

Pros

• No cost to you
• Tailored support from loved ones
• Financial assistance may be available for caregivers
• No waiting periods, asset limitations, or other requirements

Cons

• Not an option for everyone
• Can strain family relationships
• Skilled nursing care may be limited

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Many people plan to rely on children or other family members for financial contributions, or by acting as caregivers themselves. Nationwide, family members provided about $600 billion in unpaid care in 2021. Asking your family to support you can draw you closer together, but it’s important to be cognizant of the downsides. Family members may lack the medical training you require, and it can be a tough job. Family members caring for a loved one often face higher rates of mental health problems, medical challenges, financial issues, and overall caregiver fatigue.

Annuities and life insurance

Pros

• Flexible contract terms
• May receive benefits immediately
• Survivors may receive unpaid benefits
• May be cheaper than long-term care insurance
• Can be easier to get with existing health issues

Cons

• Taxable payments
• Can be very expensive
• May require large upfront payment
• Policy terms can be highly variable
• Complex products that can be difficult to understand
• May recoup some costs if you don’t need long-term care

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Annuities and life insurance are two complicated financial products that don’t pay for long-term care on their own, but may be able to through roundabout methods. Once purchased, you can use annuity payments for whatever you want — including long-term care. Life insurance and annuities may also be offered as hybrid products with special long-term care riders, which offer payments for qualified long-term care that won’t reduce the rest of your benefit payout. 

Veterans benefits

Pros

• Support and benefits for spouses
• Many different support programs available
• May provide monthly funds through a pension
• Covers many different types of long-term care
• May be eligible for veteran-specific nursing homes

Cons

• Waitlist may apply
• May be limited in certain areas
• Must navigate complex bureaucracy
• Asset and income limitations may apply

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The Department of Veterans Affairs (VA) provides many different options for veterans needing long-term care, some of which require a service-connected disability rating and some of which do not. Veterans pensions are available to all qualifying veterans, for example. If you don’t have a disability rating, you may qualify in other ways — including if you’re over 65 with less than $155,356 in assets. 

Selling or renting out property

Pros

• Large source of funds
• Reduced stress in maintaining old home
• More control over long-term care options

Cons

• Can impact heirs
• Can be a long process
• May require active management
• Can impact eligibility for means-tested programs like Medicaid

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Homeowners looking to permanently transition into assisted living facilities or nursing homes can benefit by renting out or selling their home for additional income. This offers a dual benefit; since the homeowner will no longer be living there, they can eliminate (or reduce) ongoing expenses for maintenance and upkeep in exchange for funds they can use to pay for long-term care. Renting out your home can provide consistent ongoing income — especially if you’ll be leaving your home to your heirs, or possibly returning — but may require hiring a property management company to handle the daily details for you. 

Personal loans and lines of credit

Pros

• Doesn’t require equity
• Short funding timelines
• May apply with co-applicant

Cons

• Higher interest rates
• Small funding amounts
• Requires monthly payments
• Qualification based on income and credit

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Personal loans are often quick and easy to get — if you have strong income and credit, and the ability to make monthly payments. That may be limited if you need long-term care, but you may be able to apply with a co-applicant, such as a working spouse, who can handle repayment on your behalf. Personal loans tend to be relatively limited in size, at least relative to the cost of long-term care, with an average personal loan balance of $18,255 in 2022. Still, it may be a helpful source of temporary funds while you wait for more permanent benefits to kick in.

Reverse mortgages

Pros

• No monthly payments
• Benefits are not taxable
• Easier credit qualification
• May apply with an eligible spouse
• Repayment won’t exceed home value
• Qualifying spouses may continue living in home

Cons

• Expensive fees
• Can impact heirs
• Must be 62 or older
• Requires a lien on home
• Balance increases over time
• Funds must pay off remaining mortgage
• Smaller loan amounts for younger seniors
• Residency requirements may trigger repayment

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These loans essentially work like your mortgage, but — as the name suggests — in reverse. The lender pays you, while your outstanding loan balance grows at a pre-set interest rate. 

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No monthly payments are required, but once you move out of your home — including moving into a long-term care facility — you will be required to repay the balance of your reverse mortgage, which will never be more than your home’s value. Many borrowers choose to do this by selling their home or transferring the title to the lender. For this reason, reverse mortgages are generally better suited to people needing long-term care in their homes, rather than an assisted living facility or nursing home.  

Home equity loan/HELOC

Pros

• Flexible funding source
• May apply with co-applicant
• No residency requirements
• Lower rates than personal loans

Cons

• Expensive fees
• Requires a lien on home
• Long application process
• Requires monthly payments
• Typically requires 20% equity in home
• Qualification based on income and credit 

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If you want to tap into your home equity and keep the door open to homeownership while you’re in long-term care, one option is a home equity loan or HELOC. You may be able to borrow up to 80% of your home equity with these options, although you will need to make monthly payments and qualify based on your credit and income as per other loans. If you're applying with a cosigner, however — such as a spouse who is still working and can afford payments — it can be an effective way to pay for your long-term care needs. 

HEI

Pros

• Lump sum funding
• Assumable by heirs
• Terms up to 30 years
• No monthly payments
• No residency requirements
• Easier credit and income qualifications

Cons

• Expensive fees
• Long funding timeline
• Requires a lien on home
• Limited to certain types of properties
• Typically requires 20% equity in home
• Unknown repayment cost until closeout 

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A Home Equity Investment, or HEI, is a home equity product where you offer a stake in your home’s future appreciation in value in exchange for a lump sum of funds now. This allows you to retain ownership of your home, including allowing it to pass to your heirs if they agree to take over the HEI. It’s especially well-suited to people needing long-term care because no income or monthly payments are required until a final balloon payment at the end of the term length — which can also be extended if needed. 

Frequently asked questions

What role does long-term care insurance play in covering costs?

Private long-term care insurance paid for about 8% of all long-term care spending in 2021, according to a Congressional report. 

What can a nursing home take for payment?

Nursing homes, like other businesses, can vary in regard to the forms of payment they accept. Most nursing homes accept payments from benefits providers like Medicare and Medicaid. Many nursing homes also accept cash, checks, and credit cards. 

Are there any alternatives to nursing homes that can save money?

Yes. Nursing homes are generally reserved for the people who need the most amount of care. People who can still function semi-independently may be better off hiring a homemaker, a home health aide, attending adult day care, or moving into an assisted living facility — all of which are cheaper options.

Final thoughts

Many Americans are asking themselves, “how can I pay for assisted living with no money.” However, you can see that there are many options to pay for your long-term care needs, and you may never have to worry about how to pay for a nursing home with no money. At the very least, Medicaid will pay for the cost of basic-level long-term care, although planning to fund your long-term care in advance can help you ensure you get the best care possible. 

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However, putting the pieces of your plan together can be very complex as you navigate intricate rules for many of your options. It’s a wise idea to speak with a certified financial advisor who can help you create a solid plan. Consider a fiduciary advisor who works on a fee-only basis, as these professionals are able to provide the most helpful and unbiased advice for your lifetime financial planning needs.