Nursing home financing and long-term care can be expensive. The methods of payment can be confusing. This article gives a general overview of the law in Illinois and answers some common questions.

Long-term care facility

A long-term care facility is a skilled nursing facility or an intermediate nursing facility. It is not a supportive living facility, an assisted living facility, or any other 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 funds from selling their home or other assets. This is called “private pay.” Each nursing home has a set daily fee for “private pay” residents.This should be stated in the nursing home contract.

Nursing homes are not allowed to require a family member or other person to guarantee payment. Another person can voluntarily agree to be responsible for payment.

Read carefully before signing a nursing home contract. Know what you are deciding to do. Do not sign if it makes someone besides the resident responsible for payment and that is not your agreement. The contract should state which services are covered by the daily cost and which are not. Many residents start off as private pay residents but need financial assistance later. 

When does Medicare pay for nursing home care?

In some cases, Medicare Part A will pay for up to 100 days of skilled nursing home care for each “spell of illness.” A “spell of illness” begins on the first day a person receives hospital-level care. It 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. 

Medicare pays for nursing home care only after a patient has spent at least three consecutive days as an inpatient in the hospital. Patients staying for observation are outpatients. Time spent as an outpatient does not apply to the 3-day requirement.

Skilled care includes services performed by or under direct supervision of skilled nursing home or therapy staff.

Medicaid and nursing homes

Medicaid is a State and Federal program, administered by the Illinois Department of Healthcare and Family Services (DHFS). It pays for care in skilled nursing facilities and intermediate care facilities. A doctor must confirm the resident needs this level of care. The resident must be eligible for benefits based on their income and assets. The resident is required to file a detailed application showing all assets and income. They must also provide certain documents to verify their finances. Then eligibility can be determined.

Do all nursing homes accept Medicaid?

No. Many facilities are certified to accept Medicaid patients. Others choose not to take Medicaid. This is because the amount paid per day 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.

Discrimination against Medicaid recipients is prohibited. However, a nursing home that accepts Medicaid recipients can limit the number of Medicaid available beds. Even if you have been told that the facility takes Medicaid, there may not be a Medicaid bed available. If you know you will need one in the future, give the nursing home plenty of warning. This way, they can plan to have a bed available.  

What expenses does Medicaid cover?

Medicaid covers all expenses of nursing home care. This includes room and board, supervision and oversight, laundry, housekeeping services, and equipment and supplies. You should not be charged for:

• 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, or
• 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, call your long-term care ombudsman or your area agency on aging. Your nursing home contract should specify the items that cost extra. This may include beauty services, telephone, and cable charges.

Who may be eligible to receive long-term care Medicaid?

If you are a resident 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.

An asset is any cash, personal or real property that a person owns. If you have the right to sell and use that asset, you own it.

Income includes all money coming in, whether earned or unearned. This includes social security, pensions, and veteran benefits.

How are assets counted when applying for medical assistance?

All assets owned by an applicant and their spouse, if they have one, must be reported on the application. Medicaid is based upon financial need. All non-exempt assets must be used to pay for care before Medicaid begins. “Exempt assets" do not need to be sold and spent before an applicant 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, and
• Certain trust funds (ask an attorney for advice on whether a fund is exempt).

Most of your other assets must be used before you will be eligible for Medicaid. You will not be eligible if you give away your assets without receiving fair market value.

What happens when one spouse lives in a nursing home, and the other does not?

The rules for married couples allow the spouse not applying for services to keep some non-exempt assets and income. These are called "spousal impoverishment" rules or protections. This is so that the spouse in the community is not placed into poverty. Learn more on the Medicaid website.

At what point in time are assets valued for Medicaid purposes?

Assets are valued during the eligibility determination. All transfers of assets and income made within 60 months (5 years) of the date of application will be reviewed. A transfer occurs when a person buys, sells, gives away, or changes the way assets are held. 

If you transferred assets within five years of the date of application and did not receive the fair market value, you may have a penalty period. You will not be eligible to receive Medicaid during the penalty period. The length of the penalty 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 for a certain time. The amount of time will depend on the private pay cost of the nursing home and the fair market value of the home she gave away. If the nursing home charges $6,000 a month for 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 on the date she entered the nursing home, she will not receive assistance for the first 10 months. 

Are there any allowable transfers?

Yes. Some transfers for less than fair market value will not affect eligibility. These include: 

• An applicant’s home transferred to certain people,
• Charitable gifts and gifts to family members which are consistent with past gifts, and
• 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 applicant entered the nursing home, or
• A child who had lived in the home continuously for at least 2 years before the parent’s admission to the nursing home. This applies if the child provided care which prevented an earlier nursing home admission

Payment to a family member or friend for providing housing, care or services 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 before her admission into a nursing home. Mary made checks out to her daughter in amounts between $100 and $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 the checks were to assist with household expenses, a $6,000 penalty period was imposed.

How much income may a nursing home resident keep?

A resident receiving Medicaid may keep a small portion of their income. This is called the Personal Needs Allowance (PNA). The amount changes from time to time. The current amount can be found on the IDHS website. 

Deductions may be made from the income going to the nursing home. These may be 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, or
• A community spouse.

How much income may a community spouse keep?

A spouse in the community may keep his/her sole income. Learn more on Medicaid.gov.

Does DHFS seek reimbursement?

There are two ways that the DHFS may try to recover money it has paid for nursing home care. It can claim the probate estate of a deceased Medicaid recipient or their spouse. DHFS 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. These can be used to assist with payment for nursing home care. There are 5 Veterans Nursing homes in Illinois that serve only veterans. They have a low cap on the monthly cost of services. More information can be found on the State of Illinois website.