Facility care and Medicaid — what happens when the money runs out

This article is for informational purposes only and does not constitute medical, legal, or financial advice. Please consult appropriate professionals for guidance specific to your situation.

If your parent is paying privately for a facility right now, there's probably a number in the back of your head. The monthly bill times twelve times the number of years your parent might live. It's a number that can make you feel a little sick, especially if you start thinking about it at three in the morning. And at some point, you've probably wondered: what happens if the money runs out? What actually happens to people in facilities when they can no longer afford to pay?

The answer is Medicaid, and here's the good news: it's possible. Your parent's care doesn't have to stop just because private funds run out. But getting there involves paperwork, planning, and understanding a system that honestly isn't designed to be easy. The good news is that if you plan for this, it doesn't have to be a crisis. If you don't, it can become one quickly.

The biggest misconception I see is that Medicaid picks up right where your savings end, like there's some automatic transition. There isn't. You need to apply, you need to qualify, you need to meet specific requirements. The facility needs to accept Medicaid. The timeline is not quick. This is something to start thinking about before the money is almost gone, not after.

Understanding the Medicaid Transition

Medicaid is not Medicare. I'm going to say that plainly because so many people mix them up, and it matters. Medicare is an insurance program you pay into your whole working life, and you become eligible when you turn sixty-five. It pays for some hospital care, some nursing care, some doctor visits. It doesn't pay for long-term residential care in facilities.

Medicaid is a needs-based program run by states for people with limited income and assets. If your parent has spent down their savings to a certain point, if they meet income requirements, and if they're in a state that covers long-term care in nursing homes, Medicaid can pay for facility care. Some states are more generous with Medicaid than others. Some cover assisted living and some don't. Some have long wait lists and some don't. The rules are different in every state.

When your parent is paying privately, the facility is accepting their personal funds or their insurance. When you transition to Medicaid, the facility is accepting a government payment. The facility has to agree to accept Medicaid. Not all facilities do. Some have only a few Medicaid beds. So part of your planning is understanding which facilities in your area accept Medicaid, because you might not be able to stay in the facility your parent is currently in if it doesn't take Medicaid.

Before you apply for Medicaid, your parent's assets and income have to be below the threshold. This is called the spend-down period. Your parent spends down their savings on their care, on their living expenses, until they meet the income and asset limits. In most states, the resource limit is around two thousand dollars. The income limit is roughly equal to the monthly Medicaid payment rate for nursing home care. How that works in your specific state is something you need to verify, because every state is different.

There are things you can do during the spend-down period to minimize the damage. There are ways to move assets around, to plan for what happens next, that are legal and appropriate. This is where talking to a Medicaid planner or elder law attorney becomes important. The person who knows what to do in your state, with your parent's specific situation. Some of these strategies involve the house, involve moving money to a spouse, involve timing. Getting this right can save your family significant money and stress.

How It Works

Once your parent's assets are down to what Medicaid allows, you apply. The application is extensive. You need records of everything: bank statements, investment accounts, property deeds, insurance policies, everything. The application process can take weeks or even months. During this time, your parent is still paying privately for the facility, unless the facility agrees to wait, which some do and some don't.

Your parent's income matters, because some of their income might go toward paying the facility even after Medicaid kicks in. Medicaid doesn't pay the full cost of care in most states. It covers the basic nursing home rate, which is different from what private pay covers. Some of your parent's Social Security or pension might be required to go toward facility costs.

If your parent is married, the spouse staying home (called the community spouse) can keep some assets. Not all of them, but some. The state law determines how much. So if both of your parents are living, you're protecting the well spouse's resources to the extent possible.

There are some things that don't count against the asset limit. The house, usually, as long as a spouse is living there or your parent still intends to return there. One car. Household goods. A burial plot. Jewelry up to a certain value. Clothing and personal items. This matters because it means you don't have to sell absolutely everything to qualify.

Once Medicaid is approved, it pays for the nursing home care going forward. The payment rate is set by the state and might be less than what your parent was paying privately. The quality of care shouldn't change, but the dignity of how your parent is treated might. They're now a Medicaid recipient instead of a private pay resident. Some facilities treat those very differently. This is where you need to be especially vigilant about checking in, making sure your parent is still getting good care, not becoming a second-class resident because the payment rate is lower.

Practical Transition

Here's the thing about this process that I want to prepare you for: it's stressful. It's possible, but it's stressful. You're dealing with your parent's fear about money, the facility's concerns about whether they'll continue to get paid, your own worry about whether you're doing this right. It's a lot.

One option is to stay in the facility your parent is currently in, if they accept Medicaid. You apply, you spend down, and then Medicaid takes over payment. The advantage is that your parent doesn't have to move, doesn't have to adjust to a new place on top of everything else. The disadvantage is that the private pay rate and the Medicaid rate are different, and the facility might have different expectations of residents based on how they're paying.

Another option is to move your parent to a facility that's specifically set up for Medicaid residents. Some facilities are entirely Medicaid, some are mixed. The advantage is that everyone there is in a similar situation, and the facility's whole system is built around Medicaid rates, not around private pay. The disadvantage is that your parent has to move, and this might be another adjustment for them.

You need to talk to the social worker at the current facility about what options exist, what the facility's process is, what happens during the transition. You need to understand whether your parent can continue there or whether you need to make a move.

There's also a timing question. Some people wait until funds are almost completely depleted to apply. Some apply earlier and live on the reduced income while Medicaid is being processed. There's a strategy question that depends on your parent's specific situation.

What I want to emphasize: this is not shameful. Medicaid is there for this reason. Your parent can continue to receive care in a facility because this program exists. Will it feel different? Probably. Will your parent still get fed and cared for? Yes. Will the facility still provide necessary medical care? Yes. It's not the same as private pay, but it's care.

During this transition, keep checking in. Keep visiting. Keep watching for quality issues. Some facilities treat Medicaid residents well and some don't, and you need to know which yours does. If your parent's care quality changes significantly after the Medicaid transition, pay attention to that. You might need to advocate more loudly, or you might need to consider a move to a facility where Medicaid residents are valued.

Your parent is still the same person. They still deserve dignity. They deserve to be visited, to be known, to have people caring about them as a person. Medicaid pays for the facility bed and the care, but it doesn't pay for your presence and your advocacy. Those are on you, and they're important.

How To Help Your Elders provides educational content for family caregivers. This is not a substitute for professional medical, legal, or financial advice. Every family situation is different — what works for one may not work for another.