Understanding facility contracts — what you're signing and what it means
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.
The contract arrives in a folder an inch thick. You're in the middle of hospital discharge. Your parent is waiting for transport. The facility representative is explaining pages of terms while you're trying to sign things because if you don't, there's nowhere for your parent to go. You're not reading. You're not comprehending. You're surviving. And somewhere in that survival mode, you're becoming responsible for understanding financial commitments that might run into hundreds of thousands of dollars.
This is not a situation designed to help you make clear decisions. The whole system benefits from your confusion and exhaustion. You need the bed. They need it to be full. The paperwork is intentionally opaque. Nobody explains it clearly. And if you ask too many questions, there's an implication that you're holding up the process, that your parent won't have a place to go, that you're being difficult. So you sign. And then, weeks later, when the bill arrives, you understand you've agreed to something you didn't actually know about.
The financial reality of facility care is one of the harshest parts of aging. It's not brutal in the way an illness is brutal, but it's relentless and absolute. Your parent might have had decent savings. The facility care system will consume them. This isn't a conspiracy. It's just the math. Skilled nursing facilities cost between five and ten thousand dollars a month, depending on your location and the level of care required. Long-term custodial care costs three to six thousand monthly. If your parent lives for a decade in facility care, we're talking hundreds of thousands of dollars. Most families don't have that. Most insurance doesn't cover it. Most of us are figuring out the financial part as we go, which means figuring it out wrongly and expensively.
Costs of Skilled Nursing
Skilled nursing care is the most expensive kind of facility care because it involves nursing oversight and medical management. The daily rate varies wildly depending on where you live and what your parent needs. In rural areas, you might find skilled nursing for a hundred and fifty dollars a day. In urban areas or specialized facilities, three hundred and fifty to four hundred dollars daily is common. That's roughly five to twelve thousand a month, depending on location.
Here's the confusing part: what insurance pays for has almost nothing to do with the actual cost. Medicare will pay for up to twenty days of skilled nursing care after a qualifying hospital stay, but only a portion of it. You pay a co-payment. After twenty days, you're in a co-insurance period where you pay most of the cost. After one hundred days, Medicare stops paying entirely. The facility still bills you.
This is where family shock happens. Your parent was in the hospital. Your parent was transferred to skilled nursing. The paperwork said Medicare would cover it. For the first few weeks, this is true. But by week six, you're getting bills. By week twelve, you're paying nearly the full amount out of pocket. And if your parent needs to stay longer because recovery is slower than anticipated, you're now paying several thousand dollars monthly with no end date.
Private insurance sometimes covers rehabilitation stays, but the coverage has strict limits. A typical policy might cover up to sixty days of skilled nursing per calendar year, with a significant daily co-payment. After those days are exhausted, you're responsible for the full cost. Additionally, insurance only pays for care that's medically necessary. If insurance determines your parent has "medically improved" and no longer needs skilled nursing, they stop paying, even if your parent is still in the facility and still needs help.
This is the gap that destroys family finances. Your parent needs continued care. The facility provides it. Insurance says they're done paying. Now you're paying. The facility can't just discharge your parent to the street because insurance stopped covering the stay. So your parent stays, and you get bills.
Long-Term Financial Planning
This is where conversations become incredibly difficult because they require acknowledging that your parent's money will run out, and when it does, you need a plan. Most families don't have this conversation until the savings are nearly gone, at which point the options are limited.
If your parent has significant assets, spending them down on care is actually necessary for something called "Medicaid planning." Medicaid is the government program that covers long-term care for people with limited resources. It's often the only way a long-term care situation gets paid for once private insurance and savings are exhausted. But Medicaid has income and asset limits. Your parent can't just hand you their money or give it away and immediately qualify. There are rules about transfers and waiting periods. These rules are deliberately complicated, and getting advice from an elder law attorney is worth every penny.
The basic idea is this: your parent spends down assets on their own care until they reach the Medicaid limit, usually around two thousand dollars in assets. Then Medicaid takes over, covering the facility costs for the rest of their life. But the spending down part is important because if you do it wrong, you create delays in Medicaid coverage or legal problems for yourselves.
Here's something nobody tells you: having this conversation is not the same as abandoning your parent. Having this conversation is not the same as hoping they'll die soon so you can access their estate. These are things guilt whispers when you sit down with your parent and say, "Let's talk about what happens when your savings run out." But these conversations are essential. Your parent's doctor can't tell you how long they'll live. The facility can't tell you how long they'll stay. But you know some basic facts: facility care is expensive, savings are finite, and at some point, you need a different payment plan.
Some families are in better positions to have this conversation than others. If your parent is alert and can participate, direct conversation is possible. Your parent can understand the timeline. Your parent can express preferences about how assets are spent. Your parent might want to spend down quickly on the best possible facility and care. Your parent might want to preserve some money for other goals, knowing that Medicaid will eventually cover basic care.
If your parent has cognitive impairment or isn't capable of this conversation, you and your siblings need to have it without them. This is harder because you're making assumptions about what your parent would want. But you still need to make the decision.
When Medicaid Becomes the Plan
Understanding Medicaid is essential because, for many families, it's the financial reality of long-term care. Medicaid isn't a single national program. Each state runs its own. This means rules, coverage, and payment rates vary dramatically by state. A facility that costs eight thousand a month in one state might cost five thousand in another. What Medicaid covers in one state it might not cover in another.
Generally, Medicaid covers long-term custodial care once your parent's assets are spent down. The state pays a daily rate to the facility, which is often lower than what private-pay residents are charged. Medicaid also covers skilled nursing, though again, the daily rate is lower than private insurance and out-of-pocket payments. These lower rates are why nursing homes sometimes prefer private-pay residents over Medicaid residents: the profit margins are better.
This creates a difficult situation for many families. Your parent spends down their savings to become Medicaid-eligible. Then the facility knows your parent is now on Medicaid. Some facilities become less attentive to Medicaid residents because they're making less profit. Some facilities maintain the same standard of care regardless of insurance status. Some facilities practice subtle discharge planning, trying to move Medicaid residents out to free up beds for private-pay residents. This isn't universal, but it happens enough that you need to be aware of it.
When your parent becomes Medicaid-eligible, you also need to understand what Medicaid covers and doesn't cover. Generally, facility costs are covered. Medications prescribed by the facility doctor are covered. Special equipment the facility deems necessary is covered. But Medicaid doesn't cover incidentals. If your parent wants cable television, you're paying. If your parent needs personal toiletries beyond basic supplies, you're paying. If your parent wants to participate in outings or activities that cost money, you're probably paying. These seem like small things, but they add up, and they create an awkward situation where your parent is in a Medicaid facility but still needs money from family for dignity and enjoyment.
Also understand that Medicaid rates vary by facility type. A basic skilled nursing facility gets a Medicaid rate. A specialized facility for dementia or ventilator care might get a higher rate. Your parent might be in a facility that accepts Medicaid, but if the facility specializes in something your parent doesn't need, the rate might be lower. This affects what the facility is willing to pay staff, what equipment is available, and indirectly, the quality of care.
State Medicaid programs also have asset protection rules that allow your parent to keep a home and one car without it counting against the asset limit. These rules allow you, potentially, to preserve some of your parent's assets in the form of property. This is complex and state-specific, and it's worth discussing with an attorney who specializes in elder law.
When your parent's resources are depleted and Medicaid is covering long-term care, you're moving into indefinite care. Your parent will remain in the facility, covered by Medicaid, for however long they live. This removes one layer of financial stress: you're not waiting for insurance to stop paying. You're not trying to figure out the next placement. You're in a stable financial situation, which is rare in eldercare. The tradeoff is that you've watched your parent's life savings disappear into care, and there's nothing left to inherit, nothing left to pass on. This is grief of a different kind. It's real, and it's worth acknowledging.
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.