Medicare vs Medicaid in Nursing Homes

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When a spouse or parent requires long-term care, quality is the top priority. But a report last year by the US Government Accountability Office (GAO) cited concerns about the quality of the federal data essential for monitoring the quality of care.  For example, three key indicators point to improvements: better nursing staff levels and clinical quality and fewer deficiencies in care that harm residents. Yet consumer complaints jumped 21 percent between 2005 and 2014, even though the number of nursing home beds has remained roughly flat in recent years.

Anthony Chicotel, an attorney with the San Francisco non-profit California Advocates for Nursing Home Reform, said care quality is intertwined with affordability, payment sources, and dramatic changes under way in nursing home economics.  For his views on this important topic, Squared Away interviewed Chicotel, who is also part of a national coalition of attorneys advocating for patient rights.

Question: Recent Boston Globe articles have highlighted substandard care at nursing home companies that allegedly sacrificed resident care quality for profits.  Are these a few bad actors or is this a larger problem?  

Problems exist in the traditional buyer-seller marketplace for nursing homes and long-term care services. Providers all get paid pretty much the same rate regardless of whether the care they provide is good or bad. It’s usually the government who’s paying, and they’ve got an imperfect monitoring system to make sure the rules are followed.

The bottom line is that dollars can be extracted from a for-profit facility that don’t go into patient care. What you sometimes see is a nursing home affiliated with a number of other companies that provide services to the nursing home at above-market rates. The same web of companies running the nursing home might be in charge of the linen supplies, medical equipment, therapy, and the above-market rents for the facilities. If they’re paying, say, $12,000 a month for linens instead of sending it to a non-affiliated company, and it costs only $7,000 per month to supply the linens, they’re making a $5,000 profit. I don’t think the government’s going to catch that or account for that money.

Q: Long-term care is so expensive – more than $6,000 per month, on average.  What are the top three financial issues that face nursing home patients and families?

The big issue is, how do you pay for it? It’s vastly expensive – beyond what most people would’ve guessed. In the Bay Area, the standard price for nursing homes is $10,000-12,000 per month for private-pay nursing home care. I think the state average is around $8,000. Nationally it’s lower, but if it’s $6,000 per month, $70,000 a year is a lot of money.

The second issue is what happens when Medicaid kicks in [after a patient depletes their personal assets paying for care]. When you are on Day 100 [after a hospital stay], Medicare will no longer pay, and you shift from Medicare to Medicaid. Medicaid pays significantly less than Medicare. When that happens, a big issue is not so much paying for it but that the nursing home might disfavor your Medicaid reimbursement source.

The result of that – and I’m speaking very generally – is that if you are a resident who is challenging to care for, or if your family is difficult to deal with, under Medicaid or even private pay, you’re more vulnerable. I have seen some facilities put the resident in a less desirable wing farther away from the nursing station. They want you to feel like a VIP when you’re on Medicare, but when Medicare payments end, a nursing home might say you’ve been in a short-term bed and you’re switching to a long-term scenario. What’s factual is that all the beds are licensed [by the state] for long-term care – that’s what nursing homes get paid to do.

Financial guarantees are a third issue.  Who’s liable for paying for the care?  Not family members. But in my experience, family members – adult children, brother, sister, niece, or nephew – will sign the contract, even though they have no legal responsibility for paying for care. Non-spousal relatives are never personally liable. Nursing homes are prohibited under federal law from requiring financial guarantors. Case law says it’s not a contract between the nursing home and a non-resident who signs it. The contract is between the nursing home and the person who requires care. But the bills are coming in the family member’s name, so of course they pay it, sometimes from their own personal funds even though they’re not required to.

Family members do have to be good representatives for the resident. If I’m handling their finances, I can’t spend the money on Christmas gifts for family.  I have to pay for the care.

Q: As an advocate and attorney handling the difficult cases, do you have a one-sided view?

The core theme I raised of some nursing homes disfavoring Medicaid residents is an issue of national significance for consumers of long-term care.

Q: What’s important to know about a spouse’s liability?   

Spouses are going to be liable for payment. The key for a spouse is to make sure they’ve done good estate and incapacity planning in advance, such as setting up trusts or powers of attorney. If a nursing home placement is precipitated by a health crisis related to cognitive impairment, they’ll need the ill patients’ consent for financial arrangements, which they can no longer get. The key is to plan in advance so that the one spouse can take over for the other one completely and protect their financial interests.

Q: What are a spouse’s financial issues?

There’s a federal spousal impoverishment law that allows them to keep some income and assets if a husband or wife is in a nursing home and goes on Medicaid. Know those rules and where the cutoffs are and how to get qualified.  For example, it may be required to take the ill spouse’s name off of certain assets. California has some good laws to protect spouses – that varies by state.

Q: What’s your impression of whether patients and families know what Medicare does – and does not – cover?

What most people don’t know is that Medicare discriminates by disease, meaning if you’ve got a heart condition Medicare’s going to pay for anything you need in terms of medicine and doctor visits. But if you have dementia, for which there is no treatment or cure, it’s just about care and meeting your daily needs, and Medicare doesn’t cover that.  A lot of seniors are under the impression, I’ve got Medicare so I’m covered by a nursing home benefit. But it’s a maximum 100 days, and after day 20 there can be expensive copays costing over $100 per day.

Q: Medicaid foots the bill for indigent people in need of nursing home care. Do people know that?

I think most people don’t even know the difference between Medicare and Medicaid. But those who do say, “I’m not poor. I don’t need Medicaid.” In fact, if you deplete all of your assets, Medicaid will cover your nursing home needs for the rest of your life. The problem is there are not enough nursing homes nationwide that want to provide care for the reimbursement they’ll get under joint state and federal Medicaid programs.  Nursing homes provide care for Medicaid recipients – about 70 percent of California residents in long-term care are partly funded by Medicaid – but this can place them at a disadvantage, because the program pays less for their care.

Q: What about people who can afford to pay privately for their own care?

For them, the issue is getting into a good facility. I like to tell a little story. I helped a woman sue a nursing home from which she had been illegally evicted. We had a settlement offer for many, many dollars. She didn’t like her new nursing home, because it was far away from her home, so she wanted to use the settlement money as a ticket of admission to buy into another place. A placement agent was looking at nursing homes for her and saying to candidates, “We’ve got all this money, and we will write the check over to you to cover however many months that will cover, and at that point she’ll go to her normal reimbursement.” Nobody would take her, because they knew that money would run out and she’d go on Medi-Cal (California’s Medicaid).

Private pay doesn’t really get you anywhere, unless you’ve got really big bucks.  But if you’ve got really big bucks and can pay $12,000-$15,000 per month, all those services are going to come to your home.

Q: This is complicated and also worrisome.  

Nursing homes are increasingly focused on short-term rehabilitation, and for people who need rehab, the system works for the most part. You get the care you need, and you get out of the nursing home and go back home and hopefully don’t go back.  But for people who need long-term care, the system doesn’t always work for them.  So what we see happening now is that the elderly are increasingly going into assisted living facilities. The classic nursing home patient who has Alzheimer’s and is only going to get worse is going to assisted living. If that isn’t enough care for them, then it’s all about Medicaid.

Assisted living has people there to take care of you, but the problem is that the presence of nurses is a lot less significant than in a nursing home – and today, that’s increasingly the option. I’m not saying it’s good or bad. It’s just the way it is because of the financing: nurses are expensive. The less skilled and lower-qualified or poorly trained workers in assisted living facilities provide a cheaper alternative.

Q: Can consumers look at the ownership structure in place at a nursing home they’re considering?

For the most part, no. It can be very difficult to obtain information on nursing homes that are part of a chain. The majority of U.S. nursing homes are privately owned and are not usually publicly traded companies. Studies show consistently across the nation that the quality of care is better in non-profits. Is it because they’re just filled with people who feel a higher calling to service? I doubt it. I think it’s more about priorities.

Q: What will you, Tony Chicotel, do if you one day need constant nursing care?

I will not go to a nursing home without my consent.  I have three young children, and they’re going to know this – and I’ve got my advance directive language to this effect. If I was diagnosed with, say, early-onset dementia, I’m in a better position than most people because I know my rights as a patient, and I know the really good providers in California.  I’d be happy in a good nursing home – and there are good ones out there – but I don’t think there are enough of them.  I will tell my three kids, “If you need to sell, my house and spend every penny on home care, just make sure I don’t end up in an institutional setting.”

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Excellent article!

Rosemary Boyle

Best article yet, and I have been reading your articles for years.


I work in two nursing homes part-time. One is privately owned and one is a large corporation. While I do not want to live in either institution, I notice the difference in the two facilities. This article is right on.

Matt McCann

This is why people should make affordable long-term care insurance part of their retirement plan. It provides the money for quality care at home or a facility. Plus case management helps find quality caregivers. Partnership benefits in most states provide additional dollar-for-dollar asset protection.


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