The Broken Healthcare System

The Plight of Nursing Homes

A few weeks ago an article about a financial crisis in the Nursing home Industry ran in the Post Gazette. Recently, I discussed this crisis on my radio show.  The article exposed a serious financial shortfall in dollars from the state subsidies for Nursing Home Medicaid patients. Nursing Home owners and administrators were interviewed about the financial difficulties they are facing due to the costs of care being greater than the state’s contributions. Some owners were concerned about being forced to shut down. Legislators responded by putting provisions in the budget to increase the state contribution for Medicaid patients. While the provisions may help to alleviate the financial loss, the system remains fragile if not broken. 

Currently, around 65% of nursing home residents in Pennsylvania are on Medicaid, because Medicare doesn’t pay for custodial long term care in a nursing home. Given the statistics, that one in three seniors is going to die with dementia, it means they will likely need care which is provided in a nursing home. The average cost of a skilled nursing facility in Pennsylvania is almost $15,000 a month. Long term care in a skilled nursing facility is probably the single biggest medical expense that seniors will have, and a significant percentage of the population cannot afford that.

Paying for Long Term Care

There are four different ways to pay for skilled care. One way is to pay privately. Secondly, if it is only a short term stay for a few weeks, Medicare may pay. The third option is using long term care insurance, which is costly. The fourth option is to go broke in order to become eligible for Medicaid to pay for care. With so many nursing home residents being on Medicaid, the financial crisis facing nursing homes is understandable. 

Medicare only pays for Acute Care

It hardly seems fair that a senior who has a heart attack, and receives open heart surgery to save him, will be provided for with Medicare benefits. Medicare pays for this acute care including surgery and hospitalization for the heart attack patient. He may go on to live another 20 years at home, and he won’t need to pay for his care. However, if a senior has a severe stroke, he still goes to the hospital and is taken care of, but he will need long term care in the nursing home for the rest of his life. The stroke patient’s care in hospital is also going to cost Medicare $400,000, as it did for the heart attack patient. Unfortunately, Medicare which seniors rely on for healthcare in their retirement, only pays for 20 days of rehabilitation in a nursing home. Medicare may pay up to 100 days with heavy co-payments, after which the senior has to pay $460 per day, for as long as he lives, or until he runs out of money. Once he runs out of money, Medicaid starts paying for the nursing home.

The Cause of the Financial Crunch

This problem is largely attributable to the Covid crisis, with increased deaths of the elderly and the staff who worked in nursing homes contracting Covid. Costs associated with covid care and protective equipment became costly over time.  Many healthcare workers did not return to the industry after Covid, causing a staffing shortage and overwhelmed facilities.  Care givers who stayed are seeking higher compensation in light of the change in work conditions. 

If you consider the wave of baby-boomers who are now seniors, many of them are needing long term care. With 65% of them on Medicaid, it is a crisis that needs to be resolved. If financially struggling nursing homes are forced to close, who will care for the increased aging population that will soon be nursing home bound? Finding adequate facilities might become a challenge. 

A Big Plus

Fortunately, this plight has been recognized, and $515 million has been offered to long term care facilities. This money will go towards alleviating this financial crunch. The nursing homes are receiving $1000 more per month, in reimbursement for each senior who is on Medicaid. This rate is probably not as much as the private paying rate, but it is a significant increase in revenue. This increase will help the nursing homes cover costs and provide the care, and allow the nursing homes to hire and train good people to take care of the seniors.


This increase is a great boost for long term care facilities, but the issue of seniors going broke to be eligible for Medicaid, has not been resolved. Additionally, the amount of money seniors are allowed to keep has not been increased. 

If a single person, Joe goes into a nursing home, he is only allowed to keep $8000. If Joe has a house, and $200 000 in savings, he has to spend that money down. He would have to write checks every month for $15,000 to the nursing home. Joe needs to do this until he is left with about $8,000, and only then he is eligible for Medicaid to pay for his care. However, all of Joe’s income must go to the nursing home every month. This means he can only keep $45 per month. Joe’s allocation of money is not being increased, despite the rising costs for basic provisions. Having only $1.50 per day for his personal needs, is not much at all to enjoy retirement. 

Nobody Wants to Go Broke in a Nursing Home

While Joe still owns a house, he would not be able to afford the maintenance costs for the house for very long. Having only $8,000 is not enough to cover these costs. If Joe sells his house it would yield $150,000 cash. Given Joe’s $8,000 allowance, he cannot keep $150,000 cash, because he risks losing his Medicaid benefits. He would have to spend that money down to once again becomes eligible for Medicaid. He can only keep $8,000. Essentially Joe would lose the house and his savings to long term care costs, which is a great shame. Joe didn’t want to go broke in a nursing home. Sadly, this is an issue many seniors face, and it needs to be resolved.

You Can Protect Assets

Fortunately, there are ways to protect assets. The law allows you to take legal steps with Trusts and different techniques, to protect assets. Long term care costs are the biggest issue facing middle-class Americans in retirement. Find out more when you come to one of our Estate Planning and Elder Law asset protection workshops. Register for a workshop HERE.

To listen to the Life & Legacy Podcast relating to this article, click HERE or Watch the Video on YouTube.