The most expensive line item most families never budget for is long-term care, and its price keeps climbing. The national median cost of a private room in a nursing home has pushed past $10,000 a month, or more than $120,000 a year, a figure that can drain a lifetime of savings in a few years. Medicare does not cover extended custodial stays, which leaves two options for most people: pay out of pocket until the money is nearly gone, or qualify for Medicaid by spending down assets to almost nothing. The rules that govern that transition are unforgiving, and they surprise families at the worst possible moment.
Why a private room now costs more than $120,000 a year
Nursing-home prices have risen faster than general inflation for years, driven by labor shortages, higher wages for aides and nurses, and steady demand from an aging population. A private room commands a premium over a shared, semi-private one, and in high-cost metropolitan areas the monthly bill runs well above the national median.
The most-cited benchmark comes from an annual industry survey that contacts thousands of facilities across the country. According to the Genworth and CareScout Cost of Care Survey, the median private nursing-home room recently reached roughly $10,646 a month, an increase of about 9 percent in a single year. That is the median, meaning half of all facilities charge more. The survey measures private-pay rates rather than the discounted amounts Medicare or Medicaid reimburse, which is exactly the price a family writing its own checks will face.
Crucially, standard Medicare does not pay for this. It covers a limited stretch of skilled nursing after a qualifying hospital stay, tapering off after 100 days, but it does not fund the ongoing custodial care, help with bathing, dressing, and eating, that defines a long-term nursing-home stay. Once Medicare’s short window closes, the full private-pay rate lands on the resident.
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The $2,000 line that Medicaid draws
Medicaid is the program that ultimately pays for most long nursing-home stays in the United States, but it is means-tested, designed for people with very little. To qualify, an applicant generally must reduce countable assets to a strict ceiling. In most states that limit is $2,000 in countable resources for a single applicant, a threshold that traces back to the $2,000 individual resource limit used by the Supplemental Security Income program, which many states adopt for Medicaid long-term-care eligibility.
Not everything counts toward that $2,000. A primary home up to an equity limit, one vehicle, personal belongings, and certain prepaid burial arrangements are typically excluded, while bank accounts, investments, and second properties are counted. Reaching the ceiling is called a “spend-down,” and it means using savings on care until the balance falls low enough to qualify. Medicaid’s long-term services and supports cover nursing-facility care once an applicant meets both the financial and the medical-need tests.
Married couples face a separate set of rules meant to prevent the healthy spouse from being left destitute. Spousal-impoverishment protections allow the spouse who remains at home to keep a portion of the couple’s assets and a minimum monthly income, amounts set within federal ranges and adjusted annually. Those protections soften the blow, but they still require careful accounting, and the asset limit for the spouse entering care remains near that $2,000 floor.
The five-year look-back that traps the unprepared
Families often assume they can simply give money to children to qualify, but Medicaid guards against exactly that. When someone applies, the program reviews financial records going back five years for gifts or transfers made for less than fair value. Assets moved during that look-back period trigger a penalty, a stretch of months during which Medicaid will not pay for care, calculated from the amount transferred divided by the average private-pay cost in the state.
That penalty can be devastating precisely because it lands when a person is already in a facility with no money left. A gift made three years before applying can impose months of ineligibility that no one has the cash to cover, forcing the family or the facility to absorb the cost. This is why elder-law attorneys stress that legitimate planning has to happen well before the look-back window, not in a crisis.
The larger lesson in the numbers is a squeeze with no easy exit. A private room above $10,000 a month can exhaust a mid-six-figure nest egg in roughly three to five years, and the reward for spending it down is a program that permits only $2,000 in savings to remain. Between a cost most cannot sustain and an eligibility floor that leaves almost nothing, long-term care remains the single largest unhedged financial risk many older Americans carry, and the one they are least likely to have planned for.
This article was researched and drafted with the assistance of AI and reviewed by The Money Overview editorial team.
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