Families paying privately for nursing-home care often assume that once the money runs out, the resident’s placement is at risk. Federal law says otherwise: a nursing home that participates in Medicaid cannot discharge or evict a resident simply because that resident has spent down their savings and shifted from private pay onto Medicaid coverage. The protection is not new and it is not tied to any current legislation or deadline — it is a standing federal nursing-home regulation that applies to any certified facility, in every state, today.
The fear is understandable given how nursing-home costs actually work. A private-pay resident can spend down six figures in savings within a few years at a typical facility, and by the time Medicaid eligibility is approved, many families have already braced for a call about moving their relative somewhere else. That call is not something federal law permits a certified facility to make on the basis of the payment switch alone.
The Six Grounds That Are the Only Legal Reasons to Discharge a Resident
Under federal nursing-home regulations at 42 C.F.R. § 483.15(c), a certified facility may discharge or transfer a resident for only six specific reasons: the facility can no longer meet the resident’s needs, the resident’s health has improved enough that care is no longer required, the resident’s presence endangers the safety of others in the facility, the resident’s presence creates a health hazard for others, the resident has failed to pay for care after reasonable notice, or the facility is closing. Running out of personal funds and moving onto Medicaid is not one of the six grounds.
The list is exhaustive, not illustrative — a facility cannot invent a seventh reason, and “the resident is now on Medicaid, which reimburses at a lower rate than private pay” is not, on its own, a lawful basis for discharge under any of the six categories. Facilities that participate in Medicaid have agreed, as a condition of certification, to accept the program’s reimbursement rate for covered residents, which is part of why the regulation closes off payment-switching as a workaround.
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Why Switching From Private Pay to Medicaid Isn’t “Nonpayment”
Nonpayment is a legitimate discharge ground under the regulation, but only in a narrow circumstance: a resident who, after reasonable notice, has failed to pay for a stay that Medicare or Medicaid doesn’t cover, or whose claim for coverage has been denied and who then refuses to pay out of pocket. A resident who has legitimately spent down assets and been approved for Medicaid is, by definition, being paid for by the program — the facility is simply being reimbursed by Medicaid instead of by the resident directly, which is not the same thing as nonpayment under the rule.
What Happens While a Medicaid Application Is Still Pending
The protection extends to the period before a Medicaid application is even approved. A resident who has applied for Medicaid coverage and is waiting on a decision generally cannot be forced out of the facility for nonpayment while that application is pending, since the facility does not yet know whether the stay will ultimately be covered. That matters in practice because Medicaid long-term-care applications, which require documenting the spend-down itself, can take weeks or months to process, and families are often surprised that a discharge threat during that waiting period is not something the facility is entitled to act on.
Documenting the spend-down is often the slowest part of the process, since a state Medicaid agency typically requires several years of financial records to confirm that assets were spent on the resident’s own care and not transferred away in a way that would trigger a penalty period. A family that starts gathering those records early, well before savings are actually exhausted, tends to move through the approval process with far less exposure to a facility’s payment questions along the way.
Appeal Rights Keep a Resident’s Bed in Place
If a facility does issue a discharge notice and the resident appeals it, federal regulation bars the facility from carrying out the transfer or discharge while that appeal is pending, with a narrow exception if keeping the resident in place would endanger their own health or the safety of others. A discharge notice itself has to meet specific requirements — timing, content, and to whom it is delivered — and a resident or their representative who believes a notice doesn’t meet those requirements, or rests on a reason outside the six permitted grounds, has the right to challenge it before any move takes place.
Responding to a Discharge Notice After a Medicaid Spend-Down
Knowing the discharge protection exists is different from having the paperwork trail to invoke it — a family fielding a discharge threat needs the Medicaid approval or pending-application record close at hand, along with a clear sense of what the renewal process ahead actually requires so coverage doesn’t lapse later and reopen the same fight.
The SNAP & Medicaid Renewal Organizer is a 13-page organizer with 51 state packs, a renewal document checklist, and a renewal and reporting calendar.
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This article was written with the assistance of AI tools and reviewed by The Financial Wire editorial team.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
