Guide
How to Pay for Elder Care: Medicare, Medicaid & More
With nursing home costs exceeding $9,500/month nationally, understanding your funding options early — before a crisis — can protect both the person receiving care and the family supporting them.
How do families pay for elder care?
Most families are surprised to learn how little Medicare covers for long-term care. The common assumption — that Medicare will "take care of it" — leads to financial shocks when a parent or spouse needs care for months or years rather than weeks. Understanding each funding source, and its limits, before care is needed is one of the highest-value planning moves a family can make.
Medicare: Limited Coverage, Often Misunderstood
Medicare is the federal health insurance program for people 65 and older. It covers many medical expenses, but its coverage of long-term nursing home care is intentionally narrow.
What Medicare Covers
- Skilled nursing facility (SNF) care — but only after a qualifying inpatient hospital stay of at least 3 consecutive days
- Days 1–20: Medicare covers 100% of the approved daily rate
- Days 21–100: Medicare covers care minus a daily copay (approximately $200/day in 2025)
- After day 100: Medicare pays nothing
- Home health care — intermittent skilled nursing or therapy after a hospital stay, if you are homebound and care is medically necessary
- Hospice care — for those with a terminal diagnosis and a life expectancy of 6 months or less
What Medicare Does Not Cover
- Long-term custodial care in a nursing home (help with bathing, dressing, eating)
- Assisted living costs of any kind
- Home care that is not medically necessary or post-acute
- Memory care facilities
- Adult day services (in most cases)
The bottom line: Medicare is not a long-term care solution. It may cover a short rehabilitation stay after a hospital event, but it was never designed to fund years of ongoing care.
Medicaid: The Primary Payer — With Strict Rules
Medicaid is the joint federal-state program that covers health and long-term care costs for people with low income and limited assets. Despite its complexity, Medicaid pays for more nursing home care than any other source in the United States.
How Medicaid Eligibility Works
Eligibility requires meeting both income limits and asset limits, which vary significantly by state. In many states, a nursing home resident must spend nearly all of their income on care costs, with only a small personal needs allowance retained ($30–$75/month in most states).
Asset limits are also strict. Most states allow an individual to keep $2,000 in countable assets (the primary home, one vehicle, and personal belongings are typically exempt). A spouse remaining in the community (the "community spouse") may retain more — often up to approximately $157,000 in 2025 — under "spousal impoverishment" protections.
Spend-Down and Planning
Many families must "spend down" assets — paying for care until savings are exhausted — before Medicaid kicks in. However, Medicaid has a look-back period (typically 5 years) during which asset transfers are reviewed. Gifts or transfers made within this window can trigger penalties that delay Medicaid eligibility.
An elder law attorney can help structure assets lawfully before care is needed. This is a specialized field — general estate planning attorneys may not be familiar with Medicaid rules.
Medicaid and Assisted Living
Medicaid generally does not cover assisted living costs in most states. However, many states offer Home and Community-Based Services (HCBS) waivers that can fund assisted living or home care for people who would otherwise qualify for nursing home-level care. Waiver programs often have waiting lists. Check our state pages for notes on state-specific Medicaid programs.
Long-Term Care Insurance
Long-term care (LTC) insurance is designed specifically to cover the care costs that Medicare does not. It can cover nursing home, assisted living, memory care, home care, and adult day services.
How Policies Work
- Daily/monthly benefit: A maximum payout per day or month (e.g., $200/day)
- Benefit period: How long benefits last (e.g., 2 years, 3 years, or unlimited)
- Elimination period: A waiting period before benefits begin, typically 30–90 days
- Inflation protection: Riders that increase benefits over time to keep pace with care cost inflation
Is LTC Insurance Worth It?
Premiums are lowest when purchased in your mid-50s, before health conditions make you uninsurable. By age 65, premiums may be 2–3x higher. The risk of needing care is significant: roughly 70% of people who reach 65 will need some form of long-term care at some point.
Hybrid life/LTC policies have become popular as an alternative — these combine life insurance with a long-term care benefit rider, so the premium is not "wasted" if care is never needed.
Veterans Benefits: VA Aid and Attendance
The VA Aid and Attendance (A&A) benefit is a pension supplement available to wartime veterans and their surviving spouses who need help with daily activities. It is one of the most underutilized elder care benefits in the United States.
2025 Maximum Monthly Rates
| Recipient | Max Monthly Benefit (2025) |
|---|---|
| Veteran with a spouse | ~$2,300 |
| Single veteran | ~$1,534 |
| Surviving spouse | ~$985 |
Source: U.S. Department of Veterans Affairs 2025. Approximate figures; exact rates are adjusted annually U.S. Department of Veterans Affairs 2025. Approximate figures; exact rates are adjusted annually
Compiled by the " research team.
Eligibility Requirements
- Must have served at least 90 days of active duty, with at least one day during a wartime period
- Must need help with at least 2 ADLs, or be blind, or be in a nursing home due to mental or physical incapacity
- Must meet income and net worth limits (net worth limit: approximately $155,000 in 2025, excluding primary home and vehicle)
- Benefits can be used for nursing home, assisted living, memory care, or home care costs
The application process can take 3–12 months. A VA-accredited claims agent or elder law attorney familiar with VA benefits can help navigate the process.
Home Equity Options
For homeowners, the primary residence often represents their largest asset. Several strategies can convert home equity into care funding.
Reverse Mortgage (HECM)
A Home Equity Conversion Mortgage (HECM) allows homeowners 62 and older to borrow against their home equity without monthly mortgage payments or selling the home. Proceeds can fund home care, allowing someone to age in place longer. The loan balance is repaid when the home is sold or the owner permanently leaves.
Key considerations: the homeowner must continue paying property taxes, insurance, and maintenance. A HECM is not appropriate if the person needs a higher level of care that requires leaving the home.
Selling the Home
For families where the person is moving to assisted living or a nursing home and will not return home, selling the property and using the proceeds to fund care is often the most straightforward strategy. A primary home is usually exempt from Medicaid asset calculations while the person is living there (or intends to return), but that exemption may end once it becomes clear the person will not return.
Putting It Together: A Payment Strategy Framework
Most families end up using a combination of sources. A common sequence:
- Medicare covers the first 100 days of skilled nursing after a hospital stay (limited)
- Long-term care insurance kicks in after the elimination period (if a policy exists)
- Veterans benefits supplement income for eligible veterans and surviving spouses
- Personal savings and investments fund ongoing care until Medicaid eligibility is reached
- Home equity is liquidated if needed to fund care or qualify for Medicaid
- Medicaid covers ongoing nursing home costs once assets are below the threshold
Planning ahead — ideally 3–5 years before anticipated need — gives families the most options. An elder law attorney, a CERTIFIED FINANCIAL PLANNER (CFP) with long-term care expertise, and a geriatric care manager can each play important roles.
Understand Costs in Your State
Medicaid rules, care costs, and facility availability vary dramatically by state. See state-specific data including nursing home costs and CMS quality ratings.
View State Data →What do families ask most?
Does Medicare cover nursing home costs? +
Medicare covers skilled nursing facility care for up to 100 days after a qualifying 3-day hospital stay. Days 1–20 are fully covered. Days 21–100 require a daily copay (approximately $200/day in 2025). After day 100, Medicare pays nothing. Medicare does not cover long-term custodial care or assisted living.
Does Medicaid pay for nursing homes? +
Yes. Medicaid is the primary payer for long-term nursing home care nationwide. Eligibility requires meeting income and asset limits that vary by state. Many people must spend down their savings before qualifying. Medicaid generally does not cover assisted living, though some state HCBS waiver programs may.
What does long-term care insurance cover? +
LTC insurance typically covers nursing home, assisted living, memory care, and often home care and adult day services. Benefits are expressed as a daily or monthly maximum with a defined benefit period. An elimination period (waiting period of 30–90 days) applies before benefits begin. Purchasing in your 50s is generally most cost-effective.
What is VA Aid and Attendance? +
VA Aid and Attendance is a pension benefit for wartime veterans and surviving spouses who need help with daily activities. It pays up to approximately $2,300/month for a veteran with a spouse, $1,534/month for a single veteran, or $985/month for a surviving spouse (2025 rates). It can fund nursing home, assisted living, or home care costs.
Can I use home equity to pay for elder care? +
Yes. A reverse mortgage (HECM) lets homeowners 62+ convert equity to income without selling or moving, which can fund home care. A HELOC is another option if the person qualifies. Selling the home and using proceeds is common when a permanent move to a care facility is already planned. Medicaid rules around home equity vary by state.
