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How to pay for assisted living and nursing home care

Long-term care is the biggest expense most families never planned for, and Medicare does not cover it. Here is how care actually gets paid for, in the order most families encounter it.

Private pay (savings and income)

Most people start by paying out of pocket — Social Security, pensions, retirement savings, and investment income. Because assisted living runs about $6,200 and nursing homes $9,581+ a month, savings can deplete faster than families expect. The “will my money last?” calculator and the cost-of-care planner together show how many years of care your savings actually cover.

Before you assume private pay means paying full freight: care that is medically necessary is often deductible as a medical expense, and for a nursing-home stay that can include room and board — the whole bill — when a principal reason for being there is to get medical care. Assisted living and memory care can qualify too, through the “qualified long-term care services” route, if there’s a practitioner’s certification and a plan of care. A child paying a parent’s bills can sometimes deduct them even when the parent’s income is far too high to be claimed as a dependent. It is the largest single tax item in eldercare and the one families most often miss; the rules, the 7.5%-of-income floor, and the traps are in the cost guide.

Medicare (what it does NOT cover)

This is the most common and most expensive misunderstanding: Medicare does not pay for long-term custodial care — not in assisted living, and not for a long-term nursing-home stay. It covers only short, skilled, rehab-oriented stays — up to 100 days after a qualifying hospital admission. Plan as if Medicare will not be there for ongoing care, because it will not.

One correction worth knowing, because facilities still get it wrong: coverage does not require that the person keep improving. Under the Jimmo v. Sebelius settlement, Medicare covers skilled care needed to maintain someone’s condition or slow their decline — not just care that produces progress. What matters is whether skilled care is genuinely needed, not whether therapy notes show gains. If a stay is cut short because a parent “plateaued,” that is worth appealing. It is still short-term coverage either way — it does not become long-term care.

Medicaid

Medicaid is the largest payer of long-term care in the country. It covers nursing-home care for people who meet strict income and asset limits, and in many states it covers assisted living through a waiver program (often with a waiting list). Qualifying usually means spending down countable assets to a low limit — commonly about $2,000 for an individual. There is a five-year look-back on gifts and transfers, so last-minute moves can trigger a penalty. Our Medicaid spend-down estimator shows roughly how long private funds last before eligibility, and this guide explains the rules.

Long-term care insurance

If purchased years in advance, an LTC policy can pay a daily or monthly benefit toward care. Read the elimination period (the waiting days you pay yourself), the daily benefit cap, and whether it has inflation protection — an old policy’s cap may now cover only a fraction of real cost.

When market-rate care is simply out of reach

If the numbers don’t work — savings are modest, there’s no LTC policy, and the need isn’t yet nursing-home-level — the honest answer is often subsidized senior housing, not a $6,200-a-month community. Two federal programs fund independent apartments for adults 62+ with low income, with rent generally capped near 30% of what you earn: HUD Section 202 (mostly towns and cities) and USDA Section 515 (rural areas). Many have a service coordinator on site, and most have waiting lists — so apply early and to several. Browse every property we can find by state in our affordable senior housing directory. Pair it with home-based help (a few aide hours a week) and it covers a lot of families the private market prices out.

Too much for Medicaid, too little for private pay

Now the part this page has been skipping, and it is the most common situation in American eldercare: a parent whose income is a few hundred dollars a month over the Medicaid line and a few thousand under the cost of care. Not poor enough to qualify, not comfortable enough to pay. Every option above is written for one side of that line or the other, and nothing is written for the middle. It has no name, no program, and no phone number — so people conclude they’ve misunderstood something. They haven’t. The gap is real and it is structural.

Start with an honest correction to the section right above this one: subsidized housing is generally capped around 50% of area median income, and often targets 30%. If you’re over the Medicaid line, there is a decent chance you’re over that too. We shouldn’t point you at subsidized housing as “the honest answer” without saying that it may also be closed to you. Check the number before you pin hope on it.

What actually exists for the middle, in rough order of how often it works:

The unsatisfying truth: for some families in the middle, the plan is spending down to Medicaid over a couple of years, and doing it deliberately — with an elder-law attorney, protecting what the rules let you protect, especially if there’s a spouse at home — rather than by accident. That is not a failure. It is what the program is for, and arriving there on purpose costs far less than arriving there exhausted.

Veterans benefits

Wartime veterans and surviving spouses may qualify for the VA Aid & Attendance pension, an added monthly benefit for those who need help with daily activities. It is underused because families don’t know it exists. Start at va.gov or an accredited VA benefits counselor (free — never pay for this).

Home equity

For a spouse remaining at home, or to bridge to Medicaid, home equity — a sale, a line of credit, or a reverse mortgage — is sometimes used. Each has real trade-offs and tax and Medicaid implications; talk to an elder-law attorney before tapping it.

This guide is general information, not medical, legal, or financial advice. Rules vary by state and change over time. For personalized, unbiased help, your Area Agency on Aging and your state’s Long-Term Care Ombudsman are free.