Understanding payment options for assisted living, memory care, nursing homes, and home care. Learn about government programs, insurance, and alternative funding sources available in 2026.
The cost of senior care varies widely depending on the type of care needed and geographic location. As of 2026, assisted living averages $5,900 per month, while nursing home care costs approximately $10,965 monthly for a private room. Home care agencies charge an average of $30 per hour for personal care services.
Most families use a combination of funding sources to cover these expenses. This guide covers government programs, insurance options, and alternative payment methods to help you create a comprehensive financial plan.
Important: Start researching funding options as early as possible. Many programs have application processes that take 30-90 days, and some benefits require advance planning.
| Funding Source | What It Covers | Eligibility | Best For |
|---|---|---|---|
| Medicaid | Nursing home care (100%), some assisted living services | Income under $2,982/month, assets under $2,000 | Nursing home residents, HCBS waiver recipients |
| VA Aid & Attendance | Up to $2,478/month (veteran), $2,874/month (married veteran) | Wartime veterans 65+, assets under $163,699 | Veterans needing ADL assistance |
| Medicare | Skilled nursing up to 100 days post-hospitalization | 3+ day qualifying hospital stay | Short-term rehabilitation after hospitalization |
| Long-Term Care Insurance | Nursing homes, assisted living, home care (policy-dependent) | Must purchase before care is needed | Pre-planned protection for future care needs |
| Personal Savings | All care types | N/A | Supplementing other sources, private pay |
Medicaid is the largest payer of long-term care in the United States, funding approximately 62% of nursing home residents. Unlike Medicare, Medicaid covers custodial care for eligible individuals with limited income and assets.
Medicaid pays 100% of costs in Medicaid-certified nursing homes once eligibility is established. This includes room, board, 24-hour care, and all medical services provided at the facility.
Most states offer Home and Community Based Services (HCBS) Waivers that cover personal care services in assisted living facilities. However, Medicaid does not cover room and board, which typically represents 60-70% of assisted living costs.
HCBS waivers also cover in-home personal care, skilled nursing visits, and supportive services to help seniors remain in their homes rather than move to institutional care.
Medicaid reviews all asset transfers made in the 60 months before application. Gifts or sales below fair market value during this period can result in a penalty period of Medicaid ineligibility. Consult an elder law attorney before making significant financial transfers.
Note: Medicaid programs vary significantly by state. Contact your state Medicaid office or consult with an elder law attorney for specific guidance based on your location and circumstances.
The VA Aid and Attendance benefit provides additional monthly income to wartime veterans and their surviving spouses who need help with activities of daily living. This benefit can be used to pay for assisted living, memory care, nursing home care, or in-home care services.
The VA instituted a 36-month look-back period for assets. Gifts or transfers of assets within 36 months of applying may result in a penalty period or disqualification.
Applications can be submitted online at va.gov, by mail, or through a Veterans Service Organization (VSO) that can provide free assistance. Required documents include:
Processing time typically ranges from 3-6 months, though some applications take longer. Benefits are paid retroactively to the application date once approved.
Medicare provides limited coverage for skilled nursing care following a hospital stay, but it does not cover long-term custodial care in nursing homes or assisted living facilities.
While Medicare does not cover long-term residential care costs, it continues to pay for all approved services under Parts A and B—such as doctor visits, hospital stays, medical procedures, and preventive screenings—regardless of where you receive care.
Long-term care insurance is designed to cover services that Medicare and standard health insurance don't, including assisted living, nursing home care, and in-home care. Policies must be purchased before care is needed.
Long-term care insurance premiums are tax-deductible as medical expenses if you itemize deductions. The amount you can deduct depends on your age:
Important: Long-term care insurance must be purchased while you're still healthy. Most insurers require medical underwriting and will deny coverage or charge significantly higher premiums for pre-existing conditions.
Beyond government programs and insurance, several alternative financing options can help pay for senior care. Each option has specific requirements and considerations.
A reverse mortgage allows homeowners age 62 or older to convert home equity into cash without selling the home. The loan doesn't need to be repaid until the homeowner moves, sells the home, or passes away.
Medicaid Note: Reverse mortgage payments don't count toward income limits, but unspent funds count toward asset limits the following month. Spend payments within the same month received to avoid affecting Medicaid eligibility.
Existing life insurance policies can be converted to immediate cash to pay for senior care through two primary methods: accelerated death benefits and viatical settlements.
Many life insurance policies include an ADB rider that allows policyholders to access a portion of their death benefit while still living if they meet certain conditions.
A viatical settlement involves selling your life insurance policy to a third party in exchange for a lump sum payment (less than the full death benefit).
Money received from viatical settlements is tax-free if you have a life expectancy of two years or less or are chronically ill, and the viatical company is licensed in your state.
Bridge loans are short-term financing solutions (6-12 months) designed to cover immediate senior care costs while waiting for other funding sources to become available.
Specialized lenders: ElderLife Financial and Second Act Financial Services offer bridge loans specifically designed for senior living expenses.
Several tax benefits can help offset senior care expenses. These deductions and credits can provide significant savings when caring for elderly parents or paying for your own care.
Deduct unreimbursed medical expenses exceeding 7.5% of your adjusted gross income (AGI) if you itemize.
Claim 20-50% of qualified care expenses (based on income) if you paid for care while you worked.
Claim a $500 tax credit if you claim an elderly parent as a dependent.
New deduction under the One Big Beautiful Bill Act provides additional tax relief for seniors.
If offered through your employer, you can set aside up to $7,500 in pre-tax dollars for dependent care expenses, saving approximately $3,000 in taxes annually.
Note: You cannot claim both the Dependent Care FSA and the Child and Dependent Care Credit for the same expenses.
Most families use multiple funding sources to pay for senior care. This approach helps bridge coverage gaps and makes care more affordable over time.
Research the cost of care in your area for the specific type of care needed. Get written quotes from 3-5 facilities or agencies. Factor in potential cost increases over time (typically 3-5% annually).
List all potential funding sources:
Review income and asset requirements for Medicaid, VA benefits, and any state-specific programs. Consider whether Medicaid planning strategies could establish eligibility while protecting assets.
Map out how you'll cover costs during different phases:
Start applications 90-120 days before care begins if possible. Some programs have long processing times and you want benefits in place when needed.
Reassess your financial plan every 6-12 months. Care needs change, benefits may increase or decrease, and new funding options may become available.
Consider consulting with these professionals for comprehensive planning:
Costs vary by care type and location. National averages: in-home care $30/hour, assisted living $5,900/month, memory care $7,200/month, nursing home private room $10,965/month. Urban areas typically cost 20-40% more than rural areas.
Yes, but you cannot receive payments from both programs for the same services. VA Aid & Attendance benefits are reduced dollar-for-dollar by the amount of medical expenses covered by Medicaid. However, you can use VA benefits for services not covered by Medicaid, such as assisted living room and board.
Medicaid applications typically take 45-90 days to process, though some states process faster. Emergency applications for nursing home residents can be expedited. Incomplete applications or complex financial situations may take longer.
Long-term care insurance makes the most sense if purchased in your 50s or early 60s while premiums are lower and you're still healthy. It's worth considering if: you have assets to protect ($100,000+), you can afford premiums without financial strain, and you don't have enough assets to easily self-fund 3-5 years of care.
Your primary residence is typically exempt from Medicaid's asset limits while you're alive, up to a certain equity value ($713,000 in most states as of 2026). However, Medicaid may place a lien on the home to recover costs after death through estate recovery. There are exceptions if a spouse, disabled child, or certain other family members live in the home.
Most assisted living and nursing home facilities accept Medicaid after private pay residents spend down their assets to Medicaid eligibility levels. Facilities cannot evict residents who become Medicaid-eligible, though Medicaid-certified facilities may limit the number of Medicaid beds available. It's important to choose a facility that accepts Medicaid from the start.
In most states, no. Only about 30 states have "filial responsibility" laws that could theoretically require adult children to financially support parents, but these laws are rarely enforced. However, if you sign a contract or financial agreement with a care facility on behalf of your parent, you may be personally liable for those charges.
Navigating senior care financing can be complex. Our team can help you understand your options, identify eligible benefits, and create a comprehensive payment plan.
- Medicaid Eligibility: 2026 Income, Asset & Care Requirements
- Medicaid and Assisted Living: Eligibility, Benefits & State Rules
- VA Aid & Attendance Pension: 2026 Benefits & Eligibility Criteria
- VA Aid and Attendance Benefits and Housebound Allowance | Veterans Affairs
- How Much Does Long-Term Care Insurance Cost in 2026?
- How Can I Pay for Nursing Home Care? | Medicare
- Does Medicare Pay for Assisted Living? | NCOA
- Reverse Mortgages and Paying for Elder Care - Pros & Cons
- Accelerated Death Benefits vs. Viatical Settlements for Senior Care
- Elderlife Financial Senior Living Bridge Loans | Pros & Cons