Long-Term Care Finance
How to pay for long-term care
Updated April 1, 2026 · Editorial policy
Long-term care is the most expensive risk most families never plan for. The average 65-year-old has about a 70% chance of needing some long-term care. A semi-private nursing home room runs $100,000+ a year in many states, and home care isn't far behind. Knowing the funding paths — and starting them early — is the difference between protecting an inheritance and spending it down to qualify for Medicaid.
Personal savings (self-pay)
The default funding source. Most families spend down savings, retirement accounts, and home equity before they qualify for any other program. Selling the parent's home is the single most common funding event for assisted living.
Reverse mortgages, cash-value life insurance, and HSAs (for qualified medical expenses) can supplement self-pay.
Long-term care insurance
LTC insurance pays a daily benefit for nursing homes, assisted living, and home care. It is most affordable when bought between ages 55 and 65 in good health. Modern hybrid policies (life insurance + LTC rider) have replaced most stand-alone LTC policies because they pay a death benefit if you never use the LTC piece.
Key terms: daily benefit (e.g., $200/day), elimination period (waiting period before benefits start), benefit period (how many years of coverage), and inflation rider (3-5% compound is the gold standard).
Medicare and Medicare Advantage
Medicare covers up to 100 days of skilled nursing care per benefit period after a qualifying inpatient hospital stay of at least 3 days. Days 1–20 are fully covered; days 21–100 have a daily co-pay. After day 100 there is no Medicare coverage.
Medicare Advantage plans sometimes offer limited supplemental benefits (in-home aide visits, meal delivery), but they do not pay for long-term custodial care.
Medicaid
Medicaid is the largest payer of nursing home care in the U.S. To qualify, the senior must meet the state's income and asset limits and a clinical 'nursing home level of care' standard. Most states allow about $2,000 in countable assets for a single applicant; the home, one car, and personal effects are usually exempt.
Medicaid has a 5-year look-back period: any asset transferred for less than fair market value within 5 years of applying triggers a penalty period of ineligibility. This is why Medicaid planning starts 5+ years before you think you'll need it.
Many states also have Medicaid HCBS waivers that pay for assisted living and in-home care, but those have waiting lists and benefit caps.
VA Aid & Attendance
Wartime veterans (and surviving spouses) who need help with activities of daily living may qualify for the VA's Aid & Attendance pension. In 2025 the maximum benefit is roughly $2,300/month for a single veteran and $2,700/month for a married veteran. Income and asset limits apply.
Aid & Attendance can be combined with Medicaid HCBS waivers and personal funds to cover assisted living.
Other sources
Other partial funding sources include: state non-Medicaid programs (PACE, state-funded HCBS), local Area Agency on Aging programs, Older Americans Act services, life insurance accelerated death benefits, viatical settlements, and family caregiver pay programs (some Medicaid waivers and the VA pay family caregivers).
Sources
- Medicare.gov — Skilled Nursing Facility care
- Medicaid.gov — Long-term services
- VA — Aid & Attendance
- AARP — Long-term care insurance
Sandwich is a directory and information site. This page is not legal, medical, or financial advice. For decisions that affect your family, consult a licensed professional in your state.
Frequently asked questions
Does Medicare pay for nursing home care?
Only short-term skilled care (up to 100 days after a qualifying hospital stay). Medicare does not pay for long-term custodial care.
Will I have to give up my house to qualify for Medicaid?
Not while you live in it. The home is usually exempt while a Medicaid recipient lives there, but the state can recover the value from the estate after death (Medicaid Estate Recovery). A community spouse can continue to live in the home.
When should I buy long-term care insurance?
Most people buy in their late 50s or early 60s. Premiums rise sharply with age, and underwriting gets stricter after 65 or after major health events.
What is the Medicaid look-back period?
Most states look back 5 years (60 months) at any uncompensated transfers — gifts, transfers below fair market value — when an applicant applies for Medicaid long-term care. Transfers within the look-back create a penalty period of Medicaid ineligibility.
Can family caregivers be paid?
Sometimes. Many Medicaid HCBS waivers allow self-direction where the recipient can hire a family member (often not a spouse). The VA's PCAFC program and some state programs also pay family caregivers.