By Daily Mail (U.S.) | Created at 2026-08-01 12:27:19 | Updated at 2026-08-02 14:20:19
1 day ago
For many American families, the cost of long-term care can come as a huge financial shock.
Across the US, nursing home costs sit routinely between $8,000 and $12,000 a month - meaning families can burn through life savings in just a few years.
A private room in a nursing home can run tenants tens of thousands of dollars each year, leaving many older adults worried they may have to drain their savings - or even sell their home - to afford care.
Consulting firm Milliman recently published its 2025 Long-Term Care Index, calculating that - on average - 65-year-olds should set aside $135,000 for their future high-intensity long-term care needs.
Lisa, a Missouri-born woman, saw the difficulties of the system firsthand when her mother became reliant on perpetual professional care. Her family was worried about affording the expenses that come with assisted living facilities.
But there is one government program that often steps in when people can no longer pay on their own: Medicaid.
While it is commonly associated with low-income healthcare, Medicaid is actually the largest payer of long-term care in the US, covering millions of nursing home residents.
Qualifying for the program, however, can be complicated. Applicants must meet strict financial and medical rules, and the process often requires detailed paperwork and months of review.
Lisa, who grew up in a small town in western Missouri, saw firsthand how quickly dementia care costs can escalate after her mother Marjorie was diagnosed with the condition
The difference between Medicaid and Medicare
Medicare is federally funded health insurance mainly for people 65 years and older, with some disability-based exceptions. Because it is a federal program, patients receive the same coverage no matter what state they live in.
Medicaid, on the other hand, is jointly funded by federal and state governments. It helps cover medical costs for some people with limited income and resources, but eligibility and benefits vary between states.
Many people wrongly assume that Medicare will cover long-term nursing home care because of the age group it encompasses.
In reality, Medicare typically pays only for short rehabilitation stays after a hospital visit - usually capped at around 100 days.
For ongoing nursing home care, most Americans must either pay out of pocket, rely on long-term care insurance if they have it, or eventually qualify for Medicaid.
Because long-term care costs can quickly exhaust savings, many people - including Lisa and her family - ultimately turn to Medicaid for help.
Financial rules applicants must meet
To qualify for Medicaid long-term care benefits, applicants must have limited income and assets. In many states, a single person applying for coverage cannot have more than $2,000 in assets.
These assets typically include bank accounts, easily-accessible retirement funds, stocks and additional property. If a person has savings above the limit, they may have to 'spend down' those assets by paying for medical care, nursing home costs or other approved expenses before qualifying.
However, some assets are protected under Medicaid rules.
A primary residence is typically protected while the person is alive. If the applicant or their spouse still lives in the home, it may not count toward Medicaid eligibility up to a state-specific equity limit that can reach several hundred thousand dollars.
However, states may attempt to recover some costs from estates after death through what's known as Medicaid estate recovery. This means that, in seeking repayment after the homeowner's death, states can sometimes sell the home if it was not transferred to heirs beforehand.
Because of this, many families worry about losing their home to pay for care.
Other generally exempt assets include one vehicle, personal belongings and household goods. Certain prepaid funeral or burial plans can also be excluded.
Proving a medical need for care
Meeting the financial requirements alone does not guarantee eligibility.
Medicaid long-term care benefits are designed for people who need a nursing-home level of care, meaning they require substantial daily help with tasks like showering, dressing and eating.
As Marjorie's dementia progressed, she transferred to a memory care unit. There, the room cost about $8,500 a month, with additional healthcare fees ranging from $1,800 to $3,500
After surgery left her unable to walk, Lisa's mother ultimately required 24-hour skilled nursing care costing around $11,000 a month
States conduct a medical assessment to determine if seniors will get cash to pay for care.
In addition to needing help carrying out basic daily activities, severe cognitive conditions like Alzheimer's disease or other forms of dementia may qualify someone for benefits.
If the state determines that the applicant's medical needs meet the required threshold, the person can become eligible for Medicaid coverage once the financial rules are satisfied.
The five-year 'look-back' rule
One of the most important - and often misunderstood - aspects of Medicaid eligibility is the program's five-year look-back period.
When someone applies for long-term care coverage, the state reviews financial records from the previous five years to see whether assets - such as homes, cars or stocks - were given away or transferred for less than their value.
The rule is designed to prevent people from gifting money to relatives in order to qualify for benefits.
If the state finds large transfers during that period, it may impose a penalty period during which Medicaid will not cover nursing home costs. The length of the penalty depends on the value of the assets transferred.
Because of the complexity of the look-back rule, many families seek advice from elder-law attorneys or financial planners before applying.
How to apply for Medicaid long-term care
Applications for Medicaid are handled at the state level, even though the program is jointly funded by federal and state governments.
Most people apply through their state Medicaid website, a local Medicaid office or with help from hospital discharge planners, social workers or nursing home administrators.
The application process typically requires detailed documentation, including bank statements, tax records, proof of income such as Social Security benefits or pensions, property records and medical documentation showing the need for long-term care.
Because the review process can involve verifying years of financial records, approvals may take several weeks or even months.
To qualify for Medicaid long-term care benefits, applicants must have limited income and assets. In many states, a single person applying for coverage must have roughly $2,000 or less in countable assets
Home-based care options set to expand
Although Medicaid is widely associated with nursing homes, many states now offer programs that allow people to receive care in their own homes.
These programs, often known as Home and Community-Based Services (HCBS) waivers, can pay for services such as home health aides, personal care assistance, adult day programs and certain medical equipment.
The goal is to allow people to remain in their homes as long as possible rather than moving into institutional care.
However, these programs are limited in some states and may have waiting lists due to high demand.
Getting paid as a caregiver
One little-known option for families is that Medicaid may actually pay relatives to care for a loved one at home.
Through programs known as consumer-directed care or self-directed Medicaid services, some states allow people who qualify for Medicaid long-term care benefits to choose their own caregiver.
In certain situations, that caregiver can be a family member.
These programs are often offered through HCBS waivers.
Under these arrangements, Medicaid provides funding for care services, but the person receiving care - or their legal representative - can hire someone they trust to provide that support.
In some states, this may include adult children, relatives or close friends. Spouses are usually not eligible to be paid caregivers, although the rules vary depending on the state.
The amount caregivers can earn also varies widely. Payments are typically based on the number of approved care hours and the state's Medicaid reimbursement rates for home health aides.
For families coping with dementia, the option can be significant. Caring for someone with advanced memory loss often requires constant supervision, making it difficult for relatives to maintain full-time employment. Being able to receive payment for caregiving can help offset lost income while allowing a loved one to remain at home longer.
However, qualifying for these programs still requires meeting Medicaid's financial and medical eligibility rules.
Why families often seek expert help
For many Americans facing the prospect of long-term care, the Medicaid system can feel overwhelming. The rules around income limits, asset protection and the five-year look-back period can make the process difficult to navigate without guidance.
As a result, families often turn to elder-law attorneys or Medicaid planning specialists to help structure finances and ensure applications are completed correctly.
Lisa and her family used senior-care referral service A Place for Mom to help them figure out the best course of action for her mother when things became unmanageable on their own.
While the process can be complex, Medicaid remains one of the most important safety nets available to older Americans.
For those who qualify, it can mean the difference between facing staggering care costs alone and having essential long-term care covered when it is needed most.
Case study: How dementia care costs added up for one Missouri family
Lisa, who grew up in a small town in western Missouri, saw firsthand how quickly dementia care costs can escalate after her mother, Marjorie, was diagnosed with the condition.
Her parents had modest savings to begin with - about $80,000 in the bank, along with a small $80,000 life insurance policy from Lisa's father.
After selling the family home for around $250,000, the proceeds became the main source of funding for her mother's care.
Her mother also received about $2,300 a month in Social Security, which helped cover some expenses.
At first, the family tried to keep her mother at home by hiring a daytime home health aide who helped with medications, meals, bathing and errands.
But as her condition worsened and hospital visits became more frequent, it became clear she needed more support.
She eventually moved into assisted living, where the room cost about $5,800 a month, with healthcare services adding roughly $1,300 to $3,500 monthly depending on her needs.
When her dementia progressed, she transferred to a memory care unit. There, the room cost about $8,500 a month, with additional healthcare fees ranging from $1,800 to $3,500.
After surgery left her unable to walk, Lisa's mother ultimately required 24-hour skilled nursing care costing around $11,000 a month.
At that point, Lisa knew the remaining savings would soon run out and the family would need to rely on Medicaid to continue covering the cost of care.
Eventually, she turned to A Place for Mom, a service that helps families compare senior living options.
Lisa said the organization helped streamline the process by discussing her mother's needs and quickly narrowing down suitable options. After a short consultation, advisers recommended several facilities that matched her requirements, including memory care availability and room openings.
Despite the financial strain, Lisa said the experience ultimately reinforced the importance of planning for long-term care.
'It was worth it,' she said. 'It was worth it 100 percent.'
