What Medicare and Medicaid Actually Cover for Long-Term Care (and What They Don't)

The single biggest financial misconception in elder care: "Medicare will cover it."

It won't. Not for long-term care. And discovering this after you've made decisions based on it is one of the more crushing moments families experience in this process.

Let's be clear about what both programs actually do — because the confusion between them is understandable but genuinely costly.

Medicare: What It Is and What It Covers

Medicare is health insurance for people 65 and older (and certain younger people with disabilities). It covers doctor visits, hospital stays, surgeries, medications (with Part D), and medically necessary care.

Here's what it does not cover: custodial care. That's the term for help with daily activities — bathing, dressing, eating, getting around. The kind of care that most people need when they're aging. The kind of care that costs a lot of money.

Medicare will cover a skilled nursing facility — but only in limited circumstances and for a limited time:

• After a qualifying hospital stay of at least three days
• For skilled care specifically: nursing, physical therapy, occupational therapy, speech therapy
• For up to 100 days per benefit period — and only if the care is deemed "medically necessary" and there's ongoing progress

Days 1-20: Medicare pays in full (with Original Medicare). Days 21-100: you pay a significant daily copay ($209.50 per day in 2024). After day 100: Medicare pays nothing.

This is for recovery care — not long-term care. If your parent needs help living day to day, not recovering from a specific medical event, Medicare isn't the solution.

Medicaid: What It Is and What It Actually Covers

Medicaid is the government health insurance program for people with low income and limited assets. Unlike Medicare, Medicaid does cover long-term care — including both nursing home care and, in many states, some home and community-based services.

The challenge: to qualify for Medicaid long-term care benefits, you generally have to be at or near financial destitution. The asset limits vary by state, but they're low — typically around $2,000 in countable assets for an individual (with some exclusions, like a primary home up to a certain value).

This means most middle-class families will not qualify for Medicaid until a parent has spent down their savings on care. A nursing home at $8,000-$12,000 per month can deplete a significant nest egg in a year or two.

There are legal strategies to protect some assets — Medicaid planning through an elder law attorney — but they require advance planning, often years in advance, because of Medicaid's look-back period (generally five years). Any assets transferred in the five years before applying for Medicaid can be scrutinized.

If your parent has significant assets today, consult an elder law attorney now, not when you need Medicaid next year.

So What Does Cover Long-Term Care?

In roughly this order:

1. Private funds — savings, retirement accounts, proceeds from selling a home. Most people pay for long-term care this way, for as long as the money lasts.

2. Long-term care insurance — if your parent purchased a policy. These policies cover custodial care at home, in assisted living, or in a nursing home, up to the benefit limits. Many policies purchased in the 1990s and 2000s have substantial benefits. Worth finding out if your parent has one.

3. Medicaid — after spending down to eligibility, assuming the state's Medicaid program covers the setting your parent needs.

4. Veterans benefits — if your parent is a veteran, the VA's Aid and Attendance benefit can provide meaningful financial help for care. It's underutilized because it's not well-known. Look into it if it applies.

5. Medicare — only for qualifying short-term skilled care after a hospitalization, as described above.

The Practical Takeaway

Don't plan around Medicare for long-term care. Plan around private funds first, long-term care insurance if you have it, and Medicaid as the last resort if and when the money runs out.

Get a clear picture of the financial situation now (see the financial assessment article). If there are significant assets, consult an elder law attorney about planning strategies. The worst time to learn how this all works is when you're already in a crisis.