How to Pay for Senior Care: A Plain-Language Financial Guide
Financial Planning Checklist
The First Thing to Understand: Medicare Is Not the Answer
Most families begin their senior care financial planning with the assumption that Medicare will cover the bulk of the cost. This is one of the most common and consequential misunderstandings in elder care planning. Medicare covers acute medical care, doctor visits, hospitalizations, short-term skilled nursing facility care after a qualifying stay, home health services ordered by a physician. It does not cover custodial care: the long-term help with bathing, dressing, meals, and daily activities that constitutes most senior care spending.
If your loved one needs help with daily activities, not skilled medical treatment, Medicare is largely not the answer. Planning for senior care means planning with private funds, insurance, or Medicaid as the foundation.
Medicare: What It Actually Covers
Medicare Part A covers inpatient hospital care, skilled nursing facility care (after a 3-night hospital stay, for up to 100 days, with a substantial co-pay after day 20), home health care ordered by a physician, and hospice. Part B covers outpatient medical care, physician services, and some preventive care. Medicare Advantage plans may include some supplemental benefits not in traditional Medicare, but none cover long-term custodial care as a standard benefit.
The skilled nursing benefit is often misunderstood: it covers post-acute recovery (after a surgery or major illness), not ongoing residential nursing care. Once the person no longer requires skilled services, Medicare coverage stops, regardless of where they are living.
Medicaid: For Those Who Qualify
Medicaid is the largest payer for long-term senior care in the United States. In Washington State, the ALTSA (Aging and Long-Term Support Administration) program covers a range of care settings: skilled nursing facilities, assisted living (for contracted providers), adult family homes, and home-based services for eligible individuals.
Eligibility is income and asset-based. In Washington, the asset limit for a single individual is $2,000 (excluding the primary home under certain conditions, a vehicle, and personal property). Income limits vary by care setting. Medicaid planning, legal strategies to structure assets in ways that preserve eligibility while protecting a spouse or family, is a legitimate and legal subspecialty of elder law. If you anticipate needing Medicaid, consult a certified elder law attorney before spending down assets informally.
Long-Term Care Insurance
Long-term care (LTC) insurance, purchased before the need arose, pays a daily or monthly benefit when the policyholder meets the benefit triggers, typically needing help with 2 or more activities of daily living, or a cognitive impairment. Policies vary enormously in benefit amounts, elimination periods (the waiting period before benefits start, typically 30 to 90 days), inflation protection, and covered settings.
Review the policy carefully. Key questions: What is the daily benefit? What is the lifetime maximum? Does the policy cover home care, assisted living, AND skilled nursing, or only some settings? Is there an inflation rider? What is the elimination period, and how is it counted (calendar days vs. service days)?
VA Benefits
Veterans and surviving spouses may qualify for significant benefits through the Department of Veterans Affairs. The Aid and Attendance benefit, often overlooked, provides monthly payments to eligible veterans who need help with daily activities. As of 2025, the maximum Aid and Attendance benefit is approximately $2,300/month for a veteran, $1,478/month for a surviving spouse. Application is through the VA and can take several months; working with a VA-accredited claims agent or elder law attorney speeds the process.
VA also provides community living centers (VA nursing homes), adult day health programs, home-based primary care, and hospice for eligible veterans, at no or low cost.
Private Pay: Making the Most of Personal Assets
Many families fund senior care privately, from retirement accounts, investment portfolios, home equity, or family contributions. If this is your path, financial planning matters. Strategies to consider: home equity (the family home can fund care costs through a sale, reverse mortgage, or home equity line); bridge loans (short-term financing while waiting for home proceeds or benefit approval); life insurance conversions (some policies can be converted to a long-term care benefit); and annuities (immediate annuities can create a guaranteed monthly income stream to cover recurring care costs).
Work with a fee-only financial planner and a certified elder law attorney before making major financial decisions. The interaction between assets, Medicaid eligibility, tax treatment, and family dynamics is complex enough that professional guidance typically pays for itself many times over.
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