Nursing facility care. The single most important thing to understand about Medicare and nursing facilities is that Medicare does not pay for long-term care. However, under limited circumstances and for a short time, Medicare Part A or a Medicare Advantage managed care plan can cover a stay in a skilled nursing facility while the person is recovering from a severe mental health episode that landed her in the hospital. The nursing facility stay must follow, within 30 days, a hospital stay of at least three days. And the nursing facility stay must be medically required and prescribed by her doctor to provide her with daily skilled nursing or rehabilitation services while she's recovering from the medical event that put her in the hospital. The coverage can last for up to 100 days, with Medicare paying the full amount for the first 20 days and your family member having to make a co-payment of $133.50 (in 2009) per day for days 21 through 100. For more details about Medicare Part A nursing facility coverage, see our article Understanding Medicare Part A (Hospital Insurance).

Home care. Home care is available under Medicare Part A, Part B, or Part C (managed care) if it's medically necessary for any illness or condition, including mental illness, Alzheimer's, and other forms of dementia. But the rules under which Medicare coverage is available for home care are quite strict, and coverage usually lasts only a short time.

The key thing about Medicare coverage for home care is that it applies only to home healthcare. That means your family member must need skilled nursing care or rehabilitation therapy while she's confined to home because of an injury or illness. It doesn't cover assistance with the activities of daily living such as dressing, bathing, walking, or eating unless these are provided incidentally, alongside required skilled medical care. A doctor must prescribe the home care and it must be provided by a Medicare-certified home healthcare agency.

If the person in your care qualifies, Medicare pays 100 percent of the agency's costs. But the care can continue only as long as the skilled nursing or therapy is required, while she's actually recovering. Home healthcare is covered by Medicare Part A following a hospital stay, or by Medicare Part B if there has been no prior three-day hospital stay. If she's enrolled in a Part C Medicare Advantage managed care plan, that plan provides home care under the same rules, except that the home care agency must be associated with the specific managed care plan.