I think you're referring to Medicaid, not Medicare. Medicare is a federally-funded health insurance program. Many seniors have Medicare Supplement insurance purchased from health insurance companies. Medicare and health insurance
companies pay for medically necessary health care expenses. Medicare and private companies pay very little for custodial care, which is what most long-term care expenses are used for.
On the other hand, Medicaid is a program jointly-funded by the federal and state governments for financially needy seniors. Medicaid is administered by the states and each state sets the maximum level of assets that a senior can keep under the program. In most states, the limit is $2,000.
If a senior qualifies for Medicaid, but has assets above the limit, he or she is required to either spend down the excess assets prior to applying for Medicaid or pay privately for long term care until the assets are below the limit. So yes, if your parents have assets above the maximum level required by the state and they want to qualify for coverage under Medicaid, they must spend their assets until they meet the eligibility requirements for their state.
Keep in mind: the goal of Medicaid is not to pay for everyone's long term care. It is a provider of last resort for those seniors who have depleted their assets.