It’s no secret that long-term care is expensive, and many people want to know what kind of financial assistance options are available to help defray some of the costs. For example, the average monthly cost for assisted living in the United States is $4,300, while memory care costs $5,375 and nursing home care is $7,756, according to Genworth’s Cost of Care Survey 2020, which also reports 7 out of 10 people will need long-term care in their lifetime.

While all seniors over 65 are eligible for Medicare, more than one-fifth also have Medicaid. Trying to understand what is covered and by which program can be confusing.

Although Medicare and Medicaid don’t cover all costs associated with assisted living, they do cover some. In this guide, we sort out the differences between Medicare and Medicaid coverage of long-term care, who is eligible, and what is and isn’t covered.

Medicare Explained

Medicare is an exclusively federal program enacted by law in 1965 and designed to provide fee-for-service health coverage for seniors and other qualifying individuals. Because Medicare is a federal program, benefits are generally the same from state to state.

Original Medicare has separate parts that cover specific medical services:

  • Medicare Part A covers institutionalized care, such as hospitals, some home care services and nursing homes, although long-term care benefits are limited. Medicare Part A has no premiums for qualifying recipients, but deductibles and co-pays can apply, depending on the services or length of stay.
  • Medicare Part B covers most other noninstitutional medical expenses, including physician services, outpatient care and medical supplies. Medicare Part B has a monthly premium based on income, deductibles and co-pays.
  • Medicare Part D covers prescription drugs and has premiums based on income.

States have various Medicare-approved Medigap plans that provide supplemental coverage of deductibles and co-pays associated with Original Medicare.

Through a series of laws and changes since the 1970s, Original Medicare has expanded to include Medicare Part C, also known as Medicare Advantage. Medicare Part C allows private insurance companies to manage the health care of Medicare patients through HMOs and other managed care plans in place of fee-for-service health coverage. Medicare Advantage plans replace Original Medicare for those who enroll and aren’t considered supplemental coverage.

Medicare Eligibility and How to Apply

Medicare covers individuals 65 and older who have (or their spouses have) paid into the program for a minimum of 10 years. It also covers younger people with disabilities and others with qualifying health conditions. To apply for Medicare and determine your eligibility, contact the Social Security Administration.

Medicaid Explained

Medicaid is a federal health coverage program for children and certain qualifying adults. It’s administered by states and funded jointly by the federal government and individual states through fund-matching. It was signed into law at the same time as Medicare in 1965.

The law authorizes each state to develop its own state plan, which the Centers for Medicare and Medicaid Services need to review and approve for the state to qualify for federal funds.

While federal guidelines regulate Medicaid, states have a great deal of freedom to determine what services they will offer and who is eligible to receive them. Because of this, Medicaid coverage can vary widely from state to state

Original Medicaid provides coverage for institutionalized care, which includes hospitals, nursing home facilities and other residential facilities that offer total care for their patients. These institutions don’t include assisted living facilities. Assisted living facilities provide services for their residents that Medicaid does cover, although it doesn’t include all services.

To expand care for seniors at risk of costly institutionalized care, Medicaid lets states bypass these restrictions. States can offer coverage for home care through Home and Community-Based Services Medicaid waivers. HCSB waivers allow Medicaid recipients to receive some of the same services they would receive in institutions, but not room and board and food costs. 

Medicaid separates the designation of any noninstitutionalized care as “home care,” which includes assisted living facilities, so some assisted living services are covered through HCBS waivers. Each state has its own definition of home care and what facilities and services their HCSB waivers cover. Most states use other terms rather than assisted living to refer to these services, including adult foster care, residential care and supported living. 

Medicaid Eligibility and How to Apply

Eligibility for Original Medicaid for adults is primarily based on income, but other nonfinancial factors can qualify an individual. Disabilities sustained since birth and those acquired through injury, illness or trauma may automatically qualify an individual for Medicaid, irrespective of income or financial status. Other designations also qualify an individual for Medicaid depending on the eligibility requirements for their state, and federal guidelines mandate eligibility for some groups.

HCBS waivers expand not only the benefits Medicaid recipients can receive but also the eligibility requirements. Waivers allow for a higher income limit than Original Medicaid state plans. Although this can vary, generally, the waiver limit is 300% of SSI, which is much higher than the Original Medicaid eligibility income limit of 133% of the federal poverty level.

For HCBS waivers, there’s also an asset limit, which is typically around $2,000 and usually doesn’t include major assets, such as a car, home or wedding rings. You can circumvent asset limits for waiver benefits legally through planning strategies, such as Medicaid asset protection trusts.

For seniors who don’t meet the financial requirements or aren’t considered disabled, the need for a certain amount or type of assistance with daily living activities may still create eligibility, depending on the state. To apply for Medicaid, contact your state’s Medicaid agency.

Medicare vs. Medicaid Coverage of Senior Care

Both Medicare and Medicaid cover some expenses associated with assisted living, but those costs are limited and very specific. Below, we break down what both Medicare and Medicaid do and do not cover when it comes to long-term senior care. 

Does Medicare Cover Long-Term Care?

Medicare Part A provides coverage for 100 days of long-term care in a Medicare-covered skilled nursing facility if it immediately follows a minimum of a three-day hospital stay for those that meet the eligibility requirements.

Medicare doesn’t cover custodial care, room and board, food, assistance with daily living activities, nonemergency transportation or any other nonmedical costs related to assisted living. Medicare does cover any health services the senior would otherwise receive in any residential setting, including exams, medications and medical equipment covered by Medicare Part B.

Does Medicaid Cover Long-Term Care?

Medicaid covers any additional health services received in an assisted living facility not covered by Medicare, such as hearing exams and hearing aids in states with Medicaid programs that provide such coverage. Medicaid also covers long-term institutionalized care, such as nursing homes, not covered by Medicare.

Assisted living is a combination of room and board and other services, some of which Medicaid covers and some it doesn’t. While Medicaid coverage varies by state, generally it covers:

  • Case management
  • Personal care services and assistance with activities of daily living
  • Meal preparation, but not the cost of the food
  • Homemaking services
  • Transportation
  • Any medical-related services not covered by Medicare

HCBS waivers extend these services beyond institutional care to home care facilities, but Medicaid doesn’t cover food or room and board for assisted living facilities the way it does for residents of nursing homes. To make assisted living services attainable for Medicaid recipients, states can control these costs and offer supplemental programs that cover room and board and other assisted living expenses not covered by Medicaid. The programs available and what coverage they provide vary from state to state. 

For more information about Medicare and Medicaid coverage for assisted living, contact us at (800) 973-1540.