How To Pay For Memory Care

If your loved one has Alzheimer's disease or a similar dementia, it can seem complicated to figure out how to pay for memory care. Complex service options, exclusions, and state-by-state differences may make it difficult to understand the scope and cost of coverage.

Fortunately, you can use several types of funding to pay for care, including private sources, public programs, and more. In this guide, we help explore your financial options and provide details on each source to help you make the best decisions for your loved one.  

Start your search for ways to pay for memory care by taking stock of your loved one's personal savings and assets. These funds provide flexibility, allowing you to choose the right facility and pay for costs beyond insurance coverage. 

• Best For: Families in need of quick funding to pay initial housing costs
• Covers: Monthly fees, up-front move-in costs, and medical costs
• Pros: Can be used for any type of costs; no eligibility rules
• Cons: May drain retirement savings
• Limitations: Some accounts may have tax penalties or withdrawal restrictions; consider talking to a financial advisor before selling assets

Example: A family might use a parent's savings account to pay the move-in costs and the first few months of memory care. Meanwhile, they list their loved one's condo for sale. When it sells, it can provide a longer-term source of funds, paying monthly costs after savings are depleted. 

If your loved one lives in an independent living, assisted living, or nursing facility, they may not have any home equity. However, if they own a home or condo that is mostly or entirely paid off, equity can significantly reduce the cost of memory care. 

The family could choose to sell the home or rent it out to unlock some funds. Another option, a reverse mortgage, functions as a loan on the home's value. Consult a financial advisor if you choose this strategy.

• Best For: Homeowners looking for substantial funding for memory care costs
• Covers: Monthly memory care fees, medical and therapy expenses, and other care-related costs
• Pros: Can generate a significant nest egg; offers flexible funding with few restrictions (except for reverse mortgage)
• Cons: Reverse mortgages come with fees and require eventual repayment; home selling can be a stressful experience
• Limitations: Reverse mortgages may not be a good idea if a spouse or child is still living in the home

Example: A family rents out their loved one's home, using the monthly rental fee to pay regular and unchanging memory care costs. Later, if they sell the home, the proceeds can provide more long-term funding for care.

Health insurance covers many of the medical costs for individuals in memory care facilities, but other types of policies can also assist. Long-term care insurance, if previously purchased, can help pay expenses. 

If your loved one has a type of permanent life insurance, such as whole life or universal life, they could access the policy's cash value if they have accrued enough to make it worthwhile. Some policies also include accelerated benefits that recipients can access with certain conditions.

• Best For: Seniors who have purchased long-term care insurance earlier in life, or who have a life insurance policy with cash value or accelerated benefits
• Covers: Some room and board costs, personal care services, medical needs, and other approved costs, depending on the policy
• Pros: Can reduce out-of-pocket costs; may provide steady monthly payments or a lump sum for move-in costs, and helps preserve savings
• Cons: Policies must have been purchased well before diagnosis; benefits and exclusions may apply; and using life insurance payouts may reduce the death benefit
• Limitations: Terminal illness, long-term care, or critical illness riders on life insurance require a doctor's diagnosis before accessing funds; some policies may not cover memory care

Example: A couple in their 80s uses a long-term care insurance policy through which the benefits cover a portion of the monthly room and board for the husband, who is in a memory care unit. To supplement this coverage, the wife could explore accessing accelerated death benefits from life insurance if her husband has a terminal diagnosis or chronic illness, depending on the policy's riders. 

Medicare and Medicaid may help pay some of the costs of dementia care, but they work differently. Though they are both government-funded sources, Medicare does not pay room and board, but Medicaid may, depending on the state and the patient's financial situation. Recipients can use both programs to pay for some medical costs, but Medicare may offer more limited coverage. 

• Best For: Seniors who need help with medical costs (Medicare) or long-term care and nursing home-level care (Medicaid)
• Covers: Doctor visits, medications, hospital care, rehab, limited skilled nursing (Medicare); nursing home care, dementia care services, and some personal care assistance (Medicaid, with state waiver programs)
• Pros: Medicare helps with continuing medical needs, while Medicaid can reduce long-term care expenses for low-income senior adults
• Cons: Medicare won't pay for room and board; Medicaid eligibility is strict and varies by state, and state-funded waiver programs for Medicaid may have long waiting lists
• Limitations: Medicaid income and asset limits apply; benefits differ by state; Medicare has time limits for rehab and skilled nursing care

Example: The family of a senior adult with dementia can use their Medicare benefits to pay for doctor's visits and medications. If the loved one becomes ill, it will cover hospital costs and, if necessary, rehabilitation and therapy sessions. 

Honorably-discharged veterans and their surviving spouses may qualify for government support through the Veterans Administration. Recipients most commonly qualify through the Aid and Attendance Program. It provides a monthly, tax-free payment to eligible veterans, including those with dementia, who need help with their activities of daily living (ADLs).

• Best For: Veterans and surviving spouses looking for help paying for long-term dementia care
• Covers: Memory care fees, personal care services, medical expenses, and out-of-pocket care costs
• Pros: Payments are tax-free
• Cons: Application can take time; extensive documentation is required
• Limitations: Applicants must meet service, income, and medical-need criteria; benefit amount varies depending on marital status and needs

Example: A veteran with moderate dementia needs help with ADLs such as grooming and dressing herself. If she qualifies for Aid & Attendance benefits, the monthly payments can cover the cost of an aide to assist her.

Use our calculator to understand your monthly memory care budget based on factors like income, savings, and expenses.

The cost of memory care can be high, but sources like personal savings, home equity, insurance, and Medicare or Medicaid benefits can help lower your loved one's overall financial burden. When you begin researching how to pay for memory care, consider every available option. Caring.com has a wealth of memory care resources to help you understand what you need to know when your senior loved one's health requires a move to a memory care facility.

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