Where to start › Who pays
Who pays for care, and in what order?
No single source pays for long-term care. Families tend to go through the same sources in about the same order. Knowing that ahead of time prevents costly surprises. Treat what follows as the usual pattern, not a rule. The order depends on what a family has.
The usual pattern
- 1. Your own money. Savings, income, the sale of a home, help from family. Most people start here.
- 2. A long-term-care insurance policy, if there is one. Now is the time to read it. A "tax-qualified" policy usually starts paying when the person needs a lot of help with two of six daily activities, or needs close watching because of severe memory or thinking problems. But the policy's own wording decides. See long-term-care insurance. Most people do not have one of these policies. Federal projections put private insurance at about 5% of lifetime long-term-care costs.[4]
- 3. Medicare — and this is where people get it wrong. Medicare "doesn't cover custodial care if it's the only care you need."[1] Custodial care means help with daily life. So Medicare does not pay assisted living rent, ongoing help at home, or a nursing home stay with no end date. What it does cover is medical care, hospice, and up to 100 days in a benefit period of skilled nursing or rehab that is medically needed, in a facility approved by Medicare, after a hospital stay that qualifies. That is an upper limit with conditions, not a set number of days you get. A Medicare Advantage plan may have its own rules.[1] Part B still covers doctor visits and physical, speech or occupational therapy for a person living in a facility. The dated numbers are in what Medicare actually pays for.
- 4. Medicaid. Medicaid pays more for long-term care than any other source in the country. It covers nursing home care for people aged 21 and over who qualify. Two conditions are worth knowing ahead of time. First, each state decides what counts as needing nursing home care, and each has its own test. Second, Medicaid only pays in a home that the state has licensed and approved as a Medicaid nursing facility.[3] So ask any home if it takes Medicaid before a person moves in, not when the money runs low.
About "payer of last resort"
You may hear Medicaid called the "payer of last resort." What CMS really describes is third party liability. That means when someone else, such as an insurance company, has a legal duty to pay for part or all of a Medicaid member's medical care, they pay first.[2] It is sorted out bill by bill.
Who qualifies for Medicaid is a separate question. Each state decides it with its own money rules and care-need rules. And there is more than one way in. 36 states and the District of Columbia use spend-down programs (called "medically needy" programs or "209(b)" states). These work through income, not savings.[2] Spending down explains the difference.
What we can do best is show you the money.
What each source really pays
Federal researchers at ASPE made a projection for people turning 65 in 2021–2025. They expect lifetime long-term-care costs, in 2020 dollars, to be paid like this:[4]
- Medicaid: $51,800, about 43%.
- Families, out of their own pockets: $44,800, about 37%.
- Other public programs: $18,300, about 15%.
- Private insurance: $6,000, about 5%.
These numbers are a projection for one age group. They are not a record of what has happened. But the big picture is the useful part: Medicaid and families pay most of it, in about equal shares, and insurance pays only a small part. If you plan on anything else, you are planning on being the exception.
What care costs has the rest of those numbers. When the money runs out is the next step on the road.
Free local help. Your Area Agency on Aging will talk through your choices with you for free. Your state's SHIP counselors give free advice on Medicare questions. Find an Area Agency on Aging through the federal Eldercare Locator at 1-800-677-1116 or eldercare.acl.gov (run by the Administration for Community Living).[5] To learn about the four kinds of local helpers, see Who helps me locally.
Sources and what they support
Sources checked 2026-09-19 using AI-assisted editorial research. This is a source check, not financial or benefits advice.
- Medicare, nursing home care. Supports the quoted rule that Medicare does not cover custodial care if that is the only care needed, that Part A may cover up to 100 days of short-term nursing home or rehabilitation care in a Medicare-certified facility after hospitalisation, that long-term stays are generally not covered unless skilled nursing care is being received, and that Part B covers doctor visits and physical, speech or occupational therapy for a nursing-home resident. The 100 days is a maximum under conditions decided on the individual's facts, and Medicare Advantage plans may apply different cost-sharing and rules.
- CMS, Medicaid eligibility policy. Supports the quoted definition of third party liability, that medically needy individuals can become eligible by spending down income above a state's medically needy income standard, that 36 states and the District of Columbia use spend-down programs either as medically needy programs or as 209(b) states, and that beneficiaries needing long-term services and supports will be denied that coverage if they transferred assets for less than fair market value in the five years before applying. This is a federal overview; each state administers its own eligibility, and nothing here establishes an order in which payers must be exhausted.
- CMS, Medicaid nursing facilities. Supports that nursing facility services must be provided by state Medicaid programs for eligible people aged 21 or over, that the need for those services is defined by states which have all established level-of-care criteria, and that coverage is available only for services in a home licensed and certified by the state survey agency as a Medicaid nursing facility. Eligibility is a state determination on an individual's facts, and a facility's participation can change.
- HHS / ASPE, Long-Term Services and Supports for Older Americans: Risks and Financing, 2022 (official GovInfo copy). Supports the payer shares quoted here — $51,800 Medicaid, $44,800 family out-of-pocket, $18,300 other public programs and $6,000 private insurance — as projected average lifetime long-term-care costs in 2020 inflation-adjusted dollars for adults turning 65 in 2021–2025. These are modelled projections for one birth cohort, not observed spending and not a personal forecast; the percentages are shares of that projected total.
- Administration for Community Living, Eldercare Locator. Supports the referral route to a local Area Agency on Aging for free options counselling. It does not determine Medicaid eligibility or decide Medicare coverage.
Corrected in this pass: "payer of last resort" was presented as the rule, where CMS describes third party liability and separate state eligibility; the claim that most long-stay nursing-home residents reach Medicaid eventually was removed for want of a denominator; and the four-step order is now described as a common pattern rather than a national sequence. Added because families need it before they choose a home: Medicaid nursing-facility coverage only applies in a facility certified as a Medicaid nursing facility.