An assisted living facility is a residential senior living solution for older adults to get help with everyday tasks like bathing or cooking as they age. But how do you pay for it? Whether you are a senior or a family member exploring the idea of assisted living, knowing how to pay for long-term residential care is a major part of moving to senior living. Will your insurance cover assisted living? Some types of insurance do and others don’t. In this article, we explain how different types of insurance pay cover assisted living and which ones do not.
Assisted living facilities are senior living communities that assist with activities of daily living, such as bathing and dressing, while allowing the senior to be largely independent. They also may assist with housekeeping tasks and meal preparation, simplifying older adults’ lives. These communities offer lively, social atmospheres and activities so you can avoid the isolation that often comes with aging. The dependable staff and services and chances to meet new friends make assisted living facilities a good place for seniors to live. The support mentioned above that residents receive in assisted living is nonmedical, also called personal or custodial care. This is an important concept to understand as we explain whether different types of insurance cover assisted living costs.
Does Medicare cover assisted living?
The short answer is that Medicare does not cover assisted living. Medicare is designed to cover medical services, and because assisted living services help with custodial or personal care (not medical care, like a doctor’s appointment or procedure), Medicare Part A (hospital insurance) and Part B (medical insurance) do not pay for room and board or personal care at an assisted living facility.
Medicare will continue to cover certain approved medical costs while you are living in an assisted living facility, just as it does for individuals who live at home. For example, Medicare Part D covers many prescription medications, and Part B covers durable medical equipment, including walkers and other assistive devices. An assisted living resident could still use Medicare benefits to help pay for approved expenses. Medicare may also cover medical services your doctor recommends after a medical event, like short-term physical therapy to recover from an injury. So, while Medicare is an insurance that doesn’t cover assisted living rent, you may still use it to pay for approved medical expenses while living at a facility.
Does Medicaid cover assisted living?
Medicaid might cover assisted living, depending on your state and your facility. For example, as of January 2024, assisted living communities in Alabama do not accept Medicaid as payment. On the other hand, New Jersey allows its assisted living communities to accept Medicaid — though not all facilities choose to. You need to check with the facility to learn if it accepts Medicaid.
If you live in a state that allows assisted living facilities to accept Medicaid and you want to be able to use Medicaid to pay for that facility, you’ll need to plan in a few ways:
- •Find the facility you want to live in and ask if they accept Medicaid, or find a list of facilities in your area that accept Medicaid and choose from that list.
- •If the facility accepts Medicaid as a form of payment, you typically cannot move in while on Medicaid. Most facilities that accept Medicaid require a resident to guarantee they can pay for 24 months of rent and services with their personal funds before they apply for Medicaid. This means you must have enough money to pay for two years at the assisted living facility and apply for Medicaid when you spend your assets down enough to qualify for the program.
While Medicaid and state rules are complicated, it’s possible that this type of insurance covers assisted living in some cases.
Does long-term care insurance cover assisted living?
A helpful choice for families searching for ways to pay for assisted living care is long-term care insurance. This is a financial product you must have purchased before needing to pay for long-term care, but those who have paid premiums for this kind of insurance can benefit in the long run.
Long-term care insurance (LTCi) is a type of insurance product that helps cover costs your health insurance, such as Medicare, doesn’t cover. As an example, an adult gets Medicare health insurance when they turn 65 and can get coverage for many medical services. But when they need to move to assisted living because they need help with activities of daily living and other personal care tasks, Medicare won’t pay for those services because services that help with activities of daily living are personal or custodial care, not medical care.
That’s where long-term care insurance helps. When a policyholder qualifies to make a claim on their insurance policy, they can be reimbursed for a certain amount of money per day — and over the course of a month, this can add up to help pay for rent at an assisted living facility.
Most insurance companies offer long-term care insurance. If yours doesn’t, a number of reputable insurance providers offer long-term care insurance policies that can suit your needs.
Does life insurance cover assisted living?
Believe it or not, there are a few different ways that people with life insurance may leverage their policies to help pay for assisted living. Some only see life insurance as a financial product that guarantees your surviving family members money when you pass away, but there are other ways to use the policy during your lifetime if you need those funds.
Accelerated death benefits or viatical settlements can be used in certain circumstances, allowing the policyholder to access the funds during their lifetime. If the policy has a cash value, you may be able to opt for a life settlement. This is when the policyholder sells their policy to a third-party company, who becomes the beneficiary of the policy. Though the individual no longer has the policy and their beneficiaries no longer receive death benefits, the individual receives a sum of money and can use the funds how they choose.
There are benefits and drawbacks to using your life insurance policy during your lifetime. In circumstances where you need funds now to help pay for assisted living, it could be a great option to cover the care you need. Talk to your life insurance provider about the considerations to keep in mind when using your life insurance policy for assisted living fees. These considerations include the following:
- •Your family will not get any money from the policy if you withdraw the entire cash value.
- •You could owe taxes and fees.
- •Your insurance company will deduct interest payments from your cash value if you borrow money from your policy.
Although using your life insurance policy is a major financial decision, it can help you cover the cost of an assisted living facility.
Concerns about the cost of assisted living care
Try to be as prepared as possible. Creating an estate plan is the best way to ensure you have the money to cover long-term care needs like custodial care in an assisted living facility. An elder law attorney can ensure your estate plan is on track to pay for your long-term care needs. Being aware of your options and having an insurance policy in place that covers assisted living can help ease your concerns about how to pay for any long-term care you may need in the future.
