Medicaid and Long-Term Care

As life expectancy continues to rise, Americans face a longer retirement—and potentially, a more expensive one. For many older adults, particularly those impacted by chronic or degenerative conditions like Alzheimer’s disease, the financial burden of long-term care can be overwhelming. If you or a loved one doesn’t have long-term care insurance—or couldn’t qualify for it—Medicaid may end up being a crucial safety net. Understanding how Medicaid works and how to qualify is essential for those facing the high costs of aging and healthcare.

The Rising Costs of Aging and Health Care

Today’s longer lifespans come with a steep price. According to Fidelity’s most recent Retiree Health Care Cost Estimate, the average 65-year-old couple retiring in 2024 can expect to spend approximately $315,000 on healthcare expenses during retirement. That figure doesn’t even include the cost of long-term care, which can significantly outpace standard medical costs.

The Alzheimer’s Association reports that in 2024, the annual cost of nursing home care for individuals with Alzheimer’s disease can exceed $100,000—and with the disease lasting anywhere from 5 to 20 years, the financial toll can be devastating. Assisted-living facilities and in-home care options also carry high costs ranging from $4,500 to $7,000 per month, depending on location and level of care.

Despite this, many people are unprepared. A 2023 Employee Benefit Research Institute (EBRI) survey found that just 13% of workers are very confident they’ll have enough money to pay for medical expenses in retirement. And long-term care insurance—which can help cover these expenses—is not an option for everyone due to high premiums or medical underwriting that can disqualify those with pre-existing conditions.

If a Long-Term Care Policy Isn’t an Option

Long-term care insurance can be a helpful tool—but it’s not universally accessible. Premiums increase dramatically with age and health conditions, often pricing out those who need it most. Some applicants are denied coverage altogether. So, what happens if you don’t have long-term care insurance and can’t afford years of out-of-pocket care?

This is where Medicaid can come into play—as a last resort for many families facing the crushing cost of elder care.

Medicaid Coverage for Long-Term Care

Medicaid is a joint federal and state program that provides healthcare coverage to low-income individuals, including older adults who need assistance paying for long-term care. Unlike Medicare, which generally does not cover extended stays in nursing homes or assisted living facilities, Medicaid can cover these costs—but only if you meet certain financial and medical eligibility criteria. What are those Qualifications? Each state manages its own Medicaid program, so income and asset limits vary slightly depending on where you live. That said, there are some general rules:

• Income limits: Most states set a monthly income cap for long-term care Medicaid eligibility. For example, in 2025, the limit for an individual in many states is around $2,829 per month.
• Asset limits: Typically, an individual must have no more than $2,000 in countable assets to qualify. Some assets, like a primary residence (up to a certain equity value), a car, and personal belongings, are exempt.
• Medical need: Applicants must also demonstrate a medical need for long-term care services. This often requires an assessment that shows the individual cannot perform a certain number of Activities of Daily Living (ADLs), such as bathing, dressing, or eating independently.
  

What If You Have Too Many Assets?

For individuals whose assets exceed Medicaid thresholds, there are a few options:

• Spend-down strategy: This involves using personal assets to pay for care until you reach Medicaid eligibility thresholds. However, this must be done carefully to comply with Medicaid’s rules.
• Medicaid planning with a legal professional: Elder law attorneys can help structure your finances—such as
  setting up irrevocable trusts or transferring ownership of certain assets—well in advance of needing care. Keep in mind that Medicaid has a 5-year lookback period, which penalizes transfers made for less than market value within five years of applying.
• Community spouse protections: If one spouse requires nursing home care and the other remains at home, Medicaid allows the “community spouse” to retain a portion of income and assets without disqualifying the institutionalized spouse from benefits.

A Summary of Things to Consider

If you think Medicaid may be necessary in the future, consider taking the following steps:

• Start planning early because of the lookback period. Planning five or more years in advance can provide more flexibility and protect more of your assets.
• Document all financial transactions and  keep clear records to avoid delays or penalties when applying for benefits.
• Consult professionals such as an elder law attorney or a financial-planning professional. They can help you evaluate your options and make informed choices.

In Conclusion

The financial toll of aging—especially in the face of chronic illness—can exhaust even a well-prepared retirement portfolio. For those who don’t have adequate long-term care insurance or who are medically ineligible for it, Medicaid may become the only viable path to receiving the care they need.

While relying on Medicaid isn’t ideal, it does offer essential protections for the most vulnerable. By understanding how it works and preparing early, individuals and families can navigate this complex system with more clarity and confidence.

The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.