Does insurance pay for memory care facilities?

With the median monthly cost of memory care in the U.S. nearing $6,500 in 2025, according to A Place for Mom data, understanding the financial landscape is critical. This guide explores whether insurance pays for memory care facilities and outlines the various funding streams available to families facing this challenge.

Quick Summary

Insurance coverage for memory care facilities is complex, with standard health insurance and Medicare rarely covering long-term residency costs, though they may cover some medical services. Specialized policies like long-term care insurance, as well as government programs like Medicaid and VA benefits, can help cover costs, subject to strict eligibility and coverage rules.

Key Points

• Medicare's Limitations: Medicare does not cover the long-term custodial care and room and board costs that are the primary expenses of memory care facilities, only short-term skilled care and medical services.

• Medicaid's State-Specific Coverage: Medicaid can cover memory care, but eligibility rules vary by state; while it covers all costs in certified nursing homes, HCBS waivers may only cover care services in assisted living/memory care settings, not room and board.

• Long-Term Care Insurance Timing: To cover memory care, a long-term care insurance policy must be purchased and in effect before a dementia diagnosis, as pre-existing conditions typically prevent eligibility.

• Leveraging VA Benefits: Veterans and surviving spouses may qualify for the Aid and Attendance benefit, a pension supplement that can be used flexibly to pay for memory care costs in various settings.

• Combining Funding Sources: Most families rely on a combination of resources, including private funds (savings, investments, home equity), specialized insurance, and government programs, to manage the high costs of memory care.

• Early Planning is Crucial: Due to eligibility requirements and waiting periods, financial planning for memory care is most effective when done proactively, before a formal dementia diagnosis.

Understanding the Complexities of Insurance and Memory Care

Memory care facilities, designed for individuals with Alzheimer's disease and other forms of dementia, provide a secure environment with specialized services. However, the high cost of this care often leads families to question if insurance can shoulder the financial burden. The short answer is that while some types of insurance can help, most do not cover the bulk of the expenses, which are categorized as 'custodial' care rather than 'medical' care. This distinction is fundamental to understanding your financial options.

The Role of Medicare in Paying for Memory Care

For many seniors, Medicare is their primary health insurance, but its coverage for memory care is very limited. It’s important to separate what Medicare pays for from what it doesn't.

• What Medicare covers: Medicare Part A may cover a short, rehabilitative stay (up to 100 days) in a skilled nursing facility (SNF) following a qualifying hospital stay, but only for medically necessary skilled care, not for ongoing custodial needs. Part B covers outpatient medical services, like doctor's visits, cognitive assessments, and occupational or physical therapy. Part D covers prescription drugs for dementia.
• What Medicare does not cover: Crucially, Original Medicare does not cover the cost of long-term custodial care, which includes assistance with activities of daily living (ADLs) or room and board in a memory care facility.
• Medicare Advantage (Part C): These private plans must offer at least the same benefits as Original Medicare, but some may offer additional benefits. While some Special Needs Plans (SNPs) exist for chronic conditions like dementia, they still have limitations on covering long-term custodial care.

Using Medicaid for Memory Care Costs

Medicaid is a joint federal and state program for low-income individuals and is a more comprehensive option for covering memory care, but eligibility rules vary significantly by state and are based on both financial and functional needs.

• Institutional Medicaid: For those requiring a nursing home level of care, Institutional Medicaid typically covers the full cost of care, including room and board, in a Medicaid-certified nursing facility. This can include specialized memory care wings within these facilities.
• Home and Community-Based Services (HCBS) Waivers: Many states offer these waivers to allow individuals to receive long-term care services in community settings, like assisted living or memory care facilities, rather than in an institutional setting. HCBS waivers often cover care services, but not the room and board portion. This means residents may need to use personal funds or other sources to pay for living expenses. HCBS waivers are not an entitlement, so there may be waiting lists.

The Targeted Coverage of Long-Term Care Insurance

This specialized type of private insurance is specifically designed to cover the costs of long-term care services, including memory care.

• Pre-Diagnosis is Key: To be eligible, a person must purchase an LTC insurance policy before they receive a diagnosis of dementia. Most policies require medical underwriting, and a pre-existing condition like dementia would disqualify an applicant.
• Benefit Triggers: Benefits typically begin after a person is unable to perform two or more ADLs or has a severe cognitive impairment, such as dementia. Policies have an elimination period (a waiting period) before they start paying.
• Coverage Details: Policies vary widely in daily benefit limits, maximum payout periods, and lifetime benefit amounts. It's vital to review a policy's specifics carefully. For more information, the National Council on Aging offers helpful resources on this topic: Navigating Long Term Care Insurance for Dementia Patients.

VA Benefits for Veterans and Spouses

Eligible veterans and their surviving spouses may qualify for various benefits through the Department of Veterans Affairs that can help pay for memory care.

• Aid and Attendance: This is a monthly monetary supplement added to a VA Pension for qualifying veterans or surviving spouses who need assistance with ADLs. This tax-free income can be used to pay for memory care in an assisted living setting or at home.
• VA Health Care: The VA health system provides a range of services for veterans with dementia, such as adult day care, skilled nursing home care, and caregiver support. The specifics depend on the veteran's needs and the availability of services at local VA medical centers.

Comparison of Financial Resources for Memory Care

Feature	Medicare	Medicaid	Long-Term Care Insurance	VA Aid and Attendance
Primary Coverage	Medically necessary services (short-term)	Nursing home care, some community care services	Long-term custodial and medical care	Monthly cash benefit supplement
Room and Board	Not Covered	Covered (in nursing homes), not covered (waiver programs)	Covered (depending on policy)	Helps cover (via pension supplement)
Eligibility	Age 65+ or certain disabilities	Low income and assets, functional need	Must purchase while healthy	Wartime service, financial need, functional need
Pre-existing Condition	Does not affect eligibility	Based on financial and functional need	Ineligible for new policy	Does not affect eligibility
Benefit Limits	Limited skilled care (100 days), medical services	Varies by state program and setting	Daily, time, and lifetime limits vary	Monthly dollar amount based on need
Facility Flexibility	N/A (for long-term residence)	Limited to Medicaid-approved facilities	Covers most licensed facilities	Can be used at any facility

Alternative Payment Options

When insurance falls short, families often turn to other resources to cover memory care costs.

1. Personal Assets and Savings: Using personal savings, retirement funds (401(k), IRA), or other investments is a common method for funding care.
2. Home Equity: A person’s home can be a significant asset. Options include selling the home outright, using a reverse mortgage to convert equity into cash, or securing a bridge loan for immediate needs while waiting for a home to sell.
3. Life Insurance: Some life insurance policies can be leveraged. A policyholder can sell their policy (life settlement) or cash it out (accelerated death benefits), though these actions reduce or eliminate the future death benefit.
4. Social Security Benefits: While not enough to cover costs alone, Social Security retirement benefits or Social Security Disability Insurance (SSDI) can provide a reliable source of monthly income.
5. Non-Profit Assistance: Organizations like the Alzheimer’s Association may offer guidance on finding local resources or provide small grants for care.

Creating a Comprehensive Financial Plan

Navigating the payment landscape for memory care is a marathon, not a sprint. A comprehensive financial plan is essential.

1. Assess the Situation: Start by evaluating the loved one's current health status, the likely progression of their condition, and their financial resources, including all types of insurance, investments, and assets.
2. Consult Experts: Engage with a financial planner specializing in elder care, an elder law attorney, or a social worker. These professionals can provide personalized advice and help navigate complex eligibility rules for programs like Medicaid and VA benefits.
3. Combine Resources: Recognize that a single solution is unlikely. Most families use a mix of private funds, insurance benefits, and government assistance to cover costs.
4. Plan for the Future: For those in earlier stages of dementia or looking to prepare for the future, proactive planning is crucial. Purchasing long-term care insurance while healthy is one of the most effective strategies to secure coverage.

Choosing the right path requires diligence and understanding, but with a well-researched strategy, families can secure the highest quality of care for their loved ones without undue financial strain.

Frequently Asked Questions

What is the difference between custodial and medical care?

Medical care is delivered by licensed medical professionals and is generally covered by standard insurance. Custodial care involves non-medical help with daily living activities like bathing, dressing, and eating. Most memory care costs are for custodial care, which Medicare and typical health insurance do not cover.

Does private health insurance cover memory care facilities?

Generally, private health insurance does not cover the room and board or long-term custodial care services in a memory care facility. It may, however, cover some medically necessary services provided within the facility, similar to Medicare.

Can I get long-term care insurance after a dementia diagnosis?

No, most long-term care insurance policies require medical underwriting during the application process. If a dementia diagnosis has already been made, it is highly unlikely that you will be able to purchase a new policy.

How do I find out if a memory care facility accepts Medicaid?

You can contact your state's Medicaid agency or local Area Agency on Aging for a list of certified facilities. It is also recommended to ask facilities directly during your search, as not all assisted living or memory care facilities accept Medicaid.

What if a veteran doesn’t need a skilled nursing level of care?

Veterans who do not require a skilled nursing level of care may still be eligible for the Aid and Attendance benefit, which can help cover costs in an assisted living or memory care setting. VA-approved Community Residential Care homes are another option.

Are there tax benefits for paying for memory care?

Yes, some memory care expenses may be tax-deductible as medical expenses, but rules vary. This often includes costs for care services and, in some cases, a portion of the room and board. It is best to consult with a tax professional to understand your eligibility.

What is the best age to purchase long-term care insurance?

While it depends on the individual, financial experts often suggest looking into long-term care insurance in your mid-50s. This is a time when most people are still in relatively good health, making them more likely to be eligible for coverage and lock in a lower premium.