Financial Planning
back
As Americans live longer, planning for future health-care needs has become an essential part of retirement and estate strategy. If a time comes when you can no longer care for yourself, nursing home care may be necessary — but the cost can be significant. Understanding how Medicaid works, what it covers, and how eligibility is determined can help protect both your finances and your peace of mind.¹
Levels of Care in Nursing Homes
Nursing homes are licensed facilities that provide varying degrees of long-term care depending on a resident’s medical and functional needs:
Paying for Nursing Home Care
While Medicare may pay for short-term rehabilitation following a hospital stay, it generally does not cover long-term custodial or intermediate care.⁵ Medigap policies may fill small coverage gaps but also exclude extended stays.
That leaves three primary payment options for most nursing home residents:
Because LTCI policies can be expensive or unavailable to older adults with pre-existing conditions, Medicaid often becomes the payer of last resort.⁷
How Medicaid Helps
Medicaid is a joint federal-state program that covers medical and long-term care costs for qualifying low-income individuals, including older adults and people with disabilities. It is the largest single payer of nursing home expenses in the United States, funding more than half of all long-term care nationwide.⁸
Eligibility rules vary by state but must meet federal minimum standards. Applicants must demonstrate:
Certain assets—such as a primary residence (up to state limits), a vehicle, or personal belongings—may be excluded.⁹ Many states allow residents who initially exceed these limits to “spend down” their assets by paying for care until they qualify.¹⁰ However, this can quickly deplete life savings if not carefully planned.
Medicaid Planning
Because Medicaid rules are complex, planning ahead is crucial. Strategic steps may include:
Improper transfers of assets can trigger penalty periods of ineligibility, so consulting an elder law attorney familiar with state-specific Medicaid rules is essential.¹¹
Selecting a Nursing Home
Not all nursing homes accept Medicaid, and those that do may limit the number of Medicaid-funded beds.¹² If Medicaid will be part of your care plan, confirm that your chosen facility participates in the program.
When evaluating nursing homes, consider:
Planning early—before a crisis arises—can help secure placement at a quality facility that aligns with your needs and financial plan.
The Bottom Line
Nursing home care is one of the largest potential expenses in retirement. While Medicaid provides a critical safety net, its eligibility restrictions make advance planning essential. A qualified elder law or financial planning professional can help you explore long-term care insurance, asset-protection strategies, and spousal safeguards to ensure you receive the care you need—without unnecessarily jeopardizing your estate.
Medicaid and Nursing Home Care
Levels of Care in Nursing Homes
Nursing homes are licensed facilities that provide varying degrees of long-term care depending on a resident’s medical and functional needs:- Skilled nursing care: 24-hour care ordered by a physician and delivered by licensed medical professionals, usually following an illness, surgery, or hospital stay.²
- Intermediate care: Occasional rehabilitative and nursing services under a physician’s supervision, often used for chronic conditions that require regular monitoring.³
- Custodial care: Assistance with daily activities—such as bathing, eating, or dressing—typically provided by trained aides rather than medical professionals.⁴
Paying for Nursing Home Care
While Medicare may pay for short-term rehabilitation following a hospital stay, it generally does not cover long-term custodial or intermediate care.⁵ Medigap policies may fill small coverage gaps but also exclude extended stays.That leaves three primary payment options for most nursing home residents:
- Medicaid, for those who meet strict income and asset requirements.
- Private assets, such as personal savings or investments.
- Long-term care insurance (LTCI), for those who purchased coverage earlier in life.⁶
Because LTCI policies can be expensive or unavailable to older adults with pre-existing conditions, Medicaid often becomes the payer of last resort.⁷
How Medicaid Helps
Medicaid is a joint federal-state program that covers medical and long-term care costs for qualifying low-income individuals, including older adults and people with disabilities. It is the largest single payer of nursing home expenses in the United States, funding more than half of all long-term care nationwide.⁸Eligibility rules vary by state but must meet federal minimum standards. Applicants must demonstrate:
- Medical need, meaning they meet clinical criteria for nursing home care.
- Financial need, meaning their income and countable assets fall below state thresholds.
Certain assets—such as a primary residence (up to state limits), a vehicle, or personal belongings—may be excluded.⁹ Many states allow residents who initially exceed these limits to “spend down” their assets by paying for care until they qualify.¹⁰ However, this can quickly deplete life savings if not carefully planned.
Medicaid Planning
Because Medicaid rules are complex, planning ahead is crucial. Strategic steps may include:- Establishing irrevocable trusts to protect assets (subject to look-back rules).
- Structuring income to meet eligibility thresholds.
- Preserving sufficient resources for a community spouse (the partner who remains at home).
Improper transfers of assets can trigger penalty periods of ineligibility, so consulting an elder law attorney familiar with state-specific Medicaid rules is essential.¹¹
Selecting a Nursing Home
Not all nursing homes accept Medicaid, and those that do may limit the number of Medicaid-funded beds.¹² If Medicaid will be part of your care plan, confirm that your chosen facility participates in the program.When evaluating nursing homes, consider:
- Level of medical care: Ensure the facility provides the services you anticipate needing.
- Quality indicators: Review Medicare’s Care Compare database, which rates facilities on staffing, health inspections, and outcomes.¹³
- Costs and amenities: Compare pricing and recreational opportunities.
- Staffing and cleanliness: Visit in person to assess staff-resident interactions and overall facility condition.
Planning early—before a crisis arises—can help secure placement at a quality facility that aligns with your needs and financial plan.
The Bottom Line
Nursing home care is one of the largest potential expenses in retirement. While Medicaid provides a critical safety net, its eligibility restrictions make advance planning essential. A qualified elder law or financial planning professional can help you explore long-term care insurance, asset-protection strategies, and spousal safeguards to ensure you receive the care you need—without unnecessarily jeopardizing your estate.Footnotes / Sources
- U.S. Centers for Medicare & Medicaid Services (CMS), Nursing Home Care Definitions, 2025.
- U.S. Department of Health and Human Services (HHS), Types of Long-Term Care Services, 2024.
- National Institute on Aging (NIA), Understanding Long-Term Care, 2025.
- Medicare.gov, What Medicare Covers: Skilled Nursing Facility Care, 2025.
- U.S. Government Accountability Office (GAO), Long-Term Care Financing Overview, 2025.
- National Association of Insurance Commissioners (NAIC), Long-Term Care Insurance Report, 2025.
- Kaiser Family Foundation (KFF), Medicaid’s Role in Nursing Home Care, September 2025.
- Medicaid.gov, Eligibility Rules by State, updated August 2025.
- ElderLawAnswers, Medicaid Spend-Down Explained, 2025.
- American Bar Association (ABA), Elder Law and Medicaid Planning, 2024.
- U.S. Department of Justice (DOJ), Nursing Home Admissions and Medicaid Rights, 2025.
- CMS, Care Compare Database for Nursing Homes, accessed October 2025.
