The national median cost of assisted living is $4,300 per month according to Genworth’s 2020 Cost of Care Survey. Assisted living prices vary depending on location, services, room type and amenities, but paying anywhere from $30,000 to nearly $70,000 a year on senior living costs is a shock for most older adults, regardless of their socioeconomic status.

Most families cover assisted living costs using private funds—often a combination of savings, Social Security benefits, pension payments and retirement accounts. However, there are some government programs and financial tools that can offer help paying for assisted living. It is important to ensure a senior takes advantage of all resources available to finance their long-term care. Some of the most popular ways of paying for assisted living are listed below, including some options that are less well known.

Ways to Pay for Assisted Living

Does Medicare Pay for Assisted Living?

Medicare is the federal health insurance program for people age 65 and over, some younger individuals with disabilities, and some individuals with end-stage renal disease. Like other health insurance plans, Medicare does not cover long-term care services. Therefore, Medicare does not pay for the cost of room and board or personal care in an assisted living facility.

Does Medicaid Pay for Assisted Living?

Often confused with Medicare, Medicaid is a joint federal and state program that helps people with low income and limited assets cover health care costs, including long-term care. According to the Centers for Medicare and Medicaid Services (CMS), “each state sets its own guidelines regarding eligibility and services,” but they must meet federal requirements.

Most states offer long-term care Medicaid beneficiaries some degree of financial assistance with assisted living costs, either through regular Medicaid or Medicaid waivers. However, Medicaid does not cover the cost of basic room and board the way it does for residents of nursing homes. If a senior’s state does not offer a Medicaid program that helps cover assisted living costs, it likely offers home and community based services that can help delay or prevent their move to a long-term care facility.

Read: Medicaid and Assisted Living: What’s Covered and What’s Not

Using Long-Term Care Insurance to Cover Assisted Living Costs

Long-term care insurance (LTCI) is a policy that is purchased through a private insurance company to cover the costs of elder care, including assisted living. Like health insurance policies, the price of the premium varies greatly depending on factors like the insured’s health status, age and amount of coverage. However, planning ahead is crucial if an individual wishes to use LTCI to pay for their future care. Coverage is often denied for people with pre-existing conditions, such as Alzheimer’s disease, multiple sclerosis, stroke or Parkinson’s disease. In fact, the best time to buy a LTCI policy is between ages 40 and 50 when a person is still in fairly good health. Even if a senior is not denied coverage despite advanced age and/or health issues, the premium costs are often prohibitive.

Read: Long-Term Care Insurance: How to Use a Policy and File a Claim

Applying for VA Benefits to Pay for Assisted Living

The U.S. Department of Veterans Affairs (VA) offers pension funds to some eligible wartime veterans (and their surviving spouses) who have low income and limited assets. The Aid and Attendance (A&A) benefit is an “increased” monthly pension that many veterans and their families do not know about. This higher pension amount is awarded to eligible veterans and surviving spouses who require the assistance of another person to perform activities of daily living (ADLs), such as bathing, dressing, toileting and feeding. Assisted living facilities provide these kinds of personal care services.

In 2021, an eligible veteran may receive up to $1,936 monthly, a surviving spouse with no dependents is eligible for up to $1,244 monthly, and a veteran with a non-veteran spouse is eligible for up to $2,295 monthly through the A&A pension program.

For more information on this and other VA benefits, what these programs cover, eligibility criteria and how to apply, download’s FREE Veterans Benefits eBook.

Funding Long-Term Care Services With a Life Insurance Settlement

A life settlement, or life insurance settlement, converts an existing life insurance policy into money that can be used to pay for long-term care services. A third party purchases the policy for a cash payment that is typically more than the surrender value of the policy but less than the death benefit amount. This third party assumes the responsibility of paying the premiums and becomes the beneficiary of the policy. When the insured dies, the third party receives the death benefit.

Read: How to Use a Life Insurance Policy to Pay for Long-Term Care

Using a Reverse Mortgage to Pay for Assisted Living

An older adult who owns their home outright or has only a small mortgage can convert some of the equity in their home into cash payments while still retaining ownership. While there are different types of reverse mortgages, federally insured Home Equity Conversion Mortgages (HECMs) are the most common. When it comes to paying for residential senior living (like assisted living), reverse mortgages are usually only an option if the institutionalized elder’s spouse, or another individual who is a co-borrower on the loan, still resides in the home and maintains it per the terms of the loan. Otherwise, the loan becomes due when the last borrower no longer lives in the house for 12 consecutive months, sells the home or dies.

Read: Understanding the Pros and Cons of Reverse Mortgages

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Relying on Annuity Income to Fund Long-Term Care Services

An annuity is a contract between a person and an insurance company that is designed to meet retirement and other long-range financial goals. There are a few different types of annuities, each with different features, pros and cons. You may make a lump-sum payment or series of payments and, in return, the insurer agrees to make periodic payments to you. These disbursements may begin immediately or at some future date.

Annuities aren’t for everyone, but some seniors use these investments to turn their savings into a steady stream of retirement income that can be used to pay for assisted living and other long-term care services.

Read: The Pros and Cons of Using Annuities for Retirement Planning

Taking Out a Bridge Loan to Help Pay for Assisted Living

Bridge loans are a risky option that should be used with caution. A bridge loan is a short-term loan that may be appropriate for seniors whose financial situations are not currently conducive to a move to long-term care.

For example, it is common for an elder to sell their home and use the proceeds to fund their move to assisted living. But, if their care needs suddenly become too urgent to wait until the house sells before moving to assisted living (or the house doesn’t sell quickly enough), this plan can unravel. For people affected by conditions out of their control, a bridge loan, typically for 6 to 12 months, may be a viable option for temporarily funding their care. In this case, the senior assumes that their home will sell within the length of time specified in the contract for a sum that will cover repayment of the loan.

Finding a Way to Pay for Assisted Living

Seniors can use more than one source of funds and financial assistance to cover assisted living costs. There are many options available, and seniors and their families should consider those that apply to their situation. Before taking risks with investments and assets or making major financial decisions, be sure to speak with a reputable financial advisor and possibly an elder law attorney. Local Area Agencies on Aging also provide free benefits counseling and information on government programs like Medicaid and other resources.

Sources: Genworth Cost of Care Survey 2020 (; Medicaid (; VA pension rates for Veterans (; VA Survivors Pension benefit rates (; FTC Consumer Information: Reverse Mortgages (; Annuities (