Methods of Payment and Financing Options for Assisted Living


The national median cost of assisted living is $4,500 per month, according to insurance provider Genworth. Prices vary depending on location, services, room type, and amenities, but paying anywhere from $30,000 to nearly $100,000 a year on senior living costs is a shock for most older adults, regardless of their socioeconomic status. When pricing out these communities, families often wonder, “Who pays for assisted living?”

To afford assisted living, seniors make use of an array of funding sources, some public, some private. Public sources often include Medicaid, and private ones can include personal savings, Social Security benefits, pension payments, retirement account savings, and long-term care insurance. Often, a combination of these sources is required. However, please note: Financial assistance for assisted living is limited and usually doesn't cover 100% of a senior’s costs.

Read on to learn about some of the most popular ways of paying for assisted living, including some options that are less well known.

Ways to pay for assisted living

Does Medicaid pay for assisted living?

Medicaid may cover the cost of some care services provided in an assisted living community. However, Medicaid doesn’t cover the cost of assisted living room and board the way it does for nursing home residents. If a senior’s state doesn’t offer separate resources that help cover assisted living room and board costs, it likely offers other services that can help delay or prevent their move to a long-term care facility.

It’s important to note that Medicaid helps people with low income and limited assets cover health care costs, including long-term care. The primary service that assisted living facilities across all states provide is help with activities of daily living (ADLs), including bathing, dressing, mobility, and more. However, some states permit assisted living communities to provide a higher level of care, such as limited skilled nursing services and rehabilitative therapies. Medicaid also covers these medical assisted living services.

Most states offer Medicaid beneficiaries some degree of financial assistance with home and community-based services (HCBS), such as assisted living, through a state’s regular Medicaid program, Medicaid waivers, or both. However, according to the U.S. Department of Health and Human Services (HHS), “each state sets its own guidelines regarding eligibility and services,” but they must meet federal requirements.

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

Does Medicare pay for assisted living?

Medicare is the federal health insurance program for people age 65 and over and some younger individuals with disabilities, end-stage renal disease, or ALS. Like other health insurance plans, Medicare does not cover long-term care services. Therefore, Medicare doesn’t pay for the cost of room and board or personal care in an assisted living facility. However, it may be used to cover a senior’s health care expenses.

Does long-term care insurance cover assisted living?

Long-term care insurance is purchased through a private insurance company to cover the costs of elder care, including assisted living. Like health insurance policies, premium prices vary greatly depending on factors like the insured’s health status, age, and amount of coverage. And, the policies vary widely in what they will cover, so reading all fine print is essential.

With these factors in mind, planning far ahead is crucial if an individual wishes to use long-term care insurance 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 long-term care insurance is between ages 40 and 50 when a person is still in fairly good health.

Most importantly, even if a senior isn’t denied coverage despite advanced age and/or health issues, the premiums are often cost-prohibitive and increase over time.

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 benefit is an “increased” monthly pension that many veterans and their families don’t 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.

The maximum VA Aid and Attendance pension rates for 2022 are:

  • $2,051 monthly for a veteran with no dependents
  • $2,431 monthly for a veteran with a non-veteran spouse
  • $1,318 monthly for a surviving spouse with no dependents

Read: Veterans’ Surviving Spouses May Be Entitled to VA Pension

Paying for assisted living 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 assisted living and other long-term care services. A third party purchases the policy for a cash payment that’s 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

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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 for Seniors

Relying on annuity income to fund long-term care services

An annuity is a contract between a person and an insurance company that’s designed to meet retirement and other long-range financial goals. There are a few different types of annuities, each with different features, and each with their own 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.

Taking out a bridge loan to pay for assisted living

Bridge loans are a risky option that should be used with caution. These short-term loans may be appropriate for seniors whose financial situations aren’t currently conducive to a move to long-term care.

For example, it’s 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 (or the house doesn’t sell quickly enough), this plan can unravel. For people affected by conditions out of their control, a bridge loan 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 (usually six to 12 months) for a sum that will cover repayment of the loan.

Assisted living resources: Learn more about caregiving support as you research how to pay

As you investigate paying for assisted living, know that there are numerous supportive and informational resources available to you:

  • As AgingCare's senior living referral service counterpart, A Place for Mom is a longstanding leader in the senior living referral business. Their advice is always provided at no cost to seniors and their families who are searching for options.
  • AgingCare’s forum has been a source of inspiration, support, guidance, and more to thousands of caregivers for years.
  • The U.S. Administration on Aging’s free Eldercare Locator is a straightforward way to see what guidance and informational options are available near you.
  • Lastly, Access to Respite Care and Help’s free National Respite Locator can help you locate respite care in your area.

Finding a way to pay for assisted living

Seniors can use more than one source of funds and financial assistance to cover assisted living expenses. There are many options available, and seniors and their families should consider those that apply to their situation. Before taking risks with investments 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.

Reviewed by caregiving expert Carol Bradley Bursack.

Genworth Cost of Care Survey 2021 (
What is the Medicaid Program? (
Long-term care (
VA pension rates for Veterans (
VA Survivors Pension benefit rates (
FTC Consumer Information: Reverse Mortgages (
Annuities (
What Is a Bridge Loan, and How Does It Work, With Example (

The information contained in this article is for informational purposes only and is not intended to constitute financial advice or create an advisory relationship between AgingCare and the reader. Always seek the advice of your accountant or financial advisor with respect to any particular financial matter, and do not act or refrain from acting on the basis of anything you have read on this site. Links to third-party websites are only for the convenience of the reader; AgingCare does endorse the contents of the third-party sites.

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