My wife cares for her mother in our home. Her mother needs transportation aid, medication aid, and some meal prep aid. She has significant short-term memory issues, but not dementia. We are filling out the VA Aid and Attendance application (her mother qualifies I believe) but one question is how do you distinguish home care compared to assisted living care on the application, which has several parts?. Can the VA benefit for home care for surviving spouse of a war veteran be equal to the benefit for assisted living cost? Can the benefit be transferred to an assisted living facility should that become necessary?

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The benefit is based on the cost of care. With a facility, the numbers are the "level of care" cost, which can be as low as $200 a month or a LOT higher.
How you assign the cost of home care is easy if there is an agency.
Without an agency, you need to know the hourly rates for your particular area and how many hours would be assigned.
The patient's MD has to substantiate the level of care needed.
The VA is now doing a 5 year lookback, just like Medicaid.
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