Who Pays for Long-Term Care Costs? A Payer Breakdown

Long-term care in the United States is paid for by a few sources: families paying out of pocket, Medicaid, Medicare in narrow situations, private long-term care insurance, and veterans benefits. Medicaid is the largest payer, at roughly 46 percent of national spending. Unpaid family caregivers supply most of the actual hours of care.

What counts as long-term care, and why health insurance excludes it

Long-term care is help with the ordinary activities of daily living: bathing, dressing, eating, toileting, transferring in and out of bed, and moving around. It includes supervision for people with cognitive decline. Care that is mostly this kind of hands-on help is called custodial care, and that distinction drives everything on this page, because custodial care is what most health insurance does not cover.

Skilled nursing and skilled therapy are different: medical treatment ordered by a physician and delivered by licensed clinicians, usually after a hospitalization. A short rehabilitation stay in a skilled nursing facility is medical care. Two years of help getting dressed in an assisted living facility is not. Health insurance plans are built around the first and largely exclude the second.

These services are delivered at home through home care aides or a home health agency, in adult day programs, in assisted living facilities, and in nursing homes. Most people receiving personal care assistance are at home, not in a facility.

The Congressional Research Service estimates that $563.7 billion went to long-term services and supports in 2023, about 13.7 percent of all personal health care spending. The breakdown by payer that year:

Medicaid: 45.6 percent, roughly $257 billion
Medicare: 18.0 percent, roughly $102 billion, nearly all of it short-term post-acute care
Out-of-pocket: 14.4 percent, roughly $81 billion
Private insurance: 8.7 percent, health coverage and long-term care policies combined
Other private funds: 7.5 percent
Other public sources: 5.8 percent

Definitions shift the picture. KFF, using a narrower definition that strips out post-acute spending, found the program covered about 61 percent of the $415 billion spent in 2022, with out-of-pocket spending at 17 percent. Either way, two facts hold: public programs finance most paid care, and Medicaid finances most of the public share.

For raw dollars, federal actuaries put 2024 spending on nursing care facilities and continuing care retirement communities at $219.9 billion, and home health care at $169.4 billion.

Private pay and out-of-pocket costs

Private pay means the person receiving care, or the family, writes the check from personal savings, retirement income, home equity, or the sale of a house. It is the default starting point for most households, and it is where most out-of-pocket costs land.

Research from the Department of Health and Human Services projects that 56 percent of Americans turning age 65 will develop a disability serious enough to need long-term care services. Among those who do, the average duration is 3.1 years; about 22 percent will need long-term care for more than five years. Expected future costs for a person turning 65 average about $120,900 in 2020 dollars. The average conceals wide variation: many people spend nothing, while 14 percent of older adults pay more than $100,000 out of pocket and 6 percent exceed $250,000.

Private pay is usually the entry point rather than the whole story: many people use savings to pay for care for a period, then become financially eligible for public coverage of their long-term care expenses.

Home care, assisted living, and nursing home costs

The cost of long-term care depends on the type of long-term care involved. In a KFF survey, 90 percent of adults said paying $100,000 a year for a nursing home would be impossible or very difficult, and 83 percent said the same of $60,000 a year for home care or assisted living. Those were the national median figures used in the survey; actual costs vary by region, setting, and hours of care needed each week.

Medicaid: the largest payer for institutional care

Medicaid is a joint federal and state insurance program covering health care for people with limited income and assets. It is the only major payer that covers open-ended custodial care, which makes it the country’s backstop.

As of 2025, more than 60 percent of residents in certified nursing facilities nationally had this program as their primary payer. In Florida, that was about 58 percent in urban facilities and 68 percent in rural ones. On the spending side, it paid about 44 percent of the $147 billion spent on institutional care in 2023.

Coverage extends beyond facilities. Every state must cover nursing facility care, but states choose which home and community-based services to offer, and those are capacity-limited. KFF counted 41 states with waiting lists for Medicaid home care in 2025, holding more than 600,000 people, with a median wait around 32 months.

Coverage is based on income and asset limits that vary from state to state, differ by program, and change depending on whether the applicant is married. It is worth being direct about the boundary here: an insurance agency cannot advise on eligibility, and this one does not. Under Florida law, a nonlawyer who advises on strategies for obtaining Medicaid benefits is engaged in the unlicensed practice of law. Questions about whether someone would qualify for Medicaid, or how the Medicaid program treats income and assets, belong with a Florida elder law attorney.

Public understanding is poor, which is part of why families are caught off guard. In the KFF survey, 45 percent of adults 65 and older believed Medicare would pay for a nursing home stay, and 41 percent named Medicare rather than Medicaid as the main source of coverage for low-income residents.

How this works in Florida

Florida delivers most of this coverage through the Statewide Medicaid Managed Care Long-Term Care program, overseen jointly by the Agency for Health Care Administration and the Florida Department of Elder Affairs. Enrollees receive services through a managed care plan covering a defined list that includes nursing facility care, assisted living services, adult companion care, home-delivered meals, therapies, hospice care, and transportation.

Applicants must also meet a clinical standard. Florida’s Comprehensive Assessment and Review for Long-Term Care Services unit evaluates whether a person needs a nursing home level of care. The state operates a waitlist. Screening runs through the local Aging and Disability Resource Center or the statewide Elder Helpline at 1-800-96-ELDER.

Medicare coverage for long-term care is narrow and short-term

Medicare does not pay for long-term care, and that is the most consequential misunderstanding in this subject. The program states plainly that Medicare and most health insurance, including Medicare supplement insurance, do not cover these services. Medicare does not provide coverage for custodial care when that is the only care a person needs, however long-term care needs last.

What is covered is skilled care, on a limited basis:

Skilled nursing facility care. After a qualifying hospital stay, Part A covers up to 100 days per benefit period. In 2026, days 1 through 20 cost nothing after the $1,736 deductible; days 21 through 100 carry $217 per day in coinsurance. After day 100, the beneficiary pays everything.
Home health. Intermittent skilled nursing and therapy at home for people who are homebound and under a physician’s plan of care. Not round-the-clock aides, and not an aide whose only job is help with bathing and dressing.
Hospice care. For people who are terminally ill and elect the benefit. Hospice is end-of-life care, not long-term care.

The 100 days is a maximum, not a typical stay, and applies only while daily skilled care is still required. When a resident no longer needs skilled services, Medicare coverage ends even if days remain, which families experience as an abrupt shift from covered rehabilitation to a private-pay bill.

That is why Medicare’s 18 percent share overstates its role. Nearly all of it is post-acute care in the weeks after a hospitalization, not the years of custodial help people mean when they ask who pays for long-term care.

Long-term care insurance and hybrid private insurance policies

A long-term care insurance policy pays a daily or monthly benefit once the insured needs substantial help with a set number of activities of daily living, such as bathing, dressing, and eating, or has a cognitive impairment. Policyholders qualify for long-term care benefits under that definition, not under a doctor’s order. Traditional long-term care insurance policies are standalone contracts with an ongoing premium, and the amount of coverage is set at purchase. Hybrid or linked-benefit products combine the benefit with life insurance or an annuity, so a death benefit is paid if the coverage goes unused.

It is worth stating plainly how small a share of the national bill these long-term care policies carry. All private insurance, health and long-term care coverage together, accounted for 8.7 percent of spending in 2023, and long-term care policies alone are a fraction of that. Federal analysis found fewer than 8 percent of Americans have ever purchased one, and only about 6 percent of people 50 and older hold an active policy. Self-reported ownership runs higher, near 11 percent of adults, which likely reflects confusion with other insurance policies. A limited number of employer-sponsored group offerings exist, but they reach a small population.

Two structural features explain the small market. First, medical underwriting excludes many applicants. Industry figures reported by KFF Health News showed roughly 30 percent of applicants aged 60 to 64 declined in 2021, rising to 47 percent for ages 70 to 74; more than one in five applicants in their fifties were declined. Conditions that are common by retirement age are frequently disqualifying, so the people most likely to need care are the most likely to be turned down. Second, the market contracted, from more than 100 insurers offering standalone coverage to fewer than a dozen by 2020, with substantial premium increases on older policies along the way.

None of that makes the product useless. For a household that is underwritable and can carry the premium indefinitely, it is a legitimate tool. It is also one payer among several, buying long-term care insurance is not how most Americans cover these costs, and it is not available to everyone who wants it. Whether a particular policy fits a particular household is a question for that household and its own advisors.

Veterans benefits, including Aid and Attendance

The Department of Veterans Affairs pays through two channels that are often confused.

The first is VA health care, which includes nursing care in VA community living centers, contracted community nursing homes, state veterans homes, adult day health care, respite, and home-based primary care. Access depends on service-connected disability status, priority group, and clinical need. These coverage options are assessed clinically rather than purchased, so a veteran’s access can change as their condition does.

The second is VA pension with Aid and Attendance or Housebound allowances. These are not standalone programs; they are increased monthly amounts added to a VA pension for wartime veterans or surviving spouses who meet the pension’s own income and net worth requirements. According to the VA, Aid and Attendance applies when a person needs another individual to help with daily activities such as bathing, feeding, and dressing; must stay in bed because of illness or disability; is in a nursing home due to loss of mental or physical abilities; or has severely limited vision. Housebound applies when a permanent disability keeps a person mostly at home. The two cannot be received at once.

These allowances can offset home care or assisted living costs for eligible veterans and surviving spouses, but they reach a limited population and involve financial tests. Accredited claims agents, accredited attorneys, and veterans service organizations assist with applications at no charge.

Unpaid family caregiving is the largest source of care

Every payer above pays for professional care. None cover the costs families absorb themselves, which are larger than all paid care combined.

AARP’s 2026 analysis estimated 59 million family caregivers provided 49.5 billion hours of care in 2024, with an economic value above $1 trillion. That exceeds total Medicaid spending of $932 billion that year and equals the work of 23.8 million full-time workers, roughly 17 percent of the nation’s full-time workforce. In Florida alone, an estimated 4.3 million caregivers provided 4.1 billion hours valued at about $81 billion a year.

Federal analysis makes the same point per household: for a person turning 65, the expected value of unpaid family care over their remaining lifetime averages about $204,000, more than the expected cost of all paid services combined.

This care is real and expensive, but the cost lands as lost wages, reduced retirement savings, spending on a parent’s household, and the burden for caregivers’ own health. Any honest accounting of who pays has to start here.

Other public programs

PACE. The Program of All-Inclusive Care for the Elderly serves people 55 and older who meet a nursing home level of care but can live safely in the community within a service area. Medicare and Medicaid finance it jointly on a capped per-person basis, and it becomes the enrollee’s sole source of both programs’ benefits.
Older Americans Act services. Federally funded, locally administered home-delivered meals, transportation, caregiver respite, and case management through Area Agencies on Aging. Not means-tested the way Medicaid is, but capacity-limited.
State-funded programs. Many states, Florida included, fund home and community-based services outside Medicaid for people who need help but do not meet its financial rules.

Frequently asked questions

What happens if you don’t have money to pay for a nursing home?

Most people in that position apply for Medicaid, the primary payer for the majority of long-stay nursing home residents nationally. A facility social worker or the local Aging and Disability Resource Center can point families toward the application, and a Florida elder law attorney can address eligibility. Federal law also restricts when a Medicaid-certified facility may discharge a resident, including for nonpayment while an application is pending.

What is the average monthly cost of long-term care?

It depends on setting and hours. KFF used $100,000 a year, about $8,300 a month, as a representative nursing home figure, and $60,000 a year, about $5,000 a month, for home care or assisted living. Hourly home care costs far less for a few hours a week and far more for around-the-clock coverage, and prices vary between metropolitan and rural areas.

Does Medicare cover long-term care or nursing home costs?

No. Medicare coverage includes up to 100 days of skilled nursing facility care per benefit period after a qualifying hospital stay, with $217 daily coinsurance for days 21 through 100 in 2026, plus intermittent skilled home health and hospice care. It does not cover custodial care, and neither does most private health insurance or Medicare supplement insurance.

Does Medicaid cover long-term care or nursing home costs?

Yes, and it is the largest payer for care in a long-term care facility. State programs must cover nursing facility care for eligible enrollees and may also cover home and community-based services, though those often carry waiting lists. Benefits and eligibility require meeting both financial and clinical criteria, and coverage varies by state.

How much money can you have before you have to pay for care?

Everyone pays from their own resources until they meet a payer’s rules. Medicaid applies income and asset limits that vary by state, differ by program, and are treated differently for married couples than for single applicants. How those eligibility requirements apply to a specific household is a legal question, and in Florida advising on qualification strategies is the practice of law, so it belongs with an elder law attorney rather than an insurance agency or a facility.

Why can’t seniors afford long-term care?

Because the cost is measured in years of full-time labor and most retirement income is not built for it. Needs are unpredictable, no universal public program covers custodial care, private coverage is unavailable to many applicants because of underwriting, and Medicare, which most older adults assume will cover them, excludes exactly the care they need.

Can a family member get paid to provide long-term care?

Sometimes. Some state home and community-based services programs permit self-directed care in which the enrollee hires a caregiver, and in certain states that caregiver may be a relative, though spouses and legal guardians are often excluded. Rules vary by state and program. Certain VA programs also provide caregiver stipends for eligible veterans. Whether a specific relative can be paid is a question for the administering agency.

What are the different ways to pay for long-term care?

In rough order of national share: Medicaid; out-of-pocket private pay from savings and income; Medicare for short skilled stays only; private insurance, including long-term care coverage and hybrid life insurance products; VA benefits for eligible veterans and surviving spouses; and state or Older Americans Act programs. Alongside all of them, unpaid family caregiving supplies most of the actual hours.

Disclosures

This article is general educational information about how long-term care is financed in the United States. It is not financial, tax, or legal advice, and it is not a recommendation to buy, keep, or surrender any insurance product. Figures are national or state averages drawn from the Congressional Research Service, HHS ASPE, KFF, CMS National Health Expenditure data, AARP, and Medicare.gov, and were current as of publication; program rules, benefit amounts, and eligibility standards change. Medicaid eligibility questions are legal questions and should be directed to a Florida elder law attorney. Veterans benefit questions should be directed to the Department of Veterans Affairs or an accredited representative. Lifeworth Insurance Agency is a trade name of Lifeworth Financial Group LLC, National Producer Number 21228343, licensed in Florida.