Assisted living is one of the most common care options for seniors who need help with daily activities but do not require the intensive medical care of a nursing home. However it is also one of the most significant expenses a family can face. Understanding the different ways to pay for assisted living can help families make more informed financial decisions and avoid being caught off guard by the costs.
How much does assisted living cost
The cost of assisted living varies significantly by location, the type of facility, and the level of care required. According to national surveys the median monthly cost of assisted living in the United States is approximately $4,500 to $5,000 for a private apartment. Costs in major metropolitan areas or high cost states can be significantly higher — sometimes exceeding $8,000 to $10,000 per month.
Most assisted living facilities charge a base monthly fee that covers room and board, meals, and basic services. Additional care services such as medication management, memory care, or personal care assistance are often charged separately and can add hundreds or thousands of dollars to the monthly bill.
Private pay — out of pocket
The most common way people initially pay for assisted living is out of pocket using personal savings, retirement accounts, investment income, or proceeds from the sale of a home. This is called private pay.
For many families private pay is the starting point while they explore other funding options or wait to qualify for benefits programs. The challenge is that assisted living costs can deplete savings quickly especially for those who require care for several years.
Long term care insurance
Long term care insurance is designed specifically to cover the cost of extended care services including assisted living, memory care, nursing home care, and in-home care. Policies vary widely in terms of what they cover, the daily or monthly benefit amount, how long benefits last, and the conditions that must be met to trigger benefits.
Key things to know about long term care insurance:
- Policies are typically purchased before a person needs care — usually in their 50s or early 60s when premiums are lower and health requirements are easier to meet
- Most policies require that the insured person be unable to perform a certain number of activities of daily living — typically two out of six — before benefits begin
- Benefits are usually paid as a daily or monthly amount up to the policy limit
- Some policies include inflation protection which increases the benefit amount over time to keep pace with rising care costs
- Premiums can be expensive and have increased significantly in recent years
If you or a loved one has a long term care insurance policy review it carefully to understand what is covered and how to initiate a claim.
Veterans benefits — Aid and Attendance
Eligible wartime veterans and their surviving spouses may qualify for the VA Aid and Attendance benefit which provides a monthly tax-free payment that can be used to help pay for assisted living. The benefit can provide up to approximately $2,700 per month for a veteran with a dependent or approximately $1,700 per month for a surviving spouse as of recent benefit rates.
To qualify the veteran must have served at least one day of active duty during a qualifying wartime period, meet income and asset requirements, and require assistance with daily activities. This benefit is significantly underutilized and many eligible veterans and surviving spouses are unaware it exists.
Medicaid waiver programs
Original Medicaid does not typically cover assisted living but many states offer home and community based services waiver programs — also called HCBS waivers — that can pay for assisted living or similar residential care settings for eligible low income seniors.
These waiver programs vary significantly by state in terms of eligibility requirements, covered services, and the types of facilities that qualify. Many states have waiting lists for these programs. Contact your state’s Medicaid agency or local Area Agency on Aging to find out what programs are available in your area.
Supplemental Security Income
Supplemental Security Income — SSI — is a federal program that provides monthly payments to low income individuals who are aged 65 or older, blind, or disabled. SSI recipients may be eligible for state supplements that can help cover the cost of assisted living in some states. The availability and amount of these supplements varies by state.
Life insurance options
There are several ways life insurance can be used to help pay for assisted living:
- Life settlement — selling an existing life insurance policy to a third party investor for a lump sum payment that is greater than the cash surrender value but less than the death benefit. The proceeds can be used to pay for care.
- Accelerated death benefit — many life insurance policies include a provision that allows the policyholder to receive a portion of the death benefit while still alive if they are diagnosed with a terminal or chronic illness. Check your policy for this provision.
- Surrendering the policy for cash value — if a whole life or universal life insurance policy has accumulated cash value it can be surrendered for a lump sum payment.
Reverse mortgage
A reverse mortgage allows homeowners aged 62 and older to convert a portion of their home equity into cash while continuing to live in the home. The proceeds can be used for any purpose including paying for assisted living.
However a reverse mortgage becomes due when the borrower permanently leaves the home — including moving to an assisted living facility. This means a reverse mortgage may not be a long term solution for funding assisted living if the home will be vacated. It may be more useful for funding in-home care that allows the person to remain in their home longer.
Bridge loans
Some families use short term bridge loans to cover the cost of assisted living while waiting for other funds to become available such as proceeds from the sale of a home or approval of a benefits application. Bridge loans are a temporary solution and carry interest costs so they are best used for short periods.
Area Agency on Aging
The Area Agency on Aging — AAA — is a network of local organizations funded by the federal government to help older adults and their families navigate care options and find financial assistance programs. Every community in the United States is served by an Area Agency on Aging. They can help identify local programs, benefits, and resources that may help offset the cost of assisted living.
You can find your local Area Agency on Aging by visiting eldercare.acl.gov or calling the Eldercare Locator at 1-800-677-1116.
Planning ahead
The most effective way to manage the cost of assisted living is to plan ahead. Steps that can make a significant difference include:
- Purchasing long term care insurance while still in good health
- Researching veterans benefits if you or your spouse served during a qualifying wartime period
- Consulting with an elder law attorney about Medicaid planning strategies
- Having an honest conversation with family members about finances and preferences for care
- Researching assisted living options in your area before a crisis occurs so you are not making decisions under pressure
Key terms to know
- Private pay — paying for care out of pocket using personal funds
- Long term care insurance — insurance designed to cover the cost of extended care services
- Aid and Attendance — a VA benefit that provides monthly payments to eligible veterans and surviving spouses who need help with daily activities
- HCBS waiver — a Medicaid program that funds home and community based services as an alternative to nursing home care
- Life settlement — selling a life insurance policy to a third party for a lump sum payment
- Reverse mortgage — a loan that allows homeowners aged 62 and older to convert home equity into cash
- Area Agency on Aging — a local organization that helps older adults and families navigate care options and benefits
Sources
- Medicare.gov
- Medicaid.gov
- U.S. Department of Veterans Affairs — va.gov
- Administration for Community Living — eldercare.acl.gov
- Genworth Cost of Care Survey
This article is for general informational purposes only and does not constitute legal or financial advice. Program details and costs vary by state and are subject to change. Consult a licensed professional for guidance specific to your situation.