Paying for care

What happens when your savings run out paying for care?

For most households the backstop is Medicaid — it is the programme that pays for long-term nursing home care once private funds are used down, because Medicare.gov states that Medicare does not pay for long-term care at all. Before that point, three things decide how much of your savings survives: which assets the state counts, the look-back period, and the protections for a spouse who stays at home. Several other payment paths can buy time in between. Here is the order to work through, and where each rule comes from.

Data: CareScout Cost of Care Survey — 2025 national medians

Programme sources: Medicare.gov (long-term care; skilled nursing) and Medicaid.gov (eligibility; home and community based services). Cost context: CareScout Cost of Care Survey 2025 national medians.

The order the money is spent

Care is paid for in a sequence, and knowing the sequence is what stops a household from spending the wrong pot first. Private funds go first — savings, pension income, the sale of assets. At the 2025 national medians, assisted living is $6,200 a month and a semi-private nursing home room is $9,581 a month, so a few years of care can run through a lifetime of saving. Medicaid is the payer that comes last, and it comes only for people who qualify.

The reason the middle step matters is the spouse who is not in care. Before Medicaid will pay, the couple's finances are reviewed as a unit, and the rules are built to keep the community spouse from being impoverished — but only if the money is arranged within the rules. Spending down badly, or transferring assets at the wrong time, can delay eligibility instead of protecting anyone.

What "running out" means under Medicaid

"Running out" is not the same as a zero bank balance. It means getting the assets the state counts below the limit the state sets. Medicaid.gov splits a person's resources into countable and non-countable, and it is the countable side that has to fall. The thresholds are set state by state, so no national number applies — the state agency is the only source for the figure that governs your case. Three rules decide most of it:

Countable assets for Medicaid — which resources count, and which the programme leaves out.
The Medicaid look-back period — the window of past transfers the state reviews before it will pay.
Spousal impoverishment rules — how a married couple's resources are divided so the spouse at home keeps a share.
How to apply for Medicaid long-term care — who to file with, and the level-of-care test that blocks so many applications.

One step catches families out: the level of care. Even with the finances in order, Medicaid.gov says a person may have to demonstrate a need for the level of care that would qualify for services in an institutional setting. A low functional assessment can stop a file that is financially clean, so treat the assessment as part of the plan, not an afterthought.

The payment paths that stretch savings

Between private pay and Medicaid there are real options, and each one has its own rulebook. None of them covers the whole bill, but together they can change how long savings last and how much choice the family keeps. The four worth checking first:

VA Aid and Attendance — a benefit paid on top of a VA pension for veterans and surviving spouses who need help with daily activities; it does not pay assisted living directly, but it adds to the household's income.
Long-term care insurance — pays strictly on the policy's own terms: the trigger, the daily or monthly maximum and the benefit period are all written in the contract.
Life insurance — a death benefit is not a monthly payment, but an accelerated death benefit, a cash-value surrender or a life settlement can turn a policy into money now.
HSA and FSA accounts — qualified long-term care expenses can be paid from these accounts, which stretches the same dollars further.

A reverse mortgage belongs on the same list. Under HUD's HECM programme a homeowner aged 62 or older can convert home equity into funds, and HUD requires a counselling session with a HUD-approved counsellor before the loan closes. The balance is not repaid monthly while the owner lives in the home; it is settled when the home is sold or the owner leaves. It is a way to unlock the house's value without selling it, not a way to avoid the cost of care.

The house, in life and after death

The home is the asset families worry about most, and it has two separate rules. During life, the home is often not counted while a spouse lives in it, and many states extend that to a sibling or an adult child who meets conditions the state sets. That is the protection people mean when they say the house is safe.

After death the second rule applies. States have a right to recover the cost of Medicaid long-term care from the recipient's estate, and a home that passes through the estate can be reached. Estate recovery is defined state by state, with its own exemptions and its own process, so the honest answer to "will they take the house?" is to ask your state agency how recovery works where you live. Do that before, not after, an application is filed.

What to do this month

The families who keep the most choice are the ones who act while there is still time to plan. Five steps, in order:

Write down the monthly cost of the care being considered, and the household's monthly income. The gap is the number you are actually solving for — the care cost calculator does the arithmetic.
Sort the assets into countable and non-countable using the countable assets guide, so you know what the state will look at.
Check the look-back window before moving anything. A transfer made inside the window is exactly what the state reviews, and a penalty period can follow.
Price the other payment paths — VA Aid and Attendance, the insurance policies, the HSA — while the household still owns the choices.
Call your state Medicaid agency and ask which documents and which assessment it requires. If the plan is care at home or in assisted living rather than a nursing home, ask specifically about the home and community based waiver and its waiting list — some states fund a fixed number of places.

Frequently asked questions

What happens when you run out of money paying for a nursing home?

For most families the answer is Medicaid. Medicare.gov states plainly that Medicare does not pay for long-term care, so once private funds are used down, the programme that pays for ongoing nursing home care is Medicaid, and it pays only for people who meet its rules. Long-term care Medicaid is a state programme: you apply to your state Medicaid agency, and that agency runs the financial test and the level-of-care assessment that decide the case.

Can Medicare step in once savings are gone?

No. Medicare's skilled nursing benefit is tied to a hospital stay and a limited benefit period — it is short-term, post-acute care, not a long-term payment source. On its long-term care page Medicare.gov says most long-term care is non-medical help with daily living and that Medicare and most health insurance do not cover it. Running out of savings does not change that rule.

What does it mean to spend down for Medicaid?

It means reducing the assets the state counts until they fall below the limit the state sets for long-term care. Not everything counts: Medicaid.gov draws a line between countable assets and assets it does not count, and the home can be treated differently when a spouse or certain other relative still lives in it. The limits themselves are set state by state, so the state agency is the only place to confirm the number that applies to you.

Which payment sources can stretch savings before Medicaid?

Several, and each has its own rulebook. VA Aid and Attendance is a benefit paid on top of a VA pension for veterans and surviving spouses who need help with daily activities. A long-term care insurance policy pays according to its own terms. Life insurance can be turned into cash through an accelerated death benefit, by surrendering cash value, or through a life settlement. And a reverse mortgage (HUD's HECM programme) lets a homeowner 62 or older convert home equity into funds. None of these pays everything; they buy time and choice.

Do you lose the house when Medicaid starts paying?

Often the home continues to be excluded while certain people live in it — a spouse, or in many states a sibling or adult child who meets the state's conditions. That exclusion during life is not the whole story, though: states have a right to recover from a Medicaid recipient's estate after death, which can reach a home that passes through the estate. Estate recovery is state-specific, so ask the state agency how it applies before you assume the house is protected.

Where this comes from

The statement that Medicare does not cover long-term care, and the split between medical and non-medical help, are from Medicare.gov's long-term care page. The countable-versus-non-countable asset split, the level-of-care requirement and the home and community based services rules are from Medicaid.gov. The VA Aid and Attendance description follows VA.gov. The reverse mortgage rules — the age threshold, the primary-residence requirement, the mandatory counselling and the non-monthly repayment — follow HUD's HECM programme. The two monthly cost figures are 2025 national medians from the CareScout Cost of Care Survey (fieldwork July through November 2025). No state's income, asset or estate recovery figures are stated here, because those are set state by state — check your own agency. This is not financial, legal or medical advice for any individual.

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