Long-Term Care Insurance vs. Medicaid: What’s the Difference?
Medicaid pays for long-term care only after you’ve spent down most of your assets, and home-based care often has waiting lists. Long-term care insurance is bought in advance, while you’re healthy enough to qualify, and pays a benefit regardless of your savings, helping protect what you’ve saved and giving you more say in your care.
How does Medicaid pay for long-term care?
Medicaid is a joint federal and state program for people with limited income and assets. To qualify for long-term care, you generally have to spend down your savings to your state’s limit. States also review money given away or transferred during a look-back period, commonly five years, and transfers during that time can delay eligibility. The NAIC notes that Medicaid pays for nearly one-third of all nursing home care in the U.S., but many people who need long-term care never qualify. (NAIC Shopper’s Guide)
Nursing home care is a required Medicaid benefit in every state. Care at home works differently: much of it is offered through home and community-based services programs that can cap enrollment, so waiting lists are common.
How is long-term care insurance different?
| Medicaid | Long-term care insurance | |
|---|---|---|
| When you get it | After spending down most assets | Before you need care, while healthy enough to qualify |
| Effect on savings | Requires spending them down | Designed to help protect them |
| Care at home | Often limited, with waiting lists | Can pay for care at home |
| Choice of care | Depends on your state’s programs and approved providers | With the coverage we offer, a cash benefit you direct |
| Who qualifies | Based on income and assets | Based on health when you apply |
Can you rely on Medicaid as a backup plan?
Some people plan that way on purpose. The tradeoff is that by the time you qualify, most of your savings is gone, and home care may not be available right away. For people who want to stay home and protect what they’ve saved, that tradeoff is the key thing to weigh.
Where can you get help with Medicaid questions?
Medicaid rules vary by state and change over time. For questions about eligibility or asset transfers, an elder law attorney is the right resource. To find local services, the Eldercare Locator connects you with your Area Agency on Aging.
Staying Power is a licensed insurance agency that helps people compare these two paths.
If you want to see what private coverage could look like instead, start with a few questions.
Related reading: Does Medicare Cover Long-Term Care?, How Much Does Long-Term Care Cost?, and How Does Long-Term Care Insurance Work?.
Frequently asked questions
Does Medicaid pay for in-home care?
Sometimes. Many states cover home care through home and community-based services programs, but enrollment is often capped and waiting lists are common.
What is the Medicaid look-back period?
It’s the period, commonly five years, during which your state reviews asset transfers when you apply for long-term care coverage. Transfers during that time can delay eligibility.
Can I give assets to my children to qualify for Medicaid?
Transfers during the look-back period can trigger a penalty that delays eligibility. Talk with an elder law attorney before making any transfers.
