If your clients are depending on Medicaid or Medicare coverage for their future assisted living needs, they may be in for a rude awakening. According to a recent report, the federal government spends billions of dollars of assisted living services. However, despite this large price tag, retirees end up paying for most assisted living facility costs with their personal funds, and many retirees are unprepared for the costs.
The GAO Report
A new report from the U.S. Government Accountability Office (GAO) reveals that Medicaid and Medicare spent at least $12 billion on services provided in assisted living facilities in 2024.
- Federal Medicaid spending on assisted living facilities totaled at least $3.5 billion.
- Medicare spending on assisted living facilities totaled at least $8.5 billion.
That may seem like a lot, but the amounts actually reflect very restricted coverage.
Medicare does not typically cover assisted living costs. However, Medicare may cover certain services provided in assisted living facilities if eligibility requirements are met. Specifically, Medicare can cover healthcare and hospice services provided in assisted living facilities. According to Medicare.gov, most long-term care is non-medical and therefore ineligible for Medicare coverage.
Medicaid provides more coverage, but it’s still restricted, and coverage rules depend on the state. The GAO explains that state-run Medicaid programs can opt to cover assisted living facility services, and most do, but Medicaid cannot cover room and board costs at assisted living facilities.
According to the GAO, most assisted living facility residents pay for their care using their own personal resources, not Medicare or Medicaid coverage.
Misconceptions Are Common
There are a lot of misconceptions about coverage for assisted living care. Confusion can stem from three misunderstandings:
- Medicaid vs. Medicare. The two programs sound similar, so it’s an easy mistake, but the differences are significant. Most people age into Medicare when they turn 65, but Medicaid eligibility is based on income and financial resources.
- Long-Term Care vs. Skilled Nursing Care. Long-term care refers to custodial care and includes assistance with things like dressing, eating and bathing. It is not medical care, so Medicare doesn’t cover it. Skilled nursing care is medical in nature, and Medicare Part A provides coverage when eligibility requirements are met.
- Assisted Living vs. Nursing Home. Assisted living facilities are designed for seniors who are mostly independent but may need assistance with some daily tasks. Nursing homes are designed for people who need more intensive medical care. However, the level of care available at assisted living facilities can vary. Medicare provides coverage for skilled nursing facility care for up to 100 days after a hospital stay.
According to the 2025 Nationwide Retirement Institute Long-Term Care survey, 58% of people surveyed believe that Medicare covers long-term care expenses.
Are Your Clients Prepared?
The Administration for Community Living says 70% of retirees will need long-term care. Unfortunately, many retirees are unprepared for the costs.
You can help by providing education. Do your clients understand the following?
- Medicare does not cover most long-term care costs. Don’t assume your clients know this already – most people don’t! Explain what long-term care entails and how most seniors will need it at some point.
- Medicaid has additional eligibility requirements. Although Medicaid provides some long-term care coverage, seniors may need to meet income and asset requirements before they become eligible.
- Other financing options are available. Some retirees use personal savings, annuities or a reverse mortgage to cover long-term care costs. A long-term care insurance policy or a hybrid life insurance policy can also provide long-term care coverage.
Medicare covers a lot, but it doesn’t cover everything. For many seniors, the long-term care coverage gap is especially concerning. With PTT Financial, you can offer a robust portfolio that includes Medicare as well as other products, so you can help your clients take care of all their needs. See how PTT supports agents.