Pay for It?**
This is where most people's planning breaks down. Surveys consistently show that 58% of Americans believe Medicare pays for nursing home care. It does not at least not the type of care most people need most of the time. Medicare covers skilled rehabilitative care physical therapy following a hip replacement, for example, or wound care after surgery. It covers this care in a skilled nursing facility for up to 100 days per benefit period, and only after a qualifying three-day inpatient hospital stay. For the first 20 days, Medicare pays 100%. For days 21 through 100, the enrollee pays a daily coinsurance of $217 in 2026. What Medicare does not cover is custodial care assistance with daily activities due to chronic conditions, frailty, or cognitive decline. That is exactly the care most people who need long-term care actually need, for months or years at a time. Medicare was designed for acute illness, not for the slow, extended care needs that come with aging. ++ ++ What Long-Term Care Actually Costs The 2025 CareScout Cost of Care Survey conducted by Genworth's research subsidiary provides the most comprehensive national data on long-term care costs by setting. Care Setting 2025 Monthly 2025 Annual **Year-Over-Year Median Median Change** Nursing Home $10,798 $129,575 +1% (Private Room) Nursing Home $9,581 $114,975 +2% (Semi-Private Room) Assisted Living $6,200 $74,400 +5% Community In-Home Care $6,673 $80,080 +3% (Non-Medical, 44 hrs/wk) Adult Day Health $2,058 $24,700 -5% Care (5 days/wk) The average duration of care needed is approximately three years. But 40% of people who need long-term care will require high-intensity care nursing home level for more than a year. For those diagnosed with Alzheimer's disease or another form of dementia, care needs can extend for a decade or longer. These numbers also change significantly by geography. The most expensive states for nursing home care include Alaska, Oregon, New York, Hawaii, and Connecticut where costs run substantially above the national median. By 2036, the national average annual cost for a skilled nursing facility is projected to reach $155,126, with New York projected at $233,180 per year and lower-cost states like Texas at $111,931.
There is no single right answer for long-term care funding. The appropriate strategy depends on asset level, health status at the time of planning, family situation, and risk tolerance. Here are the four primary approaches: 1. Traditional Long-Term Care Insurance (LTCI) Traditional policies pay a daily or monthly benefit for a specified benefit period for example, $200 per day for three years in exchange for an ongoing premium. The major drawback is premium instability. Insurers significantly mispriced these policies when they were first introduced in the 1980s and 1990s, underestimating how long people would need care and how expensive it would become. Many policyholders have received premium increase notices of 30%, 50%, or more years into their policies. The traditional LTCI market has contracted sharply as a result, with fewer insurers offering these products and qualification requirements becoming more stringent.
The market has shifted decisively toward hybrid policies, which now represent the majority of new long-term care insurance sales. These products combine a life insurance death benefit with an LTC rider. If you need care, you access the death benefit early to pay for it. If you never need care, your beneficiaries receive the full death benefit tax-free. Premiums on hybrid policies are typically guaranteed to never increase solving the main complaint about traditional LTCI. These can be funded with a single lump sum or over a fixed period, and some allow repositioning of existing assets such as CDs or old life insurance through a tax-free 1035 exchange. 3. Medicaid Planning Medicaid is the primary payer of nursing home costs in the United States but it is a program of last resort. To qualify, an individual must have countable assets at or below $2,000 in most states. The healthy spouse living at home can retain a portion of the couple's assets called the Community Spouse Resource Allowance, which can be as high as $162,660 in 2026 but the care recipient's assets must be largely depleted. Medicaid also employs a five-year look-back period, reviewing financial transfers for the 60 months prior to application. Assets transferred to family members within that window can result in a penalty period of ineligibility. Medicaid Asset Protection Trusts, established more than five years before care is needed, are used to shield assets from this review. In crisis situations where the five-year window has not been met, Medicaid Compliant Annuities can convert lump sums into income streams for the community spouse, reducing countable assets to within the eligibility limits.
High-net-worth households often self-insure accepting the risk and planning to pay for care out of portfolio assets. This is a viable strategy, but it requires a portfolio large enough to absorb a multi-year nursing home expense without destabilizing the surviving spouse's financial position. A two-year nursing home stay at $129,575 per year depletes $259,150 before accounting for the surviving spouse's ongoing living expenses. Health Savings Accounts are increasingly used as dedicated reserves for late-retirement healthcare costs, since HSA funds grow tax-free and can be withdrawn tax-free for qualified medical expenses. The Planning Window Is Earlier Than Most People Think Long-term care insurance underwriting is based on health at the time of application. Policies are easiest to obtain and least expensive when you are in your late 50s or early 60s. By the time most people start thinking seriously about this, in their late 60s or early 70s, the underwriting environment is more restrictive and premiums are higher. Once a diagnosis of a qualifying condition is made cognitive impairment, Parkinson's disease, multiple sclerosis, or others coverage may be unavailable entirely. The window between when people typically engage with this question and when coverage becomes unavailable is narrower than most expect. ++ ++ Seventy percent is not a fringe risk. It is not the outcome that happens to someone else. It is the most likely scenario. Understanding what coverage exists, what it costs, and how different funding strategies work is the information needed to plan for it deliberately rather than discovering the limitations of Medicare in a hospital discharge meeting. Long-term care planning is one of the most time-sensitive decisions in retirement. Coverage is easier to obtain and less expensive when you are younger and healthier. The Retirement Shield newsletter covers ongoing changes in long-term care costs and insurance options. To explore specific policy options, connect with an insurance specialist who works specifically in long-term care and hybrid life insurance products.