Nearly four in 10 middle-income U.S. households expect Medicare to pick up the tab for long-term care — a costly assumption that could leave many facing large bills or difficult choices. New industry and policy data underscore a widening gap between public expectations and how long-term care is actually paid for today.
A August survey by the American Council of Life Insurers (ACLI) found that 39% of households earning between $50,000 and $150,000 assume Medicare will cover long-term care. That belief runs up against policy reality: Medicare generally covers only limited, short-term skilled care, not ongoing custodial services for chronic illness or disability.
Why this matters now
Costs are rising and the middle class is being squeezed. An AARP Public Policy Institute study released this year shows home care prices surged roughly 39% since 2021, outpacing general inflation and making nursing home care unaffordable for many. At the same time, federal research indicates someone turning 65 today has nearly a 70% chance of needing some form of long-term care services in their lifetime.
“People assume Medicare is their long-term care plan,” said Jeff Judge, a certified financial planner and managing partner at Chesapeake Financial Planners in Maryland. “Finding out otherwise during a crisis is the worst possible time.”
What Medicare will — and won’t — pay
Experts and health-policy groups including KFF stress that Medicare is not a broad safety net for long-term custodial care. The program can cover up to 100 days of skilled nursing facility care after a qualifying hospital stay, but only when specific conditions are met — notably a prior inpatient hospital stay of at least three consecutive days.
Outside those narrow circumstances, Medicare won’t cover ongoing nursing home care, custodial assistance, or most home-based support services. Still, government spending on long-term services and supports is large: Andrew Biggs, a senior fellow at the American Enterprise Institute, recently noted federal programs spend more than $100 billion a year on these services — more than households’ out-of-pocket totals.
Who actually pays for nursing home care?
For low-income people in nursing facilities, Medicaid — not Medicare — is the primary payer. But qualifying for Medicaid can be complex and varies widely by state. “People often confuse Medicare with Medicaid when it comes to long-term care,” said Carolyn McClanahan, a physician and certified financial planner based in Florida.
As McClanahan points out, Medicaid eligibility typically requires households to exhaust most of their resources, and income and asset limits differ from state to state. That makes advance planning important.
Common payment routes
- Medicaid: Primary payer for long-term custodial care for eligible low-income individuals; rules and look-back periods vary by state.
- Private long-term care insurance: Policies can cover custodial and skilled care but premiums rise with age and health status; riders like cost-of-living adjustments add expense but protect benefits.
- Self-funding: Paying out of pocket or using savings; increasingly difficult for middle-income households as care costs climb.
- Hybrid and life-insurance-linked products: Options that combine death benefits with long-term care riders are available but vary in value and complexity.
ACLI’s survey data show about 20% of middle-class households plan to self-fund long-term care — a strategy that many experts warn may be unrealistic given the current price environment.
Consider the numbers: a 2025 cost-of-care survey from CareScout (a Genworth subsidiary) lists the national median daily rate for a semiprivate nursing home room at $315, about $114,975 annually. Large, ongoing bills can quickly erode retirement assets even for households that felt well-prepared.
Practical steps for planning
Start early. Financial planners routinely recommend that households begin long-term care conversations in their 50s or 60s — sooner if they can afford to — because premiums and policy options deteriorate with age and health changes.
Shopping for coverage before health issues arise can lower costs and preserve the ability to add riders such as a cost-of-living adjustment. “It’s amazing how fast you can blow through your resources,” McClanahan said, underscoring why advance planning matters.
Other planning tips experts offer:
- Research your state’s Medicaid rules and look-back periods well before you expect to need care.
- Compare long-term care insurance products and read fine print on exclusions and inflation protections.
- Factor potential long-term care costs into retirement income planning and home-equity decisions.
David Chavern, ACLI’s president and CEO, framed the broader concern: middle-income households are anxious not only about immediate bills but also about the possibility of outliving their savings — and they often underestimate what long-term care entails.
For readers, the takeaway is straightforward: don’t assume federal health coverage will fill gaps in long-term care. Verify what programs like Medicare and Medicaid actually cover, get state-specific guidance, and explore insurance or savings strategies well before care becomes necessary.
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Jordan Keller specializes in analyzing the US financial markets. With concrete recommendations, he helps you secure and boost your investments by providing strategies that adapt to market fluctuations.