What Medicare and Medicaid Actually Cover (Plain Language)

Medicare covers hospital stays, doctor visits, and short-term skilled nursing or home health services ordered by a physician. It does not cover long-term custodial care, which is help with bathing, dressing, cooking, and daily activities. Medicaid covers long-term care for people who meet your state’s income and asset limits, with each state running its own version under different rules.

The number one financial surprise most families encounter when caregiving starts: Medicare doesn’t cover the type of care most elderly people actually need.

This misconception (that Medicare will “take care of it”) leads families to delay planning, spend down savings they didn’t need to spend, and miss out on Medicaid benefits they could have accessed sooner.

Let’s clear this up in plain language.

Medicare: What It Is and What It Covers

Medicare is the federal health insurance program for people 65 and older (and some people with disabilities). It has four main parts:

The Home Health Care Exception

Medicare does cover home health care, but under very specific conditions:

• You must be “homebound” (leaving home requires considerable effort)
• You must need skilled care: skilled nursing, physical therapy, occupational therapy, or speech therapy
• A doctor must certify the need and order the care
• The care must be provided by a Medicare-certified agency

What it does NOT cover: custodial care (help with bathing, dressing, eating, and other activities of daily living) without accompanying skilled services. This is what most families actually need, and Medicare doesn’t pay for it.

What Medicare Explicitly Does NOT Cover

• Custodial (non-skilled) home care
• Assisted living
• Long-term nursing home care beyond the 100-day limit
• Most dental, vision, and hearing care (unless through Medicare Advantage)
• Long-term care of any kind

Medicaid: What It Is and What It Covers

Medicaid is a joint federal-state program for people with low incomes. Unlike Medicare, it is the primary payer for long-term care in the United States.

What Medicaid covers (varies by state):

• Nursing home care. Medicaid is the primary funder of nursing home care in the U.S.
• Home and community-based services (through Medicaid waivers): personal care aides, home health aides, adult day programs, respite care
• Transportation to medical appointments
• Prescription drugs (with some cost-sharing)
• In some states: dental, vision, hearing

Medicaid eligibility: Eligibility is based on income and assets. Rules vary significantly by state and by program type. For long-term care Medicaid, most states have asset limits (often around $2,000 in countable assets for a single person) and a look-back period of 5 years (60 months) that examines asset transfers made prior to application.

The spend-down reality: Many families don’t qualify for Medicaid until they’ve spent down most of their assets paying for care. This is intentional. Medicaid is designed as a safety net for people who can’t pay for their own care. But with proper planning (ideally years in advance with an elder law attorney), some asset protection is possible.

Home and Community-Based Services (HCBS) Waivers

Most states offer Medicaid waivers that fund services to help people stay home rather than move to a nursing facility. These programs can cover:

• Personal care aides (help with bathing, dressing, meals)
• Adult day programs
• Home-delivered meals
• Transportation
• Respite care for family caregivers
• Home modifications

The tradeoff: there are often long waiting lists. In some states, waits of 1–3+ years are common (KFF, 2024). Apply early, even if you don’t need the services yet.

The Coverage Gap for Middle-Income Families

Here’s the hard truth: middle-income families often fall into a gap. They have too much income/assets for Medicaid, but not enough to pay indefinitely for long-term care without depleting their savings.

Options for this group:

• Long-term care insurance: purchased before a health crisis, it can cover care costs. Premiums are high and the market has consolidated, but for people in their 50s or early 60s who are still healthy, it’s worth looking at.
• Life insurance / hybrid policies: some life insurance policies can be converted or structured to pay for long-term care
• Planning ahead: consulting an elder law attorney before care is needed allows for legal strategies that can protect assets while still qualifying for Medicaid when needed

Bridging the Gap Right Now

If your parent currently has care needs that Medicare isn’t covering and Medicaid isn’t yet in the picture:

• Check what Medicare Advantage covers. Some plans include supplemental home care benefits that traditional Medicare doesn’t.
• Contact your local AAA. They know what community programs exist to bridge gaps.
• Look at state-specific programs. Many states have programs for moderate-income seniors that fall between Medicare and Medicaid.
• Explore VA benefits if your parent is a veteran.
• Use BenefitsCheckUp.org to see what your parent might qualify for.

The system is genuinely complicated. Getting help working through it, from a SHIP counselor, social worker, or elder law attorney, is worth the time. Our guide on understanding the care system explains how the AAA and other free resources work.

Next step: If you’re wondering whether you could be compensated for the care you’re providing, read our guide on Getting Paid as a Family Caregiver.

Frequently Asked Questions

Q: What does Medicare cover for home care?

Medicare covers home health care only under specific conditions: you must be homebound, a doctor must order skilled care (nursing, physical therapy, or occupational therapy), and a Medicare-certified agency must provide the services. It does not cover custodial care (help with bathing, dressing, or cooking) unless skilled services are also being provided.

Q: Does Medicare pay for assisted living?

No. Medicare does not cover assisted living. Medicare covers short-term skilled nursing facility stays (up to 100 days after a qualifying hospital stay) but not the ongoing residential care that assisted living provides. Medicaid may cover some assisted living costs depending on your state.

Q: What’s the difference between Medicare and Medicaid for elderly care?

Medicare is federal health insurance for people 65+ and covers medical care, hospital stays, and limited skilled nursing. Medicaid is a joint federal-state program for people with low incomes and is the primary payer for long-term care (nursing homes, home health aides, and personal care) for those who qualify.

Q: How do I know if my parent qualifies for Medicaid long-term care?

Medicaid eligibility for long-term care is based on income and assets, and rules vary significantly by state. Most states have an asset limit around $2,000 for a single person and a 5-year (60-month) look-back period for asset transfers. Contact your state Medicaid office or a SHIP counselor for your state’s specific rules.

Q: Does Medicare cover 24-hour home care?

No. Medicare does not cover 24-hour home care. Even when home health services are approved, they are intermittent visits, not continuous care. Families needing round-the-clock help generally pay out of pocket or use Medicaid waiver programs where available.