How to Plan for Long-Term Care: Your Options, Costs, and Next Steps

Long-term care helps with daily living—like bathing, dressing, and memory care—but Medicare usually doesn't pay for it. Learn what's covered, what it costs, and how to plan ahead, so you can prepare for care and protect your savings.

Because "I'll never need help" isn't a plan—and knowing your Medicare costs is the first step to preparing for long-term care.

At a Glance • LTC 101 • Costs & Risk • Insurance Types • Alternatives • How to Shop • Checklist • FAQs

At a Glance

📋 What is is: Long-term care (LTC) helps with daily living, such as bathing, dressing, and memory             care, not medical care. Medicare mostly doesn't cover it.

📋 Why it matters: Care often ranges from several thousand dollars to over $9,000 per month,                 depending on the setting. 

📋 Your options: Traditional LTC insurance, hybrid life/LTC, short-term care, self-funding, home-                 based/community programs, Medicaid planning.

Long-Term Care 101: What It Is (and Isn't)

Let's talk about something most of us would rather skip: the possibility that someday you might need help buttoning a shirt, remembering to take pills, or getting out of the shower safely.

Two a.m. in the ER is the wrong time to decide who is in charge. But here's the thing: Planning for long-term care is vastly easier before you're filling out nursing home admission paperwork.

The Basics

Long-term care involves ongoing assistance with what healthcare professionals refer to as Activities of Daily Living (ADLs). That's six basic tasks: bathing, dressing, eating, using the toilet, transferring (like moving from bed to chair), and continence. It also includes supervision for cognitive impairments, such as Alzheimer's, dementia, and similar conditions. 

This care happens in several settings:

• Your own home with a visiting aide
• Adult day health programs
• Assisted living facilities
• Memory care units
• Skilled nursing facilities (what most people call nursing homes)

Here's what it's not

Medicare-covered skilled nursing after surgery. Physical therapy following a hip replacement. Those short-term medical services fall under Medicare. Long-term care is the ongoing custodial assistance, such as getting dressed, eating meals, and staying safe, that many people need as they age.

Quick definitions

• ADLs: Activities of Daily Living, like bathing, dressing, eating, toileting, transferring, and continence
• Custodial care: Help with daily living tasks, not medical treatment
• Cognitive impairment: Memory or thinking problems requiring supervision

Who pays?

Not Medicare. Not Medicare Supplement. Not Medicare Advantage.

That leaves you, private insurance, or Medicaid, and Medicaid only steps in after you've spend down most of your assets to around $2,000 (varies by state).

Why Planning Matters: Costs, Risk & Timing

About 70% of people turning 65 will need some form of long-term care during their lifetime, according to the U.S. Department of Health and Human Services. The average? Three year. But roughly 20% will need care for more than five years.

Real-World Costs

National median monthly costs from Genworth's 2024 Cost of Care Survey:

LTC Insurance Options: What to Buy (and How it Works)

Several types of long-term care coverage exist, each with different trade-offs. Let's break them down without the sales pitch.

Traditional LTC Insurance (Stand-Alone)

This is the classic model: pay premiums for years, hope you never need it, but if you do, benefits kick in.

How it pays:

• Daily or monthly benefit: The max the policy pays toward your care, commonly $150 - $300/day or $4,500 - $9,000/month
• Benefit period: How long benefits last: two years, three years, five years, or lifetime
• Elimination period: Your waiting period before coverage starts, which is typically 30, 60, or 90 days, which you pay out-of-pocket
• Inflation protection: Increases your benefit over time to keep pace with rising costs (3% or 5% compound annual growth is common)

Key terms:

• Elimination period: Waiting period before insurance pays (like a time-based deductible)
• Inflation protection: Rider that increases benefits annually to match rising care costs
• Shared care rider: Lets married couples draw from each other's benefit pools

👍 The upside: Significant leverage. Pay modest premiums, potentially receive hundreds of                       thousands in benefits.

👎 The downside: Use-it-or-lose-it coverage. Premiums can increase (though insurers need                       regulatory approval). Medical underwriting gets stricter as you age.

💵 What is costs: A healthy 55-year-old might pay $1,500 - $3,000 annually for solid coverage. By           65, that same policy might cost $3,000 - $5,000 annually.

Hybrid Life Insurance with LTC Rider

These policies combine life insurance with long-term care coverage, solving the "I paid all those premiums for nothing" problem.

👉 How it works: You can accelerate your death benefit to pay for long-term care if needed. If you             never need LTC, your beneficiaries get the death benefit when you pass.

👍 The upside: Premiums are typically guaranteed not to increase. "Use it one way or another" value       proposition.

👎 The downside: Higher upfront costs, often $50,000 to $150,000 as a single payment or spread           over 10 years.

👌 Right for: People who want life insurance anyway and can afford the larger initial cost.

Annuities with LTC Riders

Some annuities offer long-term care riders that allow tax-advantaged withdrawals for LTC expenses.

👉 How it works: You'll receive a percentage of your annuity value annually to pay for care, often with       withdrawals being partially or fully tax-free.

👌 Suitable for: People repositioning existing assets, moving money from low-interest savings into an       annuity with dual-purpose coverage.

Short-Term Care Insurance

A newer product providing benefit for six months to one year rather than multiple years.

👍 The upside: Cheaper than traditional LTC insurance. More lenient underwriting. Can bridge gaps         or cover elimination periods.

👎 The downside: Limited duration means it won't cover extended care needs.

👌 Right for: People who decline traditional coverage or those with some assets to protect but who        cannot afford comprehensive LTC insurance.

✔️ Critical illness or lower-benefit hybrids: Lump-sum or reduced-benefit policies can offset part of         early care costs when full LTC coverage is not feasible. 

✔️ Family agreements and respite grants: Written caregiver contracts and local respite programs             can share responsibilities and reduce burnout.

Downsides & Gotchas (Know Before You Apply)

Before you sign on the dotted line with any policy, here's what can trip you up:

Underwriting: What to Expect

Insurers review your health history, current medications, and cognitive function. Previous cancer diagnoses, diabetes complications, neurological conditions, or even certain prescriptions can lead to declines or exclusions. Some carriers do phone interviews that include memory tests, and there's no do-over if you stumble. 

Rate Increases Happen

Traditional LTC insurance premiums aren't locked. Insurers must get state regulatory approval to raise rates, but hikes of 20 - 50% have hit some policyholders over the years. Before buying, check the carrier's rate-increase history and ask whether your state has approved recent hikes for that specific product.

Policy Fine Print Matters

Not all policies are created equal. Watch for:

• Home-care definitions: Some policies require "hands-on" care rather than standby supervision
• Care-coordination requirements: Certain plans mandate you use their care coordinators or approved provider networks
• Licensed-provider rules: A few policies won't pay for family caregivers, even if licensed
• International coverage limits: Planning to retire abroad? Most U.S. LTC policies have geographic restrictions.

Always make sure you read the policy contract, and not just the marketing brochure.

What it Costs and What Drives the Price

Not all policies are created equal. 👀 Watch for:

• Age at purchase is the biggest factor. Buy at 50 and you lock in lower rates for life (assuming no increases). Wait until 70, and premiums can triple or quadruple.
• Health class matters. Preferred rates go to people with clean health histories. Standard or substandard ratings add 20 - 50% to premiums.
• Benefit amount: Choose a $150/day benefit instead of $300/day, and you'll cut premiums roughly in half. Fidelity's analysis shows how these choices affect overall costs.
• Monthly vs. daily design: Monthly benefit designs offer more flexibility (unused days roll forward within the month). Daily designs are slightly cheaper but less adaptable.
• Benefit period: Two-year coverage costs significantly less than five-year or lifetime coverage.
• Elimination period: Opt for a 90-day waiting period instead of 30 days, and premiums drop 15 - 25%.
• Inflation rider: Adding 3% compound inflation protection can increase premiums by about 40 - 60%, but without it, coverage erodes over time.

Dial-Turning Example (Estimated figures for illustration only)

Let's say you're a healthy 60-year-old comparing two scenarios:

Scenario A: $6,000/mo benefit | 3-year benefit period | 90-day elimination | 3% compound inflation

➡️ Estimated annual premium = ~$3,500

Scenario B: $4,500/mo benefit | 3-year benefit period | 90-day elimination | no inflation protection

➡️ Estimated annual premium = ~$1,800

That $1,700 difference? It's the cost of inflation protection and a higher benefit. Run multiple quotes to see where your comfort zone sites between premium affordability and coverage adequacy. 

If Insurance Isn't an Option: Practical Alternatives

No insurance approval? High premiums? Here's your Plan B playbook, including guidance from AARP on insurance alternatives and options reviewed by Money magazine. 

Self-Funding: Build Your Own Reserve

Earmark specific assets for potential care needs. If you contributed to a Health Savings Account (HSA) before enrolling in Medicare, those funds can be used tax-free for. long-term care expenses.

Draw-down strategy: Roth IRA withdrawals are tax-free (helpful for large care expenses). Traditional IRAs and 401(k)s require you to pay income tax on withdrawals, but you might be in a lower bracket if you've stopped working.

Home Equity Moves

Your house might be your largest asset. Options include:

Downsizing: Move to a smaller home or less expensive area to free up cash.

Reverse mortgage (HECM): Access your home's equity while continuing to live there. These have costs and complexities; tread carefully.

Public Programs

Medicaid: The primary public payer for long-term care, but eligibility requires strict income and asset limits. Generally, you must "spend down" assets to around $2,000 (varies by state) before qualifying. Consider working with an elder law attorney for Medicaid planning.

PACE (Program of All-Inclusive Care for the Elderly): An integrated Medicare/Medicaid program that coordinates all care with a goal of keeping people home longer. Not available everywhere, but transformative for those who qualify.

• PACE definition: Integrated program for people 55+ who need nursing home-level care but can live safely in the community with support.

Veterans Benefits

Aid and Attendance: If you're a wartime veteran or surviving spouse, you may qualify for additional monthly payments to help cover long-term costs for in-home care, assisted living, or nursing home care. Many veterans don't know these benefits exist.

Additional Resources

For more details on alternatives, explore the National Institute on Aging's comprehensive guide to paying for long-term care and the National Council on Aging's breakdown of LTC insurance types.

Alternatives to the "Nursing Home Only" Mindset

Beyond figuring out how to pay, think about where you want care. Caring Advisor outlines eight alternatives to nursing homes worth considering.

Aging in Place with Home-Based Supports

With the right combination of services, many people stay safely at home:

• Home health aides (several visits weekly or live-in)
• Adult day health programs
• Meal delivery (Meals on Wheels)
• Home modifications (grab bars, walk-in showers, stair lifts)
• Remote monitoring technology
• Personal emergency response systems

Cost can approach or exceed facility care, but for many, staying in familiar surroundings is worth it.

Assisted Living & Memory Care

Assisted living provides a middle ground: your own apartment, considerable autonomy, plus access to meals, housekeeping, medication management, and help with ADLs.

Memory care units specialize in dementia care with secured environments, specialized programming, and trained staff. Costs often run $5,000 - $8,000 monthly.

Continuing Care Retirement Communities (CCRCs)

Also known as life-plan communities, CCRCs offer a continuum of care, including independent living, assisted living, and skilled nursing, all in one location.

The model: Substantial entrance fee ($100,000 - $1 million, depending on community and unit) plus monthly fees.

Contract types:

• Type A (life care): Unlimited long-term care at little/no increase in monthly fees
• Type B: Specified amount of LTC included, then fees increase
• Type C (fee-for-service): Market rates for all services as you use them

Shared Housing & Co-Living

Several unrelated older adults live together, sharing costs and often hiring shared care staff. Provides economic efficiency plus built-in social connections.

The PACE Program (Worth Repeating)

PACE programs provide and coordinate all medical and social services: adult day care, home care, hospital care, and medications, with the explicit goal of keeping participants living independently as long as safely possible. 

Eligibility: 55+, live in a PACE service area, need nursing home-level care, and be able to live safely in the community. Not everywhere has PACE, but where it exists, it can be transformative.

How to Shop (Step-by-Step)

Here's your practical framework:

1. Map your risk factors

Do you have a family history of conditions requiring extended care (Alzheimer's, Parkinson's)? Are you single? (Singles face a higher risk since there's no spouse to provide care.) What's your general health trajectory?

2. Set a target benefit

What monthly amount would protect your plan? Most people target $3,000 - $6,000/month

3. Decide on inflation protection

For buyers under 65, 3 - 5% compounding is common. Without it, a policy purchased at 55 might be inadequate by 80.

4. Get quotes across types

Traditional vs. hybrid vs. short-term: Compare apples to apples on benefit amounts and periods.

5. Check carrier strength and rate-hike history

Look at insurer ratings and their history of premium increases. Not all carriers are equally stable.

6. Run the budget test

Can you afford premiums for 20 - 30 years? What happens if rates increase 20 - 30%?

7. Document Plan B

If declined or if premiums become unaffordable, what's your fallback? Write it down and share it with family. 

Decision Checklist

✅ I understand what Medicare does and doesn't cover for LTC

✅ I picked a target benefit and an inflation rider that fit my budget

✅ I understand elimination period trade-offs

✅ In compared traditional vs. hybrid vs. short-term options

✅ I reviewed carrier ratings and rate-hike history

✅ I listed Plan B options (PACE/Medicaid, home equity, VA aid)

✅ My family knows the plan (and where the policy lives)

✅ I've explored local resources (PACE programs, SHIP counselors)

FAQs

Does Medicare pay for long-term care?

Most no. Medicare covers short-term skilled rehab after illness or injury, not custodial care for daily living activities over extended periods.

When should I buy LTC insurance?

Many people apply in their 50s to early 60s for better health underwriting and lower premiums. Once major health issues develop, approval becomes difficult.

What triggers benefits?

Typically needing help with two or more ADLs or having severe cognitive impairment, as certified by a clinician.

How long will benefits last?

Until you exhaust your benefit period (the duration you selected: two years, five year, etc.) or your policy maximum.

Can premiums go up?

Traditional LTC insurance premiums can increase with regulatory approval. Hybrid policy premiums are often guaranteed.

What if I'm declined?

Consider short-term care insurance, home-equity planning, PACE/Medicaid strategies, or VA benefits if you're eligible. Timing your retirement [WP65 blog post] can also affect your financial capacity for self-funding.

What's the difference between advance directives and LTC planning?

Advance directives specify your medicare and end-of-life wishes; LTC planning addresses how you'll pay for and receive care.

Where can I learn about how income affects my Medicare costs?

Understanding IRMAA surcharges helps you see how much financial breathing room you have for LTC planning.

Where MyALEXHealth™ Fits In

While MyALEXHealth focuses on Medicare decisions, understanding long-term care affects your overall retirement planning. Here's how ALEX® helps:

ALEX does not sell LTC insurance. ALEX helps you see the Medicare cost piece clearly so you can plan for everything else retirement might bring.

▶️ Start planning Medicare costs with ALEX

🔎 Explore Medicare and retirement resources with MyALEXHealth

Bottom Line

Long-term care is one of those topics that's easy to put off until it's too late to plan effectively. Traditional insurance makes sense for some people, but it's far from the only option. Hybrid policies, short-term coverage, strategic use of home equity, Medicaid planning, veterans' benefits, and alternative care settings can all play a role.

The key? Start thinking about it before you need it. Your 50s are ideal. Your 60s are good. Your 70s are challenging. Beyond that, options narrow significantly.

Whatever approach you choose, make it a conscious decision rather than a default. Because "I'll never need help" might feel true today, but hoping for the best isn't the same as planning for the possibilities. 

Get clear on your Medicare costs now to plan for everything else—especially long-term care. 

Know your Medicare costs today. Plan your long-term care tomorrow.

Get started with ALEX