This article is part of the Biblically-Informed Framework for Retirement Stewardship (BIFRS) series. It was originally published in May of 2020 and updated in May of 2026.

This is the second article in a five-part series about long-term care. In Part One, we examined the various types of care—in-home, assisted living, memory care, and skilled nursing—and the factors involved in the decision. In this article, we cover the role that Medicare and Medicaid play in long-term care planning. This article has been significantly updated for 2026, including new information about legislative changes that directly affect Medicaid’s role as a long-term care safety net.

I often describe Medicare and Medicaid as part of God’s common grace—programs that many people, regardless of means, can benefit from during seasons of vulnerability. But as we will see, neither program covers long-term care as most people assume, and the Medicaid landscape, in particular, has changed substantially.

Medicare: what it covers and what it doesn’t

Most people age into Medicare at 65, and there are some misconceptions about what it will cover. The most consequential misconception, for purposes of long-term care planning, is the belief that Medicare pays for nursing home or assisted living care. It does not—with narrow, time-limited exceptions.

Medicare is designed for acute medical care: doctor visits, hospital stays, surgery, medications, and treatment for illness and injury. It is not designed for ongoing custodial care—the help with bathing, dressing, meal preparation, and daily personal care that constitutes the heart of long-term care. Neither private health insurance nor Medicare covers these custodial care expenses unless a physician specifically orders skilled care for a defined medical reason.

Medicare Part A: what it covers for skilled nursing care

Medicare Part A does provide coverage for skilled nursing facility (SNF) care, but under strict conditions. You must first have a qualifying inpatient hospital stay of at least 3 days (excluding the day of discharge). The SNF admission must be for a condition treated during that hospital stay. And the care must require skilled nursing or therapy—not merely custodial assistance.

Under those conditions, Medicare covers the first 20 days of SNF care in full (after the Part A deductible of $1,736 per benefit period in 2026). Days 21 through 100 require a daily coinsurance of $217 in 2026 (up from $209.50 in 2025). After day 100, Medicare pays nothing. Most people who enter a skilled nursing facility under Medicare coverage stay far fewer than 100 days—often weeks—before Medicare coverage ends or their condition plateaus.

Source: CMS 2026 Medicare Parts A & B Premiums and Deductibles Fact Sheet.

A critical point about hospital “observation status”: if a hospital admits you under observation status rather than as a formal inpatient, those days do not count toward the three-day qualifying stay—even if you sleep there for three nights. This distinction has cost many families dearly when they expected Medicare to cover subsequent SNF care. The NOTICE Act (2016) requires hospitals to inform you if you are on observation status, but the financial consequences remain severe.

Medicare home health coverage

Medicare does cover home health care for medical needs—wound care, physical therapy, occupational therapy—when you are homebound and under a physician’s orders. Typically, this is limited to no more than 28 hours per week for such services. Critically, Medicare home health coverage does not include custodial care: help with bathing, dressing, meal preparation, or housekeeping. The moment skilled medical need ends, Medicare coverage for home health ends as well.

Medicare Advantage and Supplemental coverage

Medicare Advantage plans (Part C) from private insurers offer expanded benefits beyond Original Medicare, and in recent years some plans have added limited supplemental benefits such as meal delivery, transportation to appointments, and even modest in-home support services. These benefits are real, but they are not a substitute for long-term care coverage. They are supplemental amenities, not custodial care benefits that would replace assisted living or nursing home expenses.

Medigap (Medicare Supplement) policies cover many of Medicare’s cost-sharing gaps—the deductibles, coinsurance, and copays. But they do not cover custodial long-term care expenses, because Medicare itself does not cover them. There is no gap to fill for services Medicare does not pay for at all.

The misconception that nearly half of adults 65 and older incorrectly believe matters most is that Medicare would pay for a long nursing home stay, according to a KFF survey. This misconception is not harmless. People who assume Medicare will cover long-term care fail to plan for it—and then face a financial crisis when they or a spouse needs care that Medicare will not fund. If you take away one thing from this article, let it be this: Medicare does not pay for long-term custodial care.

Medicaid: the long-term care safety net

Medicaid is a joint federal-state program that provides healthcare coverage for people with limited income and assets. Unlike Medicare, Medicaid does cover long-term custodial care—nursing home care, assisted living (in many states), and home and community-based services. In fact, Medicaid is the single largest payer of long-term services and supports in the United States, accounting for roughly 46 percent of all LTC spending nationally.

But Medicaid requires financial eligibility. To qualify for Medicaid long-term care in most states, an individual must have assets below approximately $2,000 (excluding the primary home, one vehicle, and certain other protected assets). For married couples, there are important protections: the Community Spouse Resource Allowance (CSRA) allows the healthy spouse to retain between $30,000 and approximately $154,000 in assets (exact amounts vary by state and are adjusted annually), and the Minimum Monthly Maintenance Needs Allowance (MMMNA) protects a portion of income for the healthy spouse.

Medicaid also has a five-year look-back period: when you apply for Medicaid long-term care benefits, the program reviews financial transfers made in the preceding five years. Transfers made to qualify for Medicaid by reducing assets can trigger a penalty period during which Medicaid will not pay for care. The purpose is to prevent people from giving away assets to qualify for a means-tested program while protecting wealth for heirs. Planning well in advance—ideally with an elder law attorney—is essential for anyone who may need to rely on Medicaid.

Home and Community-Based Services (HCBS)

One of Medicaid’s most important long-term care programs is its Home and Community-Based Services (HCBS) waiver programs, which allow states to offer care services in the community—in people’s homes, in assisted living, and in adult day programs—rather than requiring institutional nursing home placement. HCBS programs have grown significantly and now account for more than half of all Medicaid long-term care spending. They are a lifeline for people who want and can safely receive care at home rather than in a nursing home.

Unfortunately, HCBS programs typically have waiting lists in many states because they are optional and states limit funding. The HCBS option is not available to everyone who might benefit from it.

Veterans benefits

Veterans may be eligible for long-term care assistance through the U.S. Department of Veterans Affairs, including VA-operated nursing homes, community-based care, and the Veterans Aid & Attendance benefit, which can provide a meaningful monthly income supplement for veterans or surviving spouses who need help with ADLs. The Aid & Attendance benefit is means-tested and requires that the veteran qualify for the VA Pension program. It can be a significant resource for eligible veterans. The application process is lengthy—often six to twelve months—so starting early is critical.

SHIP: free counseling

Every state has a State Health Insurance Assistance Program (SHIP), which provides free, objective counseling to Medicare and Medicaid beneficiaries. SHIP counselors can help navigate coverage questions, compare plan options, and understand how Medicare and Medicaid interact. This is a valuable and often underutilized resource.

The Budget Reconciliation Act of 2025

The Budget Reconciliation Act (H.R. 1)—signed into law on July 4, 2025—made the largest cuts to Medicaid in the program’s history: over $900 billion in reductions over ten years. Several provisions directly affect older adults and long-term care planning. States face immediate new restrictions on the provider taxes many use to fund their share of Medicaid costs.

As state Medicaid funding tightens, the programs most vulnerable to cuts are optional ones—and Home and Community-Based Services account for more than half of all optional Medicaid spending. In states where HCBS programs were already under-funded, further cuts may reduce access to community-based care and increase pressure on families to provide unpaid care or to seek nursing home placement. The nursing home minimum staffing rule—which would have required a minimum number of nursing care hours per resident and a registered nurse on-site 24 hours a day—has been suspended for ten years, removing a federal floor on nursing home care quality. This allows chronic understaffing to continue at the most vulnerable facilities.

Beginning in 2027, many Medicaid expansion enrollees will face new work-requirement reporting obligations that may result in coverage loss due to administrative burdens, even for people who are otherwise eligible. While this provision primarily affects working-age adults rather than seniors, it affects the overall stability and funding of the Medicaid program that seniors depend on. The practical planning implication: Medicaid is a less reliable long-term care safety net than it was two years ago, and the trend is toward further constraints. People who have been treating Medicaid as their fallback plan should reassess whether that assumption holds in their state—and should consider whether additional planning is warranted.

A biblical perspective on government programs

How should Christians think about Medicare and Medicaid as part of retirement planning? I believe we can view these programs as aspects of God’s common grace—provisions that a society has made for the care of its most vulnerable members, and which individuals of every background can appropriately draw upon. Using benefits we have paid into through decades of work is not dependency; it is simply receiving what was made available for exactly this purpose.

Medicaid is different in that it is explicitly means-tested—designed for people with genuinely limited resources. Aggressive Medicaid planning strategies that transfer assets specifically to qualify for benefits while protecting wealth for heirs raise real ethical questions. Gaming a means-tested program while protecting wealth does not reflect the integrity Scripture calls us to. However, using legitimate spousal protections—the very protections Congress built into the Medicaid statute to prevent impoverishment of a healthy spouse—is a different matter. That is using the system as it was intentionally designed.

This is a genuinely complex area where competent legal counsel and honest self-examination are both warranted. An elder law attorney who understands both Medicaid law and your full financial picture is worth the investment.

Summing up

Medicare is health insurance that covers acute medical care. For long-term custodial care—the kind most likely to be needed for months or years—Medicare provides almost no coverage beyond a short skilled nursing window after a qualifying hospital stay.

Medicaid covers long-term care, but only for those with very limited assets, and the look-back rules and eligibility requirements are complex. The 2025 Budget Reconciliation Act has added new uncertainty to Medicaid’s role, particularly for home and community-based care.

For everyone who is neither very wealthy (able to self-fund care) nor very low-income (Medicaid-eligible), the question of how to fund long-term care is a real and important planning challenge. We address that in Parts Three, Four, and Five of this series.