[Last updated November 4, 2025]
When aging loved ones need help at home, families often wonder how they’ll afford it. Understanding your payment options is crucial for planning quality care without financial devastation. This guide explains the various ways to pay for home care services and what you need to know about each option.
Understanding home care vs. home health care
Before exploring payment options, it’s essential to understand what type of care you’re seeking. Home care refers to nonmedical custodial services that help with activities of daily living (ADLs) such as bathing, dressing, meal preparation, light housekeeping, companionship, and medication reminders. These services are typically provided by home care aides or personal care assistants and can be needed for months or years.
Home health care, by contrast, involves short-term skilled medical services like nursing care, physical therapy, or occupational therapy prescribed by a physician. This medical care is often covered by Medicare following a hospitalization or acute illness.
This distinction matters tremendously because the two types of care have completely different payment options. Most people seeking ongoing assistance with daily activities need home care, not home health care, and Medicare generally doesn’t cover it.
Now let’s take a look at what options are available to help people pay for home care.
Private funds
How it works: Paying privately means using personal savings, retirement accounts, investment income, or current earnings to pay home care agencies or independent caregivers directly.
Who it applies to: Anyone with available financial resources can use this option. There are no eligibility requirements or restrictions.
Important considerations: Private pay offers maximum flexibility and control. You can hire caregivers immediately without waiting for approvals, choose your own providers, and adjust services as needs change. The national average for home care costs around $34 per hour, with rates typically ranging from $25 to $50 per hour depending on location and level of care needed. For someone needing 40 hours of weekly care, annual costs can be quite high.
The primary challenge is affordability. Families may deplete savings quickly, which can jeopardize long-term financial security. It’s wise to calculate how long your resources will last and explore other options before reserves run too low.
Personal insurance products
We’ve categorized insurance products into a few groups for the purposes of this article because some are health insurance products and others are not. We’re describing non-health insurance products first, such as long-term care insurance and life insurance. Let’s go over those now.
Using long-term care insurance to pay for home care
How it works: Long-term care insurance (LTCi) policies provide coverage specifically designed for custodial care services, including home care. Policyholders pay premiums for years, then file claims when they need care.
Who it applies to: Only those who purchased policies before needing care are eligible. Most policies require a triggering event, typically the inability to perform two or more activities of daily living (ADLs) such as bathing, dressing, or eating, or cognitive impairment requiring substantial supervision.
Important considerations: Policies vary significantly in their benefits. Most have an elimination period (typically 30 to 90 days) where you pay out of pocket before coverage begins. Many operate on a reimbursement basis, meaning you pay the caregiver first, submit receipts, and wait for reimbursement. Some newer policies offer cash benefits paid directly, regardless of actual expenses.
Daily or monthly benefit limits cap how much the policy pays, and lifetime maximums limit total payouts. If your care costs $150 per day but your policy pays only $100 daily, you’ll have to cover the difference. Review your policy carefully to understand coverage periods, benefit amounts, and any exclusions.
Using life insurance to pay for home care
How it works: Certain life insurance policies offer living benefits that allow policyholders to access death benefits early to pay for long-term care expenses, including home care.
Who it applies to: Eligibility depends on your specific policy type. Permanent life insurance policies with cash value (whole life or universal life) can be borrowed against or surrendered for cash. Some policies include accelerated death benefit riders that release funds if the policyholder is diagnosed with a chronic or terminal illness. Term life insurance typically offers no living benefits unless specific riders were purchased.
Important considerations: Accessing life insurance reduces or eliminates the death benefit your beneficiaries would receive. Loans against policies accrue interest and must be repaid or will be deducted from the death benefit. Surrendering a policy ends coverage permanently. Accelerated benefits usually require certification of chronic illness, often needing assistance with two or more ADLs, similar to LTCi requirements.
This option works best when the immediate need for care outweighs preserving the full death benefit for heirs.
Can Medicare pay for home care?
How it works: Medicare covers home health care (skilled medical services) but not nonmedical home care. That’s because Medicare is health insurance that helps cover the cost of medical services. It considers home care services to be personal care, not medical care, and therefore original Medicare does not cover them. Medicare will only pay for limited, short-term home care services if you are also receiving home health care and your doctor deems home care medically necessary during that time.
Who it applies to: Only Medicare beneficiaries meeting strict medical necessity and homebound criteria will qualify. Coverage is temporary, typically following hospitalization or acute illness.
Important considerations: Many families mistakenly believe Medicare will cover daily custodial care assistance, but it won’t. While a skilled nurse might visit a few times weekly for wound care or medication management, Medicare doesn’t pay for aides to help with bathing, dressing, or meal preparation unless it’s incidental to the skilled care being provided.
Medicare Advantage plans sometimes offer supplemental benefits like limited home support or transportation to medical appointments, but these extras rarely cover substantial ongoing home care needs.
Can Medicaid pay for home care?
How it works: Medicaid, the joint federal-state program for low-income individuals, covers home care in most states through various waiver programs designed to keep seniors out of nursing homes.
Who it applies to: Eligibility for Medicaid requires meeting strict income and asset limits that vary by state. Applicants must also meet functional eligibility, typically needing nursing home-level care but choosing to remain home instead.
Important considerations: Medicaid often becomes an option only after spending down assets, though some states allow applicants to transfer assets to spouses or into certain trusts. The application process is complex and can take months. Coverage typically includes personal care services, homemaker assistance, and sometimes respite care for family caregivers.
Medicaid payment rates to agencies are lower than private pay rates, which can limit provider availability in some areas. However, for eligible seniors, Medicaid provides crucial long-term coverage that doesn’t run out like insurance policies do.
Veterans benefits can help pay for home care
The U.S. Department of Veterans Affairs (VA) offers a range of benefits and services that help older adult Veterans (and qualifying spouses) access services in the home. Qualifying individuals can receive care through these programs. Let’s explore these now.
Veterans home care programs
How it works: The VA offers several programs providing home care services to eligible Veterans, including the Home Based Primary Care program and Homemaker and Home Health Aide services.
Who it applies to: Eligibility generally requires honorable discharge, enrollment in VA health care, and a clinical determination that home care is medically necessary. Priority goes to Veterans with service-connected disabilities, lower incomes, or special circumstances.
Important considerations: VA home care programs provide comprehensive services at little or no cost to eligible Veterans. However, availability varies by location and VA resources. Some programs have waitlists, and the evaluation process to determine eligibility and appropriate services can take time.
VA Aid and Attendance benefit
How it works: This enhanced VA pension provides additional monthly payments to wartime Veterans or surviving spouses who require assistance with daily living activities.
Who it applies to: Wartime Veterans (or surviving spouses) with limited income and assets who need help with ADLs or are homebound. Service requirements include 90 days of active duty with at least one day during a wartime period.
Important considerations: The benefit pays up to $2,795 monthly for Veterans (2025 rates) and can significantly offset home care costs. However, the application process is lengthy, often taking six months to a year for approval. Income limits apply, but unreimbursed medical expenses, including home care costs, reduce countable income. This creates a situation where paying for care can actually help qualify you for benefits that then reimburse those expenses.
Loans and financial products
Multiple types of loans and financial products exist to help people access the care they need. Not every product is right for every individual’s needs and situation. Let’s go over some options that might be appropriate for paying for home care.
Reverse mortgage
How it works: Reverse mortgages allow homeowners 62 and older to convert home equity into cash without selling their home. Borrowers receive payments while continuing to live in the home, and the loan is repaid when they sell, move permanently, or pass away.
Who it applies to: Homeowners 62 and older with substantial home equity and the ability to maintain property taxes, insurance, and home maintenance can use this option. The home must be their primary residence.
Important considerations: Reverse mortgages provide funds for home care without monthly repayments, preserving other income sources. However, fees and interest accumulate, reducing equity available to heirs. If you move to assisted living or a nursing home for more than 12 months, the loan becomes due. Spouses under 62 may face complications if the borrowing spouse dies first.
Home equity line of credit
How it works: A HELOC allows homeowners to borrow against home equity up to a credit limit, drawing funds as needed and repaying with interest over time.
Who it applies to: Homeowners with sufficient equity, adequate income to make payments, and decent credit scores.
Important considerations: HELOCs offer flexibility, allowing you to borrow only what you need, when you need it. Interest rates are typically variable, meaning payments can increase. Unlike reverse mortgages, monthly payments are required, which may strain budgets already stretched by care costs. Defaulting risks foreclosure.
Personal loan
How it works: Unsecured personal loans from banks, credit unions, or online lenders provide lump-sum funding repaid in fixed monthly installments.
Who it applies to: Borrowers with adequate credit scores and income to support monthly payments.
Important considerations: Personal loans don’t require collateral but typically carry higher interest rates than home equity products. They work best for shorter-term care needs or bridging gaps until other funding sources activate. Loan amounts may be insufficient for extended care needs, and monthly payments can burden fixed incomes.
Local Area Agencies on Aging
How it works: Area Agencies on Aging (AAAs) coordinate services for older adults in local communities, often providing or connecting seniors to subsidized home care services, meal delivery, transportation, and respite care.
Who it applies to: Services vary by location but generally target seniors 60 and older, with priority for those with the greatest economic or social need. Some programs are free, while others use sliding-scale fees based on income.
Important considerations: AAA programs rarely cover comprehensive 24-hour care needs but can supplement other payment sources. Services might include a few hours of weekly homemaker assistance, delivered meals, or adult day care programs that give family caregivers breaks. The National Eldercare Locator (1-800-677-1116) connects families to local AAAs.
Many communities also have nonprofit organizations, faith-based groups, and volunteer programs offering limited free or low-cost assistance. While not sufficient as sole care solutions, they provide valuable support that reduces overall costs.
Planning your strategy to pay for home care
Few families rely on a single payment source for home care. Most successful plans combine multiple options, such as using private funds initially while applying for Veterans benefits, purchasing care privately while waiting for Medicaid eligibility, or supplementing insurance benefits with community programs.
Start planning early, understand what resources you have available, and consult with elder law attorneys or financial advisors who specialize in long-term care planning. The right payment strategy preserves dignity and quality of life while protecting long-term financial security for both care recipients and their families.
This information is for educational purposes and is not legal, financial, tax, or investment advice. It should not be substituted for information from professionals authorized to practice in your area. You should always consult a suitably qualified professional regarding your specific situation.
