[Last updated November 21, 2025]
When a loved one is diagnosed with Alzheimer’s disease or another form of dementia, families face difficult decisions about care. Memory care provides specialized support in a safe environment designed for people with cognitive impairment, but the costs can feel overwhelming. Understanding how to pay for memory care, whether in a specialized community or at home, is crucial for planning ahead and ensuring your loved one receives the care they need.
The good news is that multiple payment options exist, and many families find that combining several sources makes memory care affordable. Let’s explore the costs you can expect and the various ways to cover them.
The cost of memory care in the U.S.
Understanding what memory care costs is the first step in planning how to pay for it. According to Genworth’s Cost of Care Survey, the national median costs for long-term care services are:
- Home care (homemaker services): $6,292 per month.
- Home care (home health aide): $6,483 per month.
- Assisted living: $5,900 per month.
- Nursing home (semiprivate room): $9,277 per month.
- Nursing home (private room): $10,646 per month.
These figures represent general long-term care costs, but memory care services are often more expensive because they require specialized staff training, secure environments to prevent wandering, and programs specifically designed for cognitive impairment. Memory care in assisted living communities typically costs 15% to 30% more than standard assisted living, while memory care at home through specialized agencies may also carry premium rates.
What memory care services usually include: Memory care in a facility provides structured daily routines, medication management, assistance with activities of daily living, secure environments with monitored exits, specialized therapeutic activities, trained staff who understand dementia behaviors, and nutritious meals. Many communities also offer family support and education.
Key cost factors include the level and type of care needed (e.g., early-stage dementia requires less intensive support than advanced stages), whether you choose a private or shared room in a community setting, and geographic location (memory care in urban areas or coastal states typically costs significantly more than in rural or Midwestern locations). State-by-state costs vary widely, with monthly expenses ranging from around $4,000 in some states to over $10,000 in others.
Paying out of pocket: Personal funds and savings
Many families initially pay for memory care using personal resources. This approach offers flexibility and immediate access to care without waiting for insurance approvals.
Savings
How it works: Regular savings accounts, money market accounts, and certificates of deposit provide readily accessible funds to pay monthly memory care bills.
Who it applies to: Anyone with accumulated savings who needs straightforward payment options.
Important considerations: With memory care potentially lasting several years, calculate whether available savings can sustain the ongoing expense. Consider keeping an emergency fund separate from monthly care costs for unexpected medical expenses or care upgrades.
Retirement accounts
How it works: Withdrawals from 401(k)s, IRAs, pensions, and other retirement accounts can cover memory care expenses.
Who it applies to: Individuals who have built retirement savings and need to access those funds for care.
Important considerations: Traditional retirement account withdrawals are taxable as ordinary income, which could affect your loved one’s tax bracket. Work with a financial advisor to develop a sustainable withdrawal strategy. Medical expense deductions may offset some tax liability if memory care qualifies as deductible medical care, which it often does when prescribed by a physician.
Home sale proceeds
How it works: Selling your loved one’s home releases equity that can fund memory care for months or years, depending on the home’s value and the cost of care.
Who it applies to: Homeowners with substantial equity who will not be returning home due to their care needs.
Important considerations: Real estate transactions take time. Bridge loans can cover initial memory care costs while the home is on the market, ensuring your loved one can move into care immediately without waiting for the sale to close. Factor in selling expenses like realtor commissions, repairs, and closing costs when calculating available funds. The capital gains exclusion (up to $250,000 for individuals and $500,000 for married couples) can be beneficial if the home has appreciated significantly.
Other personal assets
How it works: Stocks, bonds, mutual funds, and other investments can be liquidated to generate funds for memory care.
Who it applies to: Individuals with investment portfolios beyond retirement accounts.
Important considerations: Review the tax implications of selling appreciated assets. Some families prefer to liquidate investments gradually to spread out tax liability across multiple years.
Personal insurance products
Several insurance products can help pay for memory care, though their applicability depends on policy specifics and when they were purchased.
Can long-term care insurance cover memory care?
How it works: Long-term care insurance typically covers memory care when a physician certifies that your loved one needs assistance with activities of daily living or requires supervision due to cognitive impairment. Policies pay a daily or monthly benefit that can be applied to memory care services in communities or at home.
Who it applies to: Individuals who purchased long-term care insurance policies, usually years before needing care.
Important considerations: Review the policy carefully to understand the daily benefit amount, elimination period (the waiting period before benefits begin, typically 30 to 90 days), benefit duration, and whether it covers memory care specifically. Some older policies may have limitations or may require greater impairment than newer policies. Contact the insurance company early in the care planning process to understand the claims process and documentation requirements.
Can you use life insurance to pay for memory care?
How it works: Permanent life insurance policies with cash value allow policyholders to take loans or make withdrawals. Alternatively, you can sell the policy through a life settlement to receive a lump sum or use accelerated death benefits if the policy includes this rider and your loved one meets the terminal or chronic illness criteria.
Who it applies to: Those with whole life, universal life, or other permanent life insurance policies.
Important considerations: Policy loans and withdrawals reduce the death benefit available to beneficiaries. Life settlements typically pay more than surrender value but are complex transactions. Accelerated death benefits, when available, may provide tax-free advances on the death benefit if your loved one qualifies as chronically ill.
Using annuities to pay for memory care
How it works: Existing annuity payments provide regular income that can be directed toward memory care costs, or you can annuitize a lump sum to create guaranteed monthly income.
Who it applies to: Individuals who own annuities or those considering purchasing an immediate annuity for predictable income.
Important considerations: Annuities provide stable, predictable payments that simplify budgeting. However, accessing funds from deferred annuities before the surrender period ends may incur penalties. Evaluate whether the guaranteed income stream aligns with anticipated care costs.
Can Medicare pay for memory care?
Medicare does not pay for long-term memory care in communities or at home, as it’s designed to cover medical care rather than custodial care. However, Medicare does provide limited coverage in specific situations.
Medicare coverage for short-term skilled nursing: After a qualifying hospital stay of at least three days, Medicare Part A provides coverage for up to 100 days in a skilled nursing facility.
Who it applies to: This applies when a memory care resident experiences a qualifying hospital stay and then requires skilled nursing care in a Medicare-certified nursing facility. The coverage is for the skilled nursing care needed after hospitalization, not for the memory care itself.
What it covers: Medicare covers medically necessary skilled nursing care, physical therapy, occupational therapy, room and board in a semiprivate room, and medications during the covered stay.
Important considerations: Coverage ends after 100 days or when skilled care is no longer needed, whichever comes first. The resident becomes responsible for all costs once Medicare coverage ends. This benefit doesn’t convert into long-term memory care coverage.
Does Medicaid pay for memory care?
Medicaid is often the most significant resource for long-term memory care once personal funds are exhausted. Unlike Medicare, Medicaid does cover long-term custodial care, including memory care services. If you are receiving memory care in a long-term care facility, like a nursing home, and qualify financially and medically, you may be able to use Medicaid to fund memory care.
How it works: Medicaid is a joint federal-state program with eligibility based on income and assets. Generally, individuals must have limited income and assets (typically around $2,000 in countable assets, though this varies by state) to qualify. If married, special rules protect the spouse still living at home.
Who it applies to: Individuals who meet their state’s financial eligibility requirements and require a nursing home level of care.
Important considerations: The Medicaid application process requires substantial documentation of income, assets, and medical need. Many families work with elder law attorneys to navigate application complexities and understand look-back periods (typically five years) for asset transfers.
The individual’s primary residence may not count as a countable asset during the application process if there are documented plans for the individual to return home. However, many people who move to memory care facilities don’t realistically plan to return home. Additionally, even if the home isn’t counted during the application, Medicaid’s estate recovery program may place a lien on the property after the recipient’s death to recover costs paid for their care. An elder law attorney can help you understand how homeownership affects both eligibility and estate planning.
Depending on your state, home and community-based services (HCBS) waiver programs may allow Medicaid to pay for memory care services at home or in assisted living, not just nursing homes. These waivers have limited slots and often have waiting lists, so apply early. Not all memory care communities accept Medicaid, so if you anticipate eventually needing Medicaid coverage, choose a community that accepts it from the start.
Veterans benefits can help pay for memory care
Veterans and their surviving spouses may qualify for benefits that help cover memory care costs, providing valuable additional income.
The Aid and Attendance benefit
How it works: The Aid and Attendance benefit provides additional monthly income on top of a Veteran’s regular pension for those who need help with activities of daily living or are housebound. This benefit isn’t designated specifically for memory care, but the recipient can use the funds for any life expenses, including memory care costs.
Who it applies to: Wartime Veterans and surviving spouses who meet service requirements, income limits, and medical need criteria. The Veteran must have served at least 90 days of active duty, with at least one day during a wartime period, and need assistance with daily activities.
Important considerations: Benefit amounts vary based on marital status and whether the Veteran or the surviving spouse is receiving it. Actual amounts depend on countable income. The application process can take several months, so apply as early as possible. Many families work with accredited VA benefits consultants or elder law attorneys to navigate the application successfully.
Veteran home care programs
How it works: The VA offers several programs that provide home care services, adult day care, respite care, and homemaker services for eligible Veterans. These programs can help Veterans with dementia remain at home longer or supplement other care arrangements.
Who it applies to: Veterans enrolled in VA health care who meet eligibility requirements based on service-connected disabilities, income, and need for services.
Important considerations: The Homemaker and Home Health Aide program provides assistance with activities of daily living and instrumental activities like meal preparation and light housekeeping.
Adult day health care centers offer socialization and therapeutic activities in a supervised setting.
These programs vary by location and availability, so contact your local VA medical center to learn what’s available in your area. Some services may have copayments based on income and service-connected disability status.
Paying for memory care requires careful planning and often a combination of resources. Many families start with personal funds, transition to insurance benefits when available, and eventually rely on Medicaid for long-term coverage. Veterans should always explore VA benefits as an additional income source. Consulting with an elder law attorney or financial advisor who specializes in long-term care planning can help you maximize available resources and create a sustainable payment strategy that ensures your loved one receives quality memory care throughout their journey.
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.
