Reviewed by Carol Bradley BursackCarol Bradley Bursack spent two decades as a primary caregiver to seven elders. She’s the author of Minding Our Elders: Caregivers Share Their Personal Stories and a contributor to several other titles. Carol is a newspaper columnist, blogger, and writer. Learn more about her at mindingourelders.com.

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If your loved one has received a dementia diagnosis, or if they’re beginning to experience symptoms of cognitive decline, it may be time to start exploring memory care. Caring for a person with Alzheimer’s disease or another type of dementia can be expensive, but there are a variety of insurance options that can help your family pay for care. Learn more about federally funded and private insurance programs that can help your loved one with dementia age in a secure, supportive environment.

Key Takeaways

Some types of insurance cover memory care costs. Depending on your loved one’s plan, benefits may cover medical fees, custodial care costs, or both.
Government-funded programs can help pay for memory care. Medicare and Medicaid both cover some aspects of memory care, depending on your relative’s financial situation and needs.
Privately purchased insurance may be helpful. Long-term care insurance is designed to cover senior living options like memory care.
If your loved one is still employed, insurance may cover memory care. Companies’ private insurance plans, disability insurance coverage, and COBRA can all contribute to memory care funds.

What is memory care?

Memory care communities are designed to help seniors with dementia age safely in a residential environment. They offer activities and therapies crafted to slow the progress of cognitive decline, 24-hour care, meals, transportation, and assistance with activities of daily living (ADLs) such as dressing, bathing, and using the toilet.

As you’re exploring whether insurance covers memory care, remember this important distinction: A memory care community, described above, is a place where dementia care is provided. However, some insurance providers and resources see memory care and dementia care as synonymous. So, memory care can be both a location and a typeoftreatment designed to help people experiencing cognitive decline.

What types of insurance cover memory care costs?

Some types of insurance cover memory care costs. Depending on your loved one’s plan and provider, they may be able to receive dementia-related medical care, custodial care, or funds your family can put toward care costs.

Below, we’ll explore the following types of insurance:

Medicare
Medicaid
Long-term care insurance
Life insurance
Social Security Disability Insurance
Disability insurance
COBRA
Private insurance policies

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Medicare

Medicare is a federally funded insurance program for seniors over 65, as well as younger people with certain disabilities. Medicare doesn’t cover long-term custodial care for people with dementia, but it may cover some medical expenses related to your loved one’s diagnosis and care.

For example, if your relative chooses to move into a memory care community, Medicare won’t cover the cost of rent, meals, or assistance with ADLs. However, Medicare may cover the cost of dementia-related occupational therapy, medications, and doctor’s appointments.^[01]

Medicaid

Medicaid is an insurance program sponsored jointly by federal and state governments. It’s available to low-income adults, and eligibility requirements vary by state.

Unlike Medicare, Medicaid generally pays for both medical and custodial care for seniors who meet program requirements. Medicaid will analyze your loved one’s assets, income, health and functional status, and five-year spending history to determine if they qualify for benefits depending on the state where they live.

Memory care facilities may not be covered by insurance through Medicaid, even though both custodial care and medical care for people with dementia are. That’s because, in many states, care must be provided in a Medicaid-certified care home. Many of these communities are technically classified as nursing homes, though they do provide memory care services to residents with dementia.^[02]

If a senior qualifies for Medicaid, they’ll pay an income-based coinsurance amount to secure care in a designated facility. Then, Medicaid insurance will cover the majority of memory care costs, including scheduled activities and therapies designed to slow the progress of cognitive decline, room and board, meals, and assistance with ADLs and health care needs.

Long-term care insurance

Long-term care policies aren’t available to people who’ve already received a dementia diagnosis or exhibited symptoms of significant cognitive decline. However, if your loved one has already purchased long-term care insurance, it may cover some aspects of memory care.

To be able to access long-term care insurance funds from their provider, a senior must:

Receive an official dementia diagnosis
Be unable to perform at least two activities of daily living independently
Have met the necessary vesting time requirements for benefit availability ^[03]

If your relative is fairly healthy and under 65, now may be the time for them to apply for a long-term care insurance policy to cover memory care later in life. However, it’s important to consult with a financial advisor and do your own research before pursuing this option.

While long-term care insurance can be beneficial in many situations, it can also become an unnecessary financial strain. If your loved one doesn’t end up needing care, their payments will be lost. If their premiums are raised and they’re no longer able to pay, they’ll forfeit coverage.

It’s also important to note that long-term care insurance policies don’t go into effect immediately. Your family will likely have to pay for several months of care out of pocket before benefits begin.

Memory tests for long-term care insurance

Even if your loved one is physically in good health, they likely won’t qualify for a long-term care insurance policy once they’ve begun showing symptoms of cognitive decline.

Insurance providers screen applicants to better understand their risk of needing care soon. Applicants who are more likely to require care are less likely to qualify for coverage. So, if your relative exhibits signs that they may need memory care sooner rather than later, the provider may deny them a policy.

To determine eligibility, a provider will conduct a memory test on the applicant. A sample memory test for long-term care insurance may include word recall exercises, basic math equations, or an exercise where the applicant is asked to draw clocks showing different times.^[04]

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Life insurance

Your loved one may be able to borrow funds from their life insurance policy or sell the policy for a lump-sum payment to cover the cost of memory care.

Accelerated benefits. If they’re diagnosed with a terminal illness or chronic condition, your relative may be able to access “accelerated benefits,” also called living benefits.^[05] It’s important to note that some insurance providers consider Alzheimer’s disease and other types of dementia in this category, while others don’t. To access living benefits, your loved one will likely need a formal diagnosis from their doctor.

Upon the insured’s death, the amount they borrowed, plus a service fee, will be deducted from the policy’s worth. The rest will be paid to your loved one’s beneficiaries.

Selling a life insurance policy. If your relative doesn’t qualify for accelerated benefits, or if they need a larger amount of money more urgently, they may be able to sell their life insurance policy to a third-party company for a lump-sum payment. Note that these benefits are generally not available in conjunction with term life insurance policies, which only last a certain amount of time and don’t pay out death benefits if the insured person outlives the policy.

Does insurance cover memory care if your loved one is still employed at the time of their dementia diagnosis?

If your loved one is diagnosed with early-onset dementia, they may still be employed. Or they could’ve chosen to work past standard retirement age. In those scenarios, employer-paid disability insurance policies and COBRA (explained below) can help cover memory care costs.

Social Security Disability Insurance

Social Security Disability Insurance (SSDI) offers disability payments to employed people under the age of 65. The individual must meet the Social Security Administration’s definition of “disability” to qualify.^[06] This generally applies to people with dementia if they’re unable to work or if the disease will last at least a year or result in death.

Disability insurance

If someone can no longer work because of an illness or injury, they may qualify for disability insurance benefits. However, the plan must already be in place before they begin exhibiting the symptoms of dementia or cognitive decline that lead to them leaving the workplace.

Employer-paid disability policies pay up to 70% of a worker’s total income, and the income received is taxed. Generally, when someone purchases an additional personal disability policy, they’ll select a payout amount, which will be provided accordingly once they qualify. Unlike employer-paid policies, personal disability policies are not taxed as income.^[07]

COBRA

Funds from the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) may be able to help your relative if they’re younger than 65 and still working. It applies to businesses with 20 or more employees, or it can be secured privately. A person’s COBRA coverage will be equivalent to the coverage they had under their employer’s insurance plan.^[08]

Under COBRA, your loved one may be covered for up to 36 months after leaving their employer or reducing hours to the point where they no longer qualify for the company’s standard health plan.^[08] While this isn’t necessarily a long-term solution, it can provide temporary health care coverage while your relative secures another type of insurance, such as Medicare, Medicaid, or insurance from a partner or spouse.

Private insurance

Employer-offered private insurance is only accessible while someone is gainfully employed. Depending on your loved one’s job, they may be able to continue working in some capacity once they begin to experience cognitive decline. When they’re no longer employed, your relative can switch to one of the options listed above.

Many dementia advocates support the idea of adjustments in the workplace to help people remain employed longer after their diagnosis. While their hours or responsibilities may be reduced, people with dementia can retain a sense of purpose and independence while maintaining their careers.

How to find memory care facilities covered by insurance

If your loved one has dementia and your family has chosen to explore memory care options, reach out to one of our Senior Care Advisors. They can go over your loved one’s budget and walk you through the process of finding the right community, all at no cost to your family.

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References

[1]United Healthcare. (2023). Does Medicare cover Alzheimer’s care?
Centers for Medicare and Medicaid Services. Medicaid. Medicaid.gov.
LTC Consumer. How to qualify for long term care insurance.
Lewis, R.H. (2022, February 23). Dementia care in long-term care insurance policies. American Bar Association.
Huddleston, C. & Danise, A. (2021, March 17). Understanding accelerated death benefits in life insurance. Forbes.
Social Security Administration. How do we define disability?
Insurance Information Institute. How can I insure against loss of income?
U.S. Department of Labor. Continuation of health coverage.

Meet the Author

Claire Samuels

Claire Samuels is a senior copywriter at OurParents, where she helps guide families through the dementia and memory care journey. Before transitioning to writing, she gained industry insight as an account executive for senior living communities across the Midwest. She holds a degree from Davidson College.

Edited byDanny Szlauderbach

Reviewed byCarol Bradley Bursack

The information contained in this article is for informational purposes only and is not intended to constitute medical, legal or financial advice or create a professional relationship between A Place for Mom (of which OurParents is a trademark) and the reader. Always seek the advice of your health care provider, attorney or financial advisor with respect to any particular matter and do not act or refrain from acting on the basis of anything you have read on this site. Links to third-party websites are only for the convenience of the reader; A Place for Mom does not recommend or endorse the contents of the third-party sites.

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