Q: My mom suddenly needs to be in a nursing home. Should I spend down her assets so she qualifies for Medicaid?

A: If you’re in a situation where your mother needs nursing home care, you may be thinking your only option is to spend down her assets so she can qualify for Medicaid. Unlike Medicare, Medicaid does pay for long-term care. But whittling an older parent’s money down to their last dime may not be the only solution.

Of the various retirement costs you may know to plan for, healthcare is perhaps the trickiest. Fidelity estimates that the average 65-year-old retiring in 2025 could incur $172,500 in medical expenses throughout their later years. And that estimate doesn’t even account for long-term care.

The Administration for Community Living reports that someone turning 65 today has an almost 70% chance of needing long-term care services in their lifetime. And not surprisingly, women tend to need care for a longer period than men (3.7 years on average, compared to 2.2 years, respectively).

The problem, though, is that long-term care needs can arise suddenly. And if you think Medicare will pay for it, you’re sorely mistaken.

Medicare will only cover the cost of care that’s medical in nature. Long-term care is generally custodial, which is a big distinction.

Needing help with everyday activities like dressing and bathing is a common byproduct of aging. But unless it’s associated with a specific illness, injury, or surgical procedure, Medicare is unlikely to pick up the tab. That’s why Medicaid has been the principal payer for 60% of people who need nursing home care.

Ways to protect assets and still qualify for Medicaid

CareScout’s most recent Cost of Care Survey puts the average annual nursing home bill at $114,975 for a shared room and $129,575 for a private room. These are costs many retirees can’t afford.

The middle-class trap

Meanwhile, retirees who are comfortable but not wealthy often fall into a trap. They have too many assets to qualify for Medicaid, but not enough money to pay for nursing home care without eventually going completely broke.

As Evan Farr, a Certified Elder Law Attorney, explains, there’s a general $2,000 limit on spendable assets to qualify for Medicaid. However, he says, “experienced elder law attorneys help people protect assets every day” while still qualifying for Medicaid.

In fact, Farr says, married couples can often protect 100% of their assets in these situations. And there are numerous legal and ethical asset protection strategies that knowledgeable attorneys can use.

In addition, Medicare provides some protections for the spouse of someone who needs nursing care, called the Community Spouse Resource Allowance (CSRA).

The singles trap

Now, Farr does acknowledge that the rules are different and, unfortunately, less favorable for single people.

“But we still have strategies,” he insists, that can commonly protect 40% to 70% of a single person’s assets.

“Some money will have to be spent down to pay for care, but not all,” he explains. So if you’re in a situation where you have a parent who needs nursing home care, don’t just go on a spending spree. Instead, consult a professional.

Michael Murray, AIF, CPFA, and president/financial planner at Peabody Wealth Advisors, agrees.

“As a single person, the best strategy would be to talk to an elder care attorney about setting up an irrevocable trust,” he says, or discussing other strategies to protect assets.

To be clear, though, protecting assets isn’t simply a matter of preserving inheritances. Rather, as Farr explains, it’s important because the money can be used to provide supplemental care for a parent entering a nursing home. This could include paying for denture replacements, hearing aids, cell phone bills, and other services not typically covered by traditional nursing home fees.

Extra funds for extra eyes

Plus, as Farr says, “In some cases, if the parent would benefit, the money that’s protected can be used to hire a private sitter to be with the parent in the nursing home so they have someone with them a few hours a day, whether to be a companion or to help with care.”

It’s not a secret that nursing homes these days are sorely understaffed. Having extra funds to pay for a private caregiver could lead to a far more positive experience and level of care.

How to spend down assets

Murray also explains that there’s a misconception as to what spending down assets to qualify for Medicaid might look like.

“You can’t just gift your money to a child,” he insists. However, he says that with careful planning, assets can be spent in meaningful and helpful ways, such as prepaying for a funeral and making home improvements.

Farr also insists that there’s a misconception about protecting assets in the context of Medicaid.

“‘Hide’ is a dirty four-letter word in our industry,” he says. “We don’t hide assets. We legally shelter assets. On the ethical and moral side, it’s no different from income tax planning, where you’re trying to get back the biggest refund.”

Long-term planning is still a must

It may be comforting to know that there are ways to get nursing home coverage through Medicaid without spending down every last penny you or a loved one worked hard to save. However, Murray says it’s essential to acknowledge that the strategies described above are “not a way for rich people to shelter their assets.”

He also insists, as does Farr, that strategic Medicaid planning is not a substitute for long-term care planning or long-term care insurance. In fact, Murray recommends prioritizing long-term care insurance and not waiting too long, since the underwriting requirements for these policies can be quite strict.

Farr, meanwhile, explains that while Medicaid commonly covers the cost of nursing home care, assisted living is a different story.

“A huge percentage of people wind up needing the assisted living level of care sometimes for five to 10 years before they ever need nursing home care,” he explains. “People with dementia often have a slow decline, and that lower level of care won’t be paid for by Medicaid.”

What about Medicaid cuts?

A recent Kaiser Family Foundation poll found that 83% of people have favorable views of Medicaid. But in July of 2025, the One Big Beautiful Bill Act (OBBA) was signed into law. And it included roughly $1 trillion in Medicaid cuts.

While many of those cuts target younger Medicaid beneficiaries, nursing home residents are vulnerable too. One major consequence is that reduced Medicaid reimbursements could force nursing homes to cut staff and whittle down services.

Protect Our Care says that in light of the OBBBA, more than 570 nursing homes are at risk of cuts and closures.

Following the OBBBA, the Centers for Medicare & Medicaid Services also repealed the minimum staffing requirements for nursing homes. The concern, of course, is that less stringent staffing requirements could lead to subpar care and put residents’ safety at risk. Immigration crackdowns are also creating staffing problems at nursing homes, which tend to rely heavily on immigrant workers.

States have had some leeway to set the maximum home equity a Medicaid applicant could have. But the new law stipulates that starting in 2028, applicants must have no more than$1 million in home equity, regardless of inflation.

The OBBBA also reduced retroactive Medicaid coverage. Justice in Aging, an advocacy organization, called the change “unwelcome news for Medicaid applicants.”

“Advocates should emphasize to their clients the importance of applying promptly,” the group said.

(Maurie Backman is a contributing writer to Kiplinger.com.)

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