Memory care is a specialized form of long-term care for individuals living with Alzheimer’s disease or other forms of dementia. This care is delivered by staff with specific training and often takes place in dedicated units within assisted living facilities or stand-alone communities. Financing this specialized environment often requires navigating Medicaid, a joint federal and state program providing health coverage to low-income individuals. Whether memory care facilities accept Medicaid depends heavily on the state and the specific type of facility. Understanding the two primary categories of long-term care facilities and how Medicaid covers each is the first step in determining financial options.
Medicaid’s Role in Residential Versus Institutional Care
Medicaid legally distinguishes between two main settings for long-term care, which affects coverage for memory care. Institutional care, primarily delivered in Skilled Nursing Facilities (SNFs), is a mandatory federal benefit for eligible individuals. When an individual qualifies and meets the medical necessity for institutional care, the program covers virtually all costs, including medical services, personal care, and room and board. This full coverage is an entitlement and includes specialized dementia care provided within a Medicaid-certified SNF.
Residential care, which includes most dedicated memory care units and Assisted Living Facilities (ALFs), is treated differently under federal Medicaid rules. Federal law prohibits Medicaid from paying for an individual’s room and board in a residential setting. Since room and board account for a large portion of the monthly cost, Medicaid cannot directly fund these “hotel” costs, even if the individual meets all eligibility criteria. States must therefore use specific mechanisms to fund the services provided in these residential environments.
A memory care patient in an SNF has their full costs covered by Medicaid once eligible. Conversely, a patient in a residential memory care unit must rely on an alternative state-level Medicaid program to cover only the care services. This policy encourages states to develop non-institutional alternatives to nursing home placement, resulting in programs that vary significantly by state. The primary vehicle for states to fund care services in a residential setting is through specialized waiver programs authorized by the federal government.
Utilizing Home and Community-Based Services Waivers
The mechanism states use to fund memory care services in residential facilities is the Home and Community-Based Services (HCBS) waiver, authorized under Section 1915(c) of the Social Security Act. These waivers allow states to use Medicaid funds to cover long-term services and supports for individuals who require a nursing home level of care but prefer to receive services in a community setting. HCBS waivers are designed to prevent or delay institutionalization, offering a more residential atmosphere for dementia patients.
These waivers do not pay for room and board, but they cover the costs of necessary care services. Services covered include personal care assistance with activities of daily living (bathing, dressing, mobility), medication management, and specialized social programming for cognitive impairment. Because these waivers are state-specific, benefits and eligibility requirements differ greatly across state lines, requiring local inquiry.
HCBS waivers are not an entitlement program; states are not required to offer them and can cap the number of participants. This limitation often results in waiting lists for applicants, even if they meet all criteria. Furthermore, a facility must be specifically contracted with the state’s Medicaid HCBS waiver program to accept these funds. The waiver helps offset a significant portion of the total monthly cost of care.
States must demonstrate to the Centers for Medicare & Medicaid Services (CMS) that providing services through a waiver does not cost more than providing the same care in a nursing home. This cost-effectiveness measure ensures the waiver programs remain a fiscally responsible alternative to institutionalization.
Financial and Medical Eligibility Requirements
To receive Medicaid funding for memory care, an individual must meet both financial eligibility and medical necessity requirements. Financial eligibility requires the applicant to have low income and limited countable assets, which vary by state but commonly cap assets for an individual at around $2,000. Countable assets include bank accounts and stocks, while the primary residence and a single vehicle are usually exempt.
If assets exceed the state limit, the applicant must “spend down” the excess funds on allowable expenses before qualifying. Allowable expenses can include paying off debt, purchasing medical devices, or making home modifications. This process must be managed carefully due to the Medicaid look-back period, a 60-month window preceding the application date.
During the look-back period, the state reviews all financial transfers to ensure assets were not gifted or sold below fair market value to meet the eligibility limit. Any improper transfer results in a penalty period of ineligibility for long-term care services, calculated based on the amount transferred. This rule prevents applicants from artificially impoverishing themselves.
The medical eligibility requirement dictates that the applicant must be assessed as needing a “nursing home level of care.” This functional assessment confirms the individual’s cognitive impairment and physical needs are significant enough to warrant the 24-hour supervision and skilled care provided in a nursing facility. Even when seeking placement via an HCBS waiver, the person must meet this high standard of medical need to qualify.
Understanding Out-of-Pocket Expenses
Even when an HCBS waiver covers care services in a residential memory care setting, the individual remains responsible for out-of-pocket expenses. The most substantial non-covered cost is the residential component, including room, board, rent, and utilities, often called the “hotel” cost. This housing expense is not covered by Medicaid due to the federal prohibition on funding room and board in residential facilities.
The resident must use their own income, such as Social Security or pension payments, to cover this monthly housing fee directly. This is sometimes called the “patient liability” or “share of cost,” representing the portion the individual pays from their income. Since room and board often represents 70 to 80% of the total cost, this remaining financial obligation is significant.
Families must verify that the specific facility accepts the state’s waiver program and understand the exact amount required for the monthly housing fee before finalizing placement. This dual payment structure ensures the individual receives necessary dementia care services while assuming responsibility for their living expenses.