What Happens When the Money Runs Out in Assisted Living?

Lilisity · October 26, 2026

When a resident's savings run out, what happens next depends on two things: whether the community accepts Medicaid, and what Medicaid covers in your state. Some states pay for care in assisted living through a Medicaid program, often with a waiting list, but Medicaid generally doesn't pay the rent and meals part of the bill. If the community doesn't accept Medicaid, your parent may need to move.

Nursing homes work differently. Medicaid is the main payer for 63% of nursing home residents (KFF, 2025), and a nursing home that is certified for Medicaid has to follow federal rules before it can discharge anyone for not paying. The earlier you plan, the more choices you keep, so start the conversation a year or two before the money is gone.

This is general information, not financial or legal advice. Medicaid rules vary by state and change often. Before you move money, talk with an elder law attorney.

Start with how long the money will last

Add up your parent's monthly income (Social Security, pensions) and savings, then compare them with what care costs now and what it will cost if their needs grow. Our How Long Will the Money Last tool shows month by month how long savings last, including price increases and a move to memory care. Our cost pages by state show what communities in your area post as prices, so you can plan with real local numbers.

If the answer is two years or less, start on the steps below now. Medicaid applications take time, and some waiting lists are long.

Ask these questions before move-in (or now)

Ask every community, in writing if you can:

• "Do you accept Medicaid, or your state's assisted living waiver?"
• "If her money runs out after she moves in, can she stay? Does she have to move to a different room?"
• "How many residents here pay with Medicaid now?"
• "How long does someone have to pay privately before you'll accept Medicaid?"
• "Is that in the contract?"

Get the answers into the residency agreement if you can. A promise on a tour is hard to hold anyone to later.

Read anything you sign as a "responsible party" carefully. Federal rules say a nursing home that takes Medicare or Medicaid can't require a family member to guarantee payment as a condition of admission or continued stay. Assisted living contracts follow state law, so ask an elder law attorney before you sign a personal guarantee.

On Lilisity, each assisted living community page shows the Medicaid program in its state, and in some states it shows whether the community appears on the state's Medicaid provider list. Those lists are often incomplete, so always ask the community too.

Medicaid in assisted living and memory care

Many states pay for care services in assisted living through home and community-based services (HCBS) waivers. The rules and the program names vary a lot by state. A few things are true almost everywhere:

Care, not rent. Federal rules don't let Medicaid waivers pay for room and board in assisted living. The waiver may pay for help with bathing, dressing and medications, and your parent still pays rent and meals from income, savings or family help.

Limited spots. States choose the maximum number of people a waiver program will serve. In 2025, 41 states reported waiting lists or interest lists for at least one HCBS waiver program (KFF). Ask your state how long the wait is for the program your parent would use, and get on the list early.

Not every community takes it. A community has to agree to take the waiver and meet the state's rules for it. Some accept only private pay.

To learn your state's program, open your state's assisted living guide on Lilisity, such as the one for Ohio, which names the program and links to the official state page. Then call your state Medicaid agency or your local Area Agency on Aging.

Medicaid in nursing homes

Nursing home care is a required Medicaid benefit for adults who qualify, and Medicaid.gov says states may not put it on a waiting list. A person still has to qualify medically and financially, and the nursing home must be certified for Medicaid and have a bed. On Lilisity, each nursing home page shows whether it is certified for Medicare and Medicaid, along with its CMS star ratings.

Once on Medicaid, a nursing home resident pays most of their monthly income toward the bill. They keep a personal needs allowance for clothing and other personal needs. Federal rules set the minimum at $30 a month, and states can set it higher. Part of the income can also go to a spouse living at home.

If your parent is already in a Medicaid-certified nursing home and their savings run low, apply for Medicaid before the money is gone. Federal rules treat it as non-payment when the resident doesn't submit the paperwork for Medicaid or another payer, or when the claim is denied and the resident refuses to pay. A resident who applies on time and keeps up with the paperwork is in a much stronger position.

Spend-down and the five-year look-back

Long-term care Medicaid has strict limits on income and savings. Many people qualify only after their savings are spent on care, which is often called spending down.

When someone applies, the state looks back 60 months (five years) at money and property given away or sold for less than it was worth. Cash gifts to children and transferring ownership of the house are common examples. A transfer like that leads to a penalty period when Medicaid won't pay for long-term care. For nursing home care, the penalty starts on the later of the date of the transfer or the date your parent is in a nursing home and otherwise eligible. So a gift made a few years before applying can leave a gap in coverage right when care is needed.

Keep receipts for everything spent on your parent's care and needs. Ask an elder law attorney before giving away money, retitling the house, or buying an annuity or other product sold as a way to qualify.

If one parent is still at home

When one spouse needs long-term care and the other stays at home, federal spousal impoverishment rules protect part of the couple's savings and some income for the spouse at home. The 2026 federal figures from CMS are:

States apply these rules in their own ways, so ask your state Medicaid office or an elder law attorney how they work where your parents live.

VA Aid and Attendance

If your parent is a wartime veteran or the surviving spouse of one, check VA's Aid and Attendance benefit. It is a monthly payment added to a VA pension for people who need help with daily activities such as bathing, dressing or eating, or who are in a nursing home because of a disability.

The pension has income and net worth limits. From December 1, 2025, to November 30, 2026, the net worth limit is $163,699. VA also reviews assets given away or sold for less than they were worth in the 36 months before the claim. With Aid and Attendance, the maximum yearly pension is $29,093 for a veteran with no dependents and $34,488 for a veteran with a spouse. VA subtracts countable income, and unreimbursed care costs can lower that income.

Our VA Aid and Attendance estimator gives a rough idea of what your parent might get. An accredited Veterans Service Officer can help you apply for free.

When to call an elder law attorney

Call an elder law attorney if:

• Savings will run out within about two years
• One parent will stay at home while the other needs care
• Anyone has given money or property away in the past five years
• A community asks you to sign as a personal guarantor
• A Medicaid application is denied

You can find one through the National Academy of Elder Law Attorneys at naela.org. Your Long-Term Care Ombudsman can also help for free if a community gives notice over money. Find yours on your state's guide on Lilisity, or read what to do if your parent is asked to leave.

For the full picture of paying for care, including long-term care insurance and what Medicare does and doesn't pay, read our free guide, Paying for Senior Living, and Does Medicare Pay for Assisted Living?

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