There are typically three different ways to pay for assisted living care: Medicaid, long-term care insurance and out of pocket. Medicare won't cover the cost of care facilities unless the care is medically necessary. Usually, assisted living situations aren't medically necessary, in that the type of help provided in assisted-living situations is considered "custodial care."
Most facilities in the United States do accept Medicaid. Medicaid is government assistance for health costs that is available to limited-income or asset-depleted elderly Americans. Regulations for Medicaid's payment for assisted living vary from state to state, but more than 100,000 people receive Medicaid assistance toward the cost of assisted living [source: National Center for Assisted Living].
Those who don't qualify for Medicaid are in danger of outliving their resources (and eventually qualifying for Medicaid). Those who don't actually outlive their funds end up spending so much on their ongoing care later that they have little if any to bequeath to surviving family members, churches or charitable causes when they die.
Long-term care insurance works like other forms of insurance: You qualify for it, pay for it before you need it, and it pays for your needs when they arise. If you wait until your health is beginning to give way, you may find it is too late to qualify for this type of insurance. Insurers know how much long-term care costs can accumulate and won't put themselves on the line for a high-risk applicant. Of course, you don't want to get prematurely insured and pay years and years of premiums for a policy you may not ultimately even need. The premiums aren't cheap -- a retiree who applies for long-term care insurance at age 65 may pay as much as $3,000 a year on premiums [source: AARP]. Some premiums will increase according to inflation or a pre-arranged staggered payment schedule that increases after a set number of years. The upside is that this insurance kicks in before you need to move to a facility, as it oftentimes will cover at least part of the costs of adult day-care or home-based care in the form of visiting nurses.
The benefits (or payout) of long-term care insurance may be calculated on a per-day or per-month basis. Once that amount is reached in your care, additional costs won't be the responsibility of the insurer.
Veterans and military personnel should contact their nearest Veterans Affairs (VA) hospital to find out if free assisted living will be available to them at a VA facility.