Who Pays for Adult Day Care? Financial Options to Know

Adult day care centers provide structured, supervised programs for adults needing assistance or companionship during the day. These facilities offer a range of services to support participants’ health, nutritional, social, and daily living needs in a group setting. Adult day care is a growing option for families seeking to provide care while maintaining their own work or personal responsibilities.

Primary Funding Sources

Private Payment

Private payment is a common method for covering adult day care costs, involving direct payment from personal savings, retirement accounts, or current income. Costs vary significantly based on location, care level, and specific services. In 2024, the average cost was about $98 per day, or $2,120 monthly for typical attendance. Specialized care, such as for individuals with dementia, can lead to higher daily expenses. Urban areas often have higher rates, and additional services like transportation or therapies can increase the overall cost.

Medicaid

Medicaid, a joint federal and state program, can help cover adult day care expenses for individuals with limited income and resources. Coverage is provided through Home and Community-Based Services (HCBS) waivers rather than directly as a medical benefit. These waivers allow states to offer services in a community setting that would otherwise be provided in an institutional setting. Eligibility for Medicaid and the scope of services covered through these waivers vary by state.

U.S. Department of Veterans Affairs (VA)

The U.S. Department of Veterans Affairs (VA) offers benefits that can assist with adult day care costs, primarily through the Aid and Attendance pension. This benefit is available to wartime veterans and their surviving spouses who meet specific service, medical, and financial criteria. The Aid and Attendance pension provides additional monthly income to help cover daily living assistance, including adult day care services. Veterans must have served during a qualifying wartime period and received an honorable discharge.

Long-term Care Insurance

Long-term care insurance policies can also cover adult day care services once specific benefit triggers are met. These policies require an assessment demonstrating the inability to perform a certain number of Activities of Daily Living (ADLs), such as bathing or dressing, or a cognitive impairment like Alzheimer’s disease. Policies may also include an elimination period, which is a waiting period before benefits begin to pay.

Other Government and Community Programs

Other government and community programs may offer limited financial assistance for adult day care. State Units on Aging and local Area Agencies on Aging (AAAs) often provide information and referral services. Some may administer programs that offer subsidies or grants. These agencies receive federal funding under the Older Americans Act and may supplement this with state and local revenues to support community-based services.

Medicare

Original Medicare does not cover adult day care services for social or custodial needs. Medicare primarily covers medically necessary services, not non-medical care that provides supervision or assistance with daily activities. While specific medical services received within an adult day care setting might be covered if medically necessary and provided by a skilled professional, the cost of the day care itself is not. Some Medicare Advantage (Part C) plans may offer partial coverage, but this varies significantly by plan.

Employer Benefits

Some employers may offer benefits that can help offset adult day care costs. Dependent care flexible spending accounts (FSAs) allow employees to set aside pre-tax money for care expenses. While not directly covering adult day care, these accounts can reduce the taxable income used to pay for such services.

Navigating Financial Assistance Programs

Contacting relevant agencies, such as the local Area Agency on Aging, the state Medicaid office, or the Department of Veterans Affairs, is a logical next step for financial assistance.

Medicaid Eligibility

Medicaid eligibility for adult day care through HCBS waivers involves both financial and functional criteria. Income and asset limits are determined at the state level and can be complex. Many states have “spend-down” provisions, allowing individuals with income slightly above the limit to qualify after incurring certain medical expenses. A five-year look-back period is used to review asset transfers.

Beyond financial requirements, Medicaid also assesses an individual’s functional need for care. This involves an evaluation by a healthcare professional to determine the level of assistance required with Activities of Daily Living (ADLs), such as bathing, dressing, or eating, or due to cognitive impairment. The application process involves submitting detailed forms, providing extensive financial documentation, and undergoing a functional assessment.

VA Aid and Attendance Eligibility

Veterans seeking Aid and Attendance benefits for adult day care must meet specific service, medical, and financial qualifications. Service requirements include having served at least one day during a designated wartime period and a total of 90 days of active duty, with an honorable discharge. The medical requirement involves demonstrating a need for assistance with ADLs or supervision due to cognitive impairment, which must be certified by a physician.

Financial eligibility for the Aid and Attendance pension includes income and net worth limits. The net worth limit, which combines income and assets, is adjusted periodically. Similar to Medicaid, there is a 36-month look-back period to review asset transfers. To apply, individuals must submit VA forms along with medical evidence and financial documentation to a local regional benefit office.

Professional Guidance

Guidance from social workers, elder care coordinators, or benefits counselors can simplify the application processes for these programs. These professionals possess detailed knowledge of eligibility rules and required documentation, helping families navigate complex systems. They can offer personalized advice and support, reducing the burden on individuals and their caregivers.

Cost Considerations and Planning

Cost Structure

Facilities may charge daily rates, hourly rates, or offer package deals. Costs fluctuate based on geographic location, the intensity of care needed, and whether specialized services like dementia care or transportation are included.

Tax Implications

Tax implications can offer some financial relief for adult day care expenses. These costs may qualify as medical expenses for itemized deductions if the primary purpose of the care is medical and the individual meets specific criteria. Taxpayers can deduct medical expenses exceeding 7.5% of their Adjusted Gross Income (AGI) on their tax return. For the expense to qualify, the care must be for an individual who cannot physically or mentally care for themselves.

Adult day care expenses may also qualify for the Child and Dependent Care Credit if the care allows the taxpayer to work or look for work. This credit is claimed on their tax return and provides a percentage of qualifying expenses, up to $3,000 for one dependent or $6,000 for two or more dependents. The dependent must be physically or mentally incapable of self-care and live with the taxpayer for more than half the year. Taxpayers cannot claim both the medical expense deduction and the dependent care credit for the same expenses.

Financial Planning

Financial planning for adult day care involves reviewing personal savings, investments, and retirement accounts. Consulting with a financial advisor can help families integrate potential care costs into their broader financial strategy.

Local Resources

Area Agencies on Aging (AAAs) have information on local subsidies, grants, or sliding-scale fee programs that might not be widely publicized.