Paying for Memory Care: Medicaid Planning for Dementia Patients in PA & NJ

When a loved one is diagnosed with dementia, families in the Philadelphia metro area are suddenly faced with more than medical and emotional decisions. The financial reality of long-term memory care can be overwhelming. Memory care facilities often cost between $8,000 and $12,000 per month, expenses that can quickly drain savings built over a lifetime.

Medicaid can play an important role in covering these costs, but many families are caught off guard by a critical detail: Pennsylvania and New Jersey handle Medicaid coverage for memory care very differently. What may be covered on one side of the Delaware River may not be covered on the other. Understanding those differences is essential to making informed decisions and avoiding costly surprises.

This guide explains how Medicaid works for dementia care in both states, what is and is not covered, and how families can plan ahead to protect assets while securing appropriate care.

Understanding Memory Care Costs in the Philadelphia Metro Area

Across the Philadelphia region, memory care costs typically range from $8,000 to $12,000 per month, or roughly $96,000 to $144,000 per year. Pricing varies depending on the facility, location, level of supervision required, and amenities offered.

For perspective, many individuals with dementia require care for four to eight years. Even at the lower end of the cost range, families can expect to spend close to $400,000 over five years. Without planning, this often leads to depleted savings, forced home sales, or the loss of retirement funds meant to support a surviving spouse.

Costs can also vary widely within the metro area. Urban facilities tend to charge more than suburban or rural ones, and memory care units within larger communities may price differently than standalone facilities. Always confirm current pricing directly with providers, as rates change and individual care needs can significantly affect monthly costs.

Given these realities, long-term financial planning is not optional. Without a strategy, families often find themselves making decisions under pressure, just as care needs become more urgent. The coverage differences between Pennsylvania and New Jersey make planning even more critical.

The Key Difference Between Pennsylvania and New Jersey Medicaid Coverage

One of the most common—and costly—points of confusion involves how each state treats memory care under Medicaid. This is one of the most important distinctions between Pennsylvania and New Jersey Medicaid.

New Jersey: Broader Coverage for Memory Care

New Jersey offers more comprehensive Medicaid support through its Managed Long-Term Services & Supports (MLTSS) program. In many cases, Medicaid in New Jersey can cover memory care provided in assisted living facilities, including room and board.

Once eligible, individuals may receive coverage for personal care, medical services, and housing costs in a memory care setting. For families, this means assisted living can remain a long-term option rather than a short-term stopgap. This makes New Jersey more favorable for families seeking memory care options.

Pennsylvania: Care Services Only

Pennsylvania’s Community HealthChoices (CHC) program takes a more limited approach. Medicaid covers care-related services such as personal assistance, medication management, adult day programs, and help with activities of daily living—including mobility, bathing, dressing, eating, and toileting. However, room and board in memory care facilities is not covered.

As a result, even after qualifying for Medicaid, Pennsylvania families are often still responsible for $8,000–$12,000 per month in housing costs. Recipients must still pay for the residential component while Medicaid covers only the care services. Many families find this financial gap unsustainable long-term, which is why this gap eventually leads to nursing home placement, where Medicaid does cover both care and housing.

Nursing Home Coverage in Both States

Both Pennsylvania and New Jersey provide full Medicaid coverage for nursing home care, including room, board, and all medical services, once an individual meets the Nursing Facility Level of Care (NFLOC) requirement. Many individuals with advanced dementia ultimately qualify for this level of care. Nursing home placement often becomes the eventual solution for Pennsylvania residents when private funds are depleted.

Why This Matters for Planning

These differences shape every aspect of Medicaid planning. New Jersey families may be able to plan toward Medicaid coverage while remaining in assisted living—Medicaid can cover the full cost of memory care in assisted living for eligible individuals, making it a viable long-term option. Pennsylvania families must plan for ongoing housing costs or accept that a future transition to a nursing facility may be unavoidable. Most Pennsylvania families cannot sustain paying $8,000–$12,000 per month for room and board while Medicaid only covers services. Planning strategies must account for these state differences—what works in New Jersey may not work in Pennsylvania.

Medicaid Eligibility Requirements for 2025

Medicaid eligibility depends on both financial and medical criteria.

Pennsylvania Financial Limits

For 2025, the income limit for a single applicant in Pennsylvania is $2,901 per month. Asset limits vary based on income:

• Income under $2,901/month: asset limit $8,000
• Income over $2,901/month: asset limit $2,400

Once enrolled, most income must go toward care costs, with a $60 monthly personal needs allowance. Recipients keep only minimal income for personal expenses, with the remaining income going to the cost of care.

Importantly, qualifying for Medicaid in Pennsylvania does not eliminate room and board costs in memory care facilities.

New Jersey Financial Limits

New Jersey uses the same income limit of $2,901 per month but has a stricter asset cap of $2,000 for single applicants—more restrictive than Pennsylvania. The personal needs allowance is $50 per month. While qualifying can be more challenging due to the lower asset limit, the benefit is more comprehensive coverage once eligibility is established. Full memory care coverage is available in assisted living once eligible.

Special Protections for Married Couples

Both states offer protections for married couples through the Community Spouse Resource Allowance (CSRA). In 2025, the non-applicant spouse may keep up to $157,920 in assets, with a minimum allowance of $31,584. The at-home spouse’s income is not counted toward the applicant’s eligibility.

This allows one spouse to qualify for Medicaid while protecting the other spouse financially. The community spouse can remain in the community with protected assets and may also retain the home, one vehicle, and certain exempt assets.

Countable vs. Exempt Assets

Countable assets generally include bank accounts, investments, retirement accounts, stocks, bonds, certificates of deposit, and cash. Exempt assets often include a primary residence (subject to equity limits), one vehicle, personal belongings, household goods, and irrevocable funeral trusts.

For 2025, home equity limits are:

• $730,000 in Pennsylvania
• $1,097,000 in New Jersey

Unless a spouse continues to live in the home, these equity limits apply. The primary home is often exempt during the applicant’s lifetime under these conditions.

Medical Eligibility

Applicants must also demonstrate the need for a Nursing Facility Level of Care (NFLOC). This assessment considers daily functioning—evaluating Activities of Daily Living such as mobility, bathing, dressing, eating, and toileting—as well as cognitive impairment and safety concerns. Instrumental Activities of Daily Living may also be assessed.

A dementia diagnosis alone does not guarantee eligibility, but advancing symptoms often lead to qualification. Many dementia patients do qualify as their condition progresses.

Strategic Medicaid Planning Options

Because Medicaid applies a five-year look-back period, planning ahead is critical.

The Five-Year Look-Back Rule

Both states review financial transactions made within the 60 months before a Medicaid application. Gifts or transfers for less than fair market value can trigger penalty periods that delay eligibility when care is needed most.

For example, transferring $100,000 within the look-back period could result in months of Medicaid ineligibility, depending on regional care costs. Penalty periods are calculated based on the transfer amount divided by the average nursing home cost in your area. Violations delay coverage when you need it most. This is why timing and professional legal guidance matter so much, especially given Pennsylvania’s limited memory care coverage.

Medicaid Asset Protection Trusts (MAPTs)

A Medicaid Asset Protection Trust (MAPT) is one of the most effective tools for long-term planning. When properly structured and funded at least five years in advance, assets placed in the trust are removed from Medicaid eligibility calculations and protected from estate recovery after death.

MAPTs are particularly valuable for Pennsylvania families, who may need to preserve assets to help cover the room and board gap in memory care while Medicaid pays for services. They are also essential for New Jersey families with significant assets given the state’s strict $2,000 asset limit.

When structured correctly, MAPTs can:

• Protect assets from Medicaid spend-down
• Shield assets from estate recovery
• Allow continued use of the home in many cases

MAPTs are irrevocable, meaning assets are permanently transferred and cannot be reversed. They are best for families with significant assets to protect, typically $100,000 or more, and require careful legal drafting and timing by an experienced elder law attorney. MAPTs are not appropriate for last-minute planning—they must be established at least five years before applying to avoid look-back violations.

Spend-Down Strategies

For families who need Medicaid sooner, strategic spend-down can help meet asset limits while improving quality of life. Options may include:

• Home accessibility improvements and modifications (ramps, walk-in showers, stairlifts)
• Paying off debt (mortgage, credit cards)
• Purchasing exempt assets
• Prepaid funeral and burial arrangements through irrevocable funeral trusts
• Medical equipment and supplies
• Vehicle purchases (one exempt vehicle allowed)
• Caregiver agreements with family members (must be properly structured)

All spending must be for fair market value to avoid penalties. Converting countable assets to exempt assets can be done strategically with proper guidance.

Protecting the Family Home

The primary residence is often exempt during the applicant’s lifetime, subject to the home equity limits mentioned earlier—$730,000 in Pennsylvania and $1,097,000 in New Jersey. The applicant must have “Intent to Return” if moving to a facility.

However, Medicaid estate recovery allows states to seek repayment after death, sometimes forcing the sale of the home. The state may place a lien on the property to recover costs paid for long-term care.

Penalty-free home transfers may be available in specific situations:

• To a spouse (always penalty-free)
• To a child under 21 or a disabled child of any age
• To a sibling with equity interest who lived in the home at least one year before the applicant’s move to a nursing home
• To a “caregiver child” who lived in the home at least two years before the applicant’s institutionalization and provided care that delayed institutional placement

A properly structured MAPT may also protect the home while allowing continued residence, shielding it from estate recovery.

Income Planning Strategies

What if your monthly income exceeds the $2,901 limit? Qualified Income Trusts, also called Miller Trusts, provide a solution for those over the income cap. These trusts are required in both Pennsylvania and New Jersey for “income cap” situations and redirect excess income in a way that preserves eligibility while ensuring care costs are paid.

Spousal income allowances protect the community spouse, ensuring adequate income for the at-home spouse. The Community Spouse Monthly Income Allowance ensures the spouse remaining at home has sufficient income to live on.

However, even with income planning, the room and board gap remains for memory care in Pennsylvania. Income planning helps with eligibility but doesn’t eliminate the housing cost challenge.

State-Specific Planning Considerations

For Pennsylvania Families:

Pennsylvania families must directly address the memory care room and board gap. Planning may involve:

• Preserving assets to cover housing costs ($8,000–$12,000 per month)
• Considering whether nursing home placement is an eventual necessity
• Preserving some assets for the private pay period if staying in memory care
• Taking advantage of the higher asset limit ($8,000) which provides a small additional cushion

For New Jersey Families:

New Jersey families benefit from broader coverage but face a more aggressive asset limit. Planning considerations include:

• Full memory care coverage is possible, making assisted living viable long-term
• The lower asset limit ($2,000) requires more aggressive spend-down strategies
• Asset protection planning is even more critical due to stricter limits
• Once eligible, full benefits provide comprehensive coverage

Early planning is critical to avoid forced spend-down and preserve family wealth in both states.

Veterans Benefits

For eligible families, Veterans benefits, such as Aid & Attendance, may help offset memory care housing costs. These benefits are especially important for Pennsylvania families dealing with the room and board gap. While they rarely cover the full cost, they can significantly reduce monthly expenses when coordinated properly with Medicaid planning.

Veterans Aid & Attendance benefits can help with the Pennsylvania room and board gap, though they typically don’t cover the entire amount. Long-term care partnership policies and hybrid life insurance with long-term care riders may also provide additional resources for some families.

When to Start Planning

The ideal time to plan is five or more years before long-term care is needed. This timeline allows Medicaid Asset Protection Trusts to clear the look-back period and provides maximum flexibility for asset protection strategies.

An early dementia diagnosis is often the best time to begin, while the individual can still participate in decisions and execute legal documents. Asset protection strategies require time to implement properly. Earlier planning is especially critical for New Jersey families due to the lower asset limits—meeting the $2,000 threshold requires more advance preparation than Pennsylvania’s $8,000 limit.

Crisis Planning: Options Beyond Spend-Down

If care is needed immediately, families should know that options exist beyond simple spend-down strategies. While the five-year look-back period limits some planning tools, an experienced elder law attorney can explore crisis planning techniques tailored to your specific circumstances.

Limited but important options exist for immediate need. Spend-down can be accomplished quickly with proper guidance. Some strategies work within the look-back period, such as exempt asset purchases and paying off debt. However, families cannot use MAPTs or most gifting strategies in crisis situations.

Beyond spend-down strategies, an elder law attorney can also explore other crisis planning tools by utilizing spousal protections, Medicaid-compliant annuities, and other crisis planning techniques, depending on your specific circumstances. These strategies can help families qualify for benefits more quickly while preserving more assets than they might expect.

Even in crisis situations, professional legal guidance can make a significant difference in the outcome. Pennsylvania families in crisis may need to plan for nursing home placement rather than memory care, given the coverage limitations. Professional help is critical to avoid costly mistakes.

Warning Against DIY Approaches

Medicaid rules are complex, state-specific, and frequently change. Improper transfers can trigger harsh penalties. Innocent-looking decisions can result in long periods of ineligibility—penalty periods that leave families without coverage when needed most.

State laws are complex, and what works in one state may not work in another. The differences between New Jersey and Pennsylvania coverage models demonstrate this clearly. Online advice is often outdated, incorrect, or incomplete and should not replace professional guidance from an elder law attorney who understands current regulations in your state. Small mistakes can have devastating consequences.

Why Professional Guidance Matters

Working with an experienced elder law attorney provides several critical advantages:

• Navigate complex Pennsylvania and New Jersey differences in coverage
• Maximize asset protection within legal boundaries
• Avoid disqualifying transfers that trigger penalties
• Coordinate Medicaid planning with overall estate plan
• Understand state-specific rules and regulations that change frequently
• Help choose between nursing home versus memory care path based on coverage realities
• Develop strategies appropriate for your timeline, whether planning years ahead or facing immediate need

The Importance of Comprehensive Legal Planning

Medicaid planning is just one component of a comprehensive approach to elder care. Families benefit from addressing multiple aspects of legal and care planning:

Care Coordination: Proper planning helps families access appropriate levels of care at the right time, potentially keeping costs down by avoiding premature nursing home placement when less expensive alternatives may be suitable. Understanding when memory care is appropriate versus when nursing home care becomes necessary can save families significant money while ensuring appropriate care.

Legal Documentation: Powers of attorney, healthcare directives, and other legal documents ensure that someone can make decisions and manage finances if your loved one becomes unable to do so. These documents should be in place well before a crisis occurs. Early dementia diagnosis is the ideal time to execute these documents while the individual can still participate meaningfully in the process.

Estate Planning Integration: Medicaid planning should coordinate with overall estate planning goals to protect assets for surviving spouses and heirs while ensuring quality care. Asset protection strategies like MAPTs serve dual purposes—qualifying for Medicaid while preserving wealth for future generations.

Ongoing Advocacy: As care needs change over time, families benefit from having legal counsel who can advocate for appropriate benefits and services. This ensures your loved one receives the care they need and that benefits are properly maintained as circumstances evolve. An attorney familiar with your situation can help navigate transitions between care settings and adjust strategies as needed.

Taking the Next Step

Given the complexity of Medicaid planning and the significant differences between Pennsylvania and New Jersey, working with an experienced elder law attorney is essential.

Finding the Right Professional

Look for an elder law attorney with specific expertise in your state—Pennsylvania and New Jersey rules differ significantly, so state-specific experience matters. Verify experience with memory care planning specifically, as this requires understanding the unique coverage models in each state. Ask about their track record with successful Medicaid applications.

What to Bring to Your Initial Consultation

Comprehensive documentation helps your attorney provide the most effective guidance:

• Financial statements and account information for the last five years if possible
• Real estate documents and property deeds
• Life insurance policies
• Current estate planning documents (wills, trusts, powers of attorney)
• A list of all assets and their approximate values
• Income documentation (Social Security statements, pension information)
• Information about the dementia diagnosis and current care needs

The more complete your information, the more accurate and effective your planning strategy can be.

Questions to Ask Potential Advisors

When selecting an elder law attorney, consider asking:

• How many Pennsylvania and New Jersey Medicaid cases have you handled?
• What’s your success rate with Medicaid applications?
• How do you charge for services?
• Will you handle the application process or just the planning phase?
• What’s your approach to the Pennsylvania room and board gap issue?
• How do you stay current on changing regulations?

Choose professionals who demonstrate deep knowledge of both states’ systems and who can clearly explain strategies for your specific situation.

Get Expert Guidance for Your Family

Memory care costs in the Philadelphia metro area are substantial—typically ranging from $8,000 to $12,000 per month. This represents a significant financial burden that can quickly deplete a lifetime of savings. However, understanding the critical differences between Pennsylvania and New Jersey Medicaid coverage allows families to prepare realistically and protect what they’ve worked hard to build.

The fundamental difference is crucial: New Jersey Medicaid covers full memory care including room and board, while Pennsylvania only covers services, not room and board. This state difference fundamentally changes planning strategies and often determines whether families can maintain memory care long-term or must eventually transition to nursing home placement.

Medicaid provides vital support, but coverage varies dramatically by state. Strategic planning protects family assets while securing quality care. The five-year look-back makes early planning essential in both states.

For New Jersey families: Plan to meet the strict $2,000 asset limit, but gain comprehensive coverage once eligible. The lower threshold requires more aggressive planning, but full memory care coverage makes assisted living a sustainable long-term option.

For Pennsylvania families: Plan for the room and board gap or prepare for eventual nursing home transition. The higher $8,000 asset limit provides some flexibility, but the coverage gap creates ongoing financial challenges that most families find unsustainable without additional resources.

At Rothkoff Law Group, we specialize in Medicaid planning for families facing dementia care decisions in both Pennsylvania and New Jersey. Our attorneys understand the unique challenges of each state’s system and can help you develop a comprehensive strategy to protect your assets while ensuring quality care for your loved one.

Whether you’re planning years in advance or facing an immediate need, we can help you navigate the complexities of Medicaid eligibility, asset protection trusts, spend-down strategies, crisis planning techniques, and estate recovery concerns. Our approach includes comprehensive legal planning, care coordination guidance, and ongoing advocacy to ensure your family’s interests are protected throughout your loved one’s care journey.

With offices serving both Pennsylvania and New Jersey, we’re uniquely positioned to guide families throughout the Philadelphia metro region. We understand the critical differences between the states’ coverage models and can help you develop strategies appropriate for your specific situation.

Proper planning allows families to focus on care, not financial crisis. With the right strategy and professional guidance, families can secure quality dementia care without losing everything they’ve worked to build. Don’t wait until a crisis forces difficult decisions under pressure.

Contact Rothkoff Law Group today to schedule a consultation and learn how we can help your family plan for the future with confidence. The sooner you plan, the more options you have.

Contact us: https://rothkofflaw.com/contact/