My 86 & 88 year old parents have many health issues and they only have Medicare, possibly on Medicaid. What are their options for living arrangements?

1) Living in a private apartment with a lot of care from you and/or from paid caregivers.
2) Living with you (with or without paid in-home care)
3) Assisted Living (which IMHO offers very little "assistance")
4) Residential Living (similar to ALFs, but in a smaller "home" environment)
4) Nursing Home (if their conditions are severe)
Medicare pays for none of these. If your parents income is low enough, they may qualify for a Medicaid NH. In our area ALFs cost about $3,000/mo and NHs are around $8,000.
Also, check your local state, city, county, offices on aging...there may be some assitance there.
good luck