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Senior Living

2001-11-01 14:58:00

Long term care costs

Question: I read the other day that nursing home costs have increased at the rate of 3-½% per year for the last 30 years, but now they are increasing at the rate of nearly 7% each year, particularly in the area of memory-impairment care. If that’s the case, won’t this type of care be unaffordable for nearly all of us in the future?

Answer:  The question of whether long term care, and more specifically, specialized dementia care (care for the memory-impaired) will become unaffordable depends of course on the financial capabilities at the time of need of the individual or family involved.  The fact remains though, that long-term nursing care is very expensive and can be financially devastating to many families.  For example (and I am speaking to the costs of specialized dementia care, as that is the care we provide), care in the Wichita metro area currently ranges from $3,100 a month on the low end to $4,200 at the other.  Variables making up this range are the differences in facilities, the individual level of care necessary, private vs. semi-private accommodations, etc.  If you take the midrange of $3,650, the annual expense is currently $43,800 and rising.  To give you a recent perspective, just five years ago the midrange for this care was about $2,850.  That works out to a 28% increase over the five year period, or just under 6% a year.A continuation of this trend could mean for many that cost increases of long-term care would outpace the financial capabilities of most retirement nest eggs.  This doesn't mean that you will not have access to care, but it does mean that after your assets have been depleted, you will need to seek state assistance through the Medicaid program.  This limits your options of care providers.For the foreseeable future I don't see much to indicate that this trend will change.  There are many factors in place forcing costs to increase faster than inflation.  First, recent news stories you have been hearing concerning serious shortages of nursing staff and certified nurse aids are real.  There is serious competition between care providers for responsible caregivers, increasing labor costs through higher wages and benefit packages.  There also is a need by most providers to fill in staffing shortages by utilizing temporary service agencies at substantially higher per hour wages.  Also, changes in fire safety regulations along with state and federal operational regulations tend to force costs up as operator's work to stay in compliance.  For traditional skilled nursing homes with Medicaid beds, state reimbursement dollars many times lag behind the facilities increased costs.  This deficit must be absorbed and is passed on in increased cost to others.  All operators are facing along with everyone else, large increases in energy costs over the past couple of years.  The single biggest factor this year has been huge across-the-board increases in liability insurance premiums.  To give you an example, our premiums this year increased by 116% above last years rates.  My agent told me I should feel good about it, as it could have been worse.  Mind you, we have never had a claim in almost nine years of operation. The situation is a national trend.  Many insurance companies are no longer interested in writing coverage for the long term care industry and those that do, are demanding huge increases.  Some providers with a poor claim history are finding coverage almost unavailable at any cost.In any case it appears for now, that there are pressures in place that will force rates up over the next few years.  No one knows as time marches on if rates will increase at these levels eacg year.  Currently though, the bill for three or four years of dementia care would cost you in the neighborhood of $175,000.  What could that be ten, twenty, thirty years from now?  What can you do?  For starters, hopefully you will remain in good health and not have a need for long term care.  Although this would be everyone's goal, it may not be practical for many since advances in medicine are pushing the average age up every year.  Another option is to purchase long-term care insurance offered now by many companies.  Long-term care policies can be purchased to cover all or part of your nursing care costs assuming, at the time of purchase you can pass the fairly strict health requirements.  I am not in the business of selling insurance, but I can tell you that for our residents that took out policies a number of years ago... it was a good financial decision for them!