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Prepare for the Rising Cost of Long-Term Care

The price tag of a nursing-home room will continue to grow at a fast pace, but there are ways to offset the cost.

How much is long-term care expected to cost in 20 to 30 years? I’m in my fifties now and am wondering what the price might be to receive care in a nursing home or my home in the future.

The cost of long-term care is already high and is expected to grow at a brisk pace for the next 20 to 30 years. The median cost of a private room in a nursing home now is $206 per day across the country, which adds up to more than $75,000 per year, according to Genworth Financial’s recent Cost of Care study. And the median cost of care from a licensed home health aide is $19 per hour, which equals $152 per day for eight hours of care -- or more than $55,000 a year.

The median nursing-home cost rose by 5.1% from 2009 to 2010, and the average pace of growth has been 4.5% per year for the past five years. If the growth rate were to continue at 5% per year, then one year in a nursing home would cost nearly $200,000 in 20 years and about $325,000 in 30 years. You can estimate the future cost of care in your area at Genworth’s Cost of Care site. The prices vary a lot by location: The median cost currently for one year in a nursing home in Connecticut is $137,000, but it’s less than $59,000 in Texas.

Home-care costs haven’t risen as quickly, in part because they’re tied to labor rates rather than health-care inflation rates. But they still increased by 2.7% over the past year and 1.7% per year over the past five years. If home-care costs rise by 3% per year, then the price tag could be more than $100,000 annually to receive home care for eight hours per day in 20 years and about $135,000 in 30 years. Home-care prices also vary considerably by location. The median hourly cost now for a home health aide provided by a state-licensed agency in Alaska, Minnesota and Rhode Island is $25 per hour, but it’s just $15 per hour in Alabama and West Virginia.


Those figures show how important it is to consider potential long-term-care costs when planning for retirement. The Community Living Assistance Services and Supports (CLASS) Act, part of the health-care-reform bill, will introduce a voluntary federal long-term-care program next year that people can pay for through payroll deductions. But the $50 to $75 in daily benefits the federal program will provide falls far short of the average cost of care, and premiums for the program may end up costing more than a private long-term-care insurance policy with similar coverage. See What Health Reform Means for Long-Term Care for more information about the CLASS Act and its limitations.

A long-term-care insurance policy may help you cover a much larger portion of potential costs. See Long-Term Care You Can Afford for more information about new strategies for lowering long-term-care insurance costs.

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