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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.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
May 4, 2010
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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Reader Comments (4)
Posted by: Bob at 05/04/2010 04:17:16 PM
Sorry...but this article didn't give any useful information. We all know about inflation. How about some information on transferring assets to a trust or gifts to your children? Most of us can not now or in the future be able to afford long term care or even the high premiums for insurance.
Posted by: Cal Gal at 05/04/2010 04:19:28 PM
Hi Kim, my husband who will soon turn 67 has been turned down for LTC insurance because of his having diabetes and some medications for mental health even though he is still working full-time and has good health otherwise. What alternatives what you suggest to protect us in the event he needs care. I have obtained LTC insurance for myself but dread having to sell off sentimental family property in the event he requires long-term care for years. We recently purchased life insurance for him but it will become very expensive in future years. There is a pattern of dementia on his mother's side of the family. Ideas?
Posted by: Jack Lenenberg of Balanced Insurance Group at 05/05/2010 01:38:35 PM
Cal Gal, I am sorry to hear that your husband was declined for coverage. It might be that he is insurable with a different carrier than the company that you applied to. Underwriting guidelines vary by company. It is imperative to work with an independent and experienced long term care specialist. Insist upon your agent to have at least 8 companies to work with. Most agents only have 2-4. If your husband is indeed uninsurable from a traditional long term care underwriting approach, you can receive long term care insurance benefits with simplified underwriting by repositioning an asset into an annuity. There are 3-4 companies that will offer this soluton to you...
Posted by: M. L. H. at 05/18/2010 11:33:02 AM
I turn 65 in less than 2 weeks and left work 4 years ago with alzheimer's to stay home. Do you know where I can get the info I need on the effect health care reform will have on hospice expenses?