Monday, December 29, 2014

Figuring Out Long Term Care Costs

While most retirees say they plan on living out their years at home, a large percentage end up in assisted living or nursing homes. How much can you expect to pay for long-term care? A look at average costs and stays can provide a rough idea.


A lot of financial advisors warn that retirees aren’t financially prepared for a long future existing only on Social Security, that they haven’t saved enough, that medical costs will eat more out of their budget than they think and that they aren’t prepared for long-term care. Although most retirees say they plan to live out their remaining years at home, a large percentage end up in assisted living or nursing homes. In fact, according to the Centers for Medicare and Medicaid Services, a majority of people over age 65 will require some type of long-term-care services, and more than 40 percent will need a period of care in a nursing home.

Retirees or those about to retire who want to figure out what long-term care might cost them can make an educated guess, based, of course, on averages. The MetLife Mature Market Institute’s market survey for 2012 found that:

  • The national average daily rate for a private room in a nursing home is $248, while a semiprivate room is $222, up from $239 and $214, respectively, in 2011. That’s about $81,000 annually for a semiprivate room.
  • The national average monthly base rate in an assisted-living community rose from $3,477 in 2011 to $3,550 in 2012. That would equal $42,600 a year.
  • The national average daily rate for adult day services remained unchanged from 2011 at $70.
However, costs can vary widely depending on the state and region of the country where you live (see sidebar, “Differences among States”). It’s also important to remember that different states require—and different facilities offer— varying baselines of level of care, so one place might offer nothing more than three meals a day plus activities, while another facility includes providing medicines, for example, in its base rate. This is especially important regarding assisted-living, which is not federally regulated.

 
Differences among States
Average costs for long-term care vary widely by state and region of the country and by private versus semiprivate room. The MetLife Mature Market Institute’s market survey found the daily price of a semiprivate room could range from a low of $138 in Louisiana to a high of $678 in Alaska. In this sampling of state prices from around the country, it is important to remember that cities generally are more expensive than rural areas. While Illinois’ rate is low, for example, the Chicago area’s rate is much higher.
Alabama

$182
Arizona

$182
California

$235
Connecticut

$362
Florida

$223
Idaho

$199
Illinois

$175
Maine

$257
Nebraska

$163
New York

$344
Oregon

$228
Texas

$139
Differences by Sex, Marital Status

Long-term costs for long-term care also vary by sex and marital status. For example, single women, on average, live the longest in nursing homes. Below is a comparison of the average length of stay in a nursing home (from Long-term Care Association's 2008 LTCi Sourcebook):

Female

2.6 years
Male

2.3 years
Married

1.6 years
Single/never married

3.8 years
Widowed

2.3 years
Divorced/separated        2.7 years

Average Stays for Long-term Care

The average nursing home stay is 28 months, according to the government's latest National Nursing Home Survey (“How to Pay For Nursing Home Costs,” U.S. News & World Report). The average stay for assisted-living residents is 27 months, according to Kiplinger.com

Other organizations break down the long-term care figures differently (Alzheimer’s care, continuum of care). The National Clearinghouse for Long-Term Care Information makes it simpler. On average, a 65-year-old today will need some form of long-term-care services for three years, according to Kiplinger.com.

Figuring Out the Total Costs

To determine the average amount a person would have to pay for long-term care, you can extrapolate from the data:

  • Cost of semiprivate room in a nursing home for average 28-month stay: $186,480
  • Cost of assisted living (base level) for average 27-month stay: $95,850 
If the average stay is three years for long-term care, your long-term care costs would be some combination of those two figures. Of course, if you need more assisted-living care than basic care, the cost goes up. If you’re a woman, you will probably pay more because you will live longer.

Another factor to throw into the mix is the average age of residents in long-term care. The median age of residents in nursing homes was 82.6 years; in assisted living, 86.4 years, according to MetLife.

If you’re wondering if you will live that long, the Social Security Administration provides calculations. For example, a man reaching age 65 today can expect to live, on average, until age 84.3, while a woman turning 65 today can expect to live, on average, until age 86.6.

Where Will Money Come From?

A recent Wall Street Journal article (“10 Things Retirees Won’t Tell You,” Sept. 21, 2014) said that nearly 60 percent of people over 55 who haven’t yet retired have saved less than $100,000 for retirement. So where will an individual find the approximately $200,000 needed for long-term care?

While Medicare does not pay for assisted living, it will help pay for nursing home care for up to 100 days if certain conditions are met (from Senior Home):
  • A senior is currently receiving Medicare Part A (Hospital insurance) benefits and is therefore 65 years or older or has been formally diagnosed with renal failure.
  • An in-patient hospital stay of three or more consecutive days (three midnights) has been made within the past 30 days.
  • A physician has determined that skilled care and/or rehabilitation is medically necessary due to a current health condition.
  • The skilled services required are provided in a facility that has been certified by Medicare.

  • Specifically, Medicare will provide 100 percent coverage for skilled nursing costs for the first 20 days of a nursing home stay. From day 21 through day 100 of the benefit period, the patient is responsible for paying approximately $130 per day. At any time, if the patient is no longer making progress, Medicare will stop paying, because this is considered a rehabilitation, not long-term care benefit.

    Medicare also pays for care at home, involving skilled nursing care and therapy, although certain restrictions apply. Even paying for home care yourself is less expensive than nursing homes and assisted living.

    Another option is long-term care insurance, which pays for assisted living, nursing homes and at-home care. However, only 10 percent of the elderly have a private long-term care insurance plan (National Bureau of Economic Research). Other sources for long-term care financial help are Medigap (supplemental policies for Medicare) policies and/or veteran’s benefits, but these policies only pay 20 percent of the charges that Medicare does not pay.

    If people in need of long-term care don’t have the financial resources and/or don’t have a long-term care insurance plan, who will take care of them? It turns out that most (78 percent) who need some kind of care are being taken care of by family and friends.
    According to the Caregiver Action Network, “The value of unpaid family caregivers will likely continue to be the largest source of long-term care services in the U.S., and the aging population 65+ will more than double between the years 2000 and 2030, increasing to 71.5 million from 35.1 million in 2000.”

    For many older people, one strategy for long-term care might be to start investing in relationships with family and friends.

    Figuring Out Long Term Care Costs was featured in the November 2014 Senior Spirit newsletter.

    Blog posting provided by Society of Certified Senior Advisors www.csa.us.