The Cost of Long-Term Care is On the Rise

Stanley and June Blum have been married for more than 75 years and are approaching the second century of life. Stanley is 97 and June is 96. Stanley is a retired shoe-industry executive who paints and writes poetry, while June is a psychologist who still works part-time. They own a home in the city and another in the country.

Stanley and June may sound remarkable, but what is most remarkable about them and others like them is that they are becoming more and more the norm.

People Are Living Longer Than Ever Before

There are more octogenarians, nonagenarians, and centenarians living today than ever before. For centenarians, the United States has the most, with an estimated number of about 80,000, and Japan follows, with an estimated 47,700. By 2050, there are expected to be a million centenarians in the United States. And even those who don’t reach 100 have a good chance of living well into their 90s.

Researchers are trying to determine what exactly contributes to extreme longevity and have found that the reasons include certain genes and a healthy lifestyle. Good luck is also a factor, in being able to avoid fatal injuries and exposure to deadly contagious diseases.

With Longevity, the Likelihood of Needing Long-Term Care Increases

Living longer has its advantages, but it also increases the likelihood of needing long-term care. Long-term care is the care you may need if you are unable to perform daily activities on your own. These activities include eating, bathing, dressing, transferring, and using the bathroom. The goal of long-term care is to help you maintain your lifestyle to the greatest extent possible as you age.

In an age of ever-increasing medical costs, planning appropriately for “old age” illnesses such as heart disease, cognitive impairment, strokes, and all the different types of dementia is imperative. Medicare, Medicare supplement insurance, and other health insurance won’t pay anything for long-term care, also called custodial care. With the way costs are rising, most of us can’t afford long-term care without going broke.

Findings from the 2018 Genworth LTC Study

For the past 15 years, Genworth has provided the annual Cost of Long-term Care Survey, underscoring the importance of planning ahead for long-term care. This year’s study shows cost increases across all care settings, affecting the stark economic realities for individuals, families, employers and communities.

Over the 15 years that Genworth has conducted the study, all care settings have cumulatively seen increases in cost ranging from 19% to 67%.
On an annual basis, the cost for facility and in-home care services has risen on average from 1.5% – 3.8% per year. That’s an increase of $700 annually for home care and up to $2,500 annually for a private room in a nursing home. At this rate, some care costs are outpacing the U.S. inflation rate of 2.1% by almost double.

The annual median cost of care nationally now ranges from $18,720 per year for adult day care services to over $100,000 per year for a private room in a nursing home. Between 2017 and 2018, assisted living facilities increased the most at 6.67%, followed by a semi-private room in a nursing home at 4.11%. Based on the five-year compound average growth rate (CAGR), the largest increase occurred within the nursing home facilities category at over 3%.

The average cost of a semi-private room in a nursing home in the DC Metro area is around $120,000 a year, though many nursing homes in the Northern Virginia and DC Metro area cost over $144,000 per year.

Why Costs Are Rising

While facility costs have always trended upwards, it is only in recent years that home care costs have risen at a higher pace than previous years. Since the survey’s inception, there has been an increase of 19% for a home health aide (sometimes called a personal care aide) and 26% for homemaker services.

Why are the costs increasing so much? Several factors are driving up the cost of long-term care:

  • The shortage of skilled workers. With demand outpacing the supply of workers, caregivers know they can demand more and companies are willing to pay more for the best workers. Also, fewer caregivers mean more overtime, which means consumers pay more for care.
  • Higher minimum wages and changes in overtime pay rules.
  • Difficulty attracting and retaining qualified workers.
  • Business constraints facing home care agencies, such as differing laws on certification of caregivers, compliance obligations, and razor-thin profit margins in many cases.
  • The increasing incidence of Alzheimer’s Disease and other types of dementia, which is increasing the need for more specialized care – and higher hourly wages.
  • Aging Americans needing more specialized care, the result of waiting too long to receive professional care. By then, the diagnosis has progressed beyond the need for basic care to very specialized and intensive levels of care, which is more expensive.

People Underestimate the Cost of Long-term Care

Increasingly, people and their loved ones are finding that the cost of long-term care services is staggering and often they are unaware of it in advance.

Many people mistakenly think they’re covered by either their health insurance or Medicare. The reality is that health insurance and traditional Medicare simply don’t cover long-term care services (although some newer Medicare Advantage plans have the option of including someone long-term care support services; see our recent article about this.

For most families, the cost of long-term care poses a significant financial challenge that is emotionally difficult to talk about in advance, and much too easy to ignore until there is a crisis situation. Although experienced Elder Law Attorneys such as myself can protect assets in a crisis situation, there can be great benefits to planning in advance for future long-term care expenses. Planning in advance expands the choices available for care later as we grow older.

Visit https://www.genworth.com/aging-and-you/finances/cost-of-care.html to learn more about the total cost of long-term care in your area and how costs have changed over time or download Genworth’s Cost of Care App from iTunes.

Rather than worry about long-term care, why not take steps to plan for it? It’ll give you the peace of mind you deserve, all the while helping to protect your finances in the process. If you or your loved ones have not done long-term care planning, please call us to make an appointment for a no-cost consultation:

Fairfax Elder Law: 703-691-1888
Fredericksburg Elder Law: 540-479-1435
Rockville Elder Law: 301-519-8041
DC Elder Law: 202-587-2797

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