Long-term Care Cost Trends

Long-term care is an under-appreciated factor in rising health spending.  As the population ages, the need for some kind of regular medical assistance rises, from in-home help to full nursing home residence.  Many, if not most of these costs, are not covered by private insurance or Medicare.  Some, like nursing home costs, are covered by Medicaid.  In fact, long-term care spending is what will sink a number of states budgets in the relatively near future, leading to a real crisis.  Genworth Financial issues an annual report on trends in long-term care costs.   (Genworth Report)   The report divides long-term care into several categories:  homemaker services, which basically involves household tasks, not health care; home health aide services, which is personal service, but usually not intensive care; adult day care, which includes social services and some medical management in a community setting; assisted living facility, which is a residential setting with some personal care and health services on site; and nursing home care, which is full residential care, usually for people with significant medical needs.

The national median hourly rate for homemaker services in 2017 was $21, up 4.75% from 2016 and with a five-year growth rate of 3.08% annually.  For home health aides, the median hourly rate was $22, a rise of 6.17%, with a five-year annual rate of 2.5%.  Adult day care has a median day rate of $70, up 3% from 2016, and a five-year growth of 2.8%.  Assisted living costs were a median $3750 per month (a very large $45,000 a year just for the basic cost of living in the facility), representing an increase of 3.36% year-over-year and a 2.6% five-year annual average increase.  And for nursing homes, a semi-private room has a median daily cost of $235 (an even larger cost of $85,775 per year), while a private one is $267.  The semiprivate growth is 4.4% YOY and 3.28% for the five-year calculation, and a private one is up 5.5% and 3.76%, respectively.  You will notice that all categories of cost are rising faster than inflation.  When you look at these costs, remember that most Americans have little to nothing saved for retirement.  And when you look at the nursing home annual costs, you can see why they will swamp a state’s Medicaid and overall budget.  To put it in perspective, for every 1000 residents in a nursing home covered by Medicaid, just the basic facility cost, not the additional medical treatment spending, is $86 million, so for 10,000 residents it is $860 million and for 100,000 it is $8.6 billion a year.  Almost every state has at least tens of thousands of people on long-term care paid for by Medicaid.  It is a big problem and explains why states are desperately developing programs to have age and live in a residential setting.