Health Care and Nursing Homes

According to a study released this month by Genworth Financial and reported in the Dallas Business Journal, the cost of nursing home care has increased for most cities in Texas over the last five years. The study also indicated that nursing home costs rose an average of 24% over the five-year period, higher than the national average of 17 percent. When it comes to the cost of one year in a private nursing home, however, Texas is doing better than the nation as a whole.

According to the New York Sun this week, as New York hospitals wrestle with cutbacks and budget constraints, nursing homes are finding a new role in treating patients who are well enough to be sent home but need additional care. In a departure from their traditional role, nursing homes statewide in recent years have seen an influx of patients seeking short-term, rehabilitative care, as cash-strapped hospitals treat and discharge patients as quickly as possible. With increasing turnover rates at nursing homes, a number of facilities citywide are responding to the demand, taking on costly renovation projects that shrink the number of long-term beds but add space devoted to short-term care.

This movement toward short-term care is a response in part to financial pressures on hospitals to decrease length of stay and move patients out, and in part to decreased demand for long-term care beds, as other options have become more available for the elderly and disabled as also reported by The NY Sun. Industry leaders said the move to "diversify" their services — by offering home care, day care, assisted living, and rehabilitation — reflects an attempt by some facilities to stay afloat. For many nursing homes, rehabilitation services are seen as lucrative. Administrators said they lose money on long-term residents because Medicaid reimbursement rates are low, but some said Medicare — which pays for patients getting rehabilitation therapy — pays better. While reimbursement rates vary by facility, one nursing home administrator said he earns $400 each day for rehabilitation patients, compared to $250 each day for nursing home residents. As a result, there also has been increased competition among facilities seeking to attract and admit "good patients," or those with the most potential to be treated and discharged.

The cost of care in a private nursing home has risen dramatically according to Genworth. The national average is $76,460, which Genworth notes is more than one and a half times the average annual household income of $48,201. One year in a San Francisco nursing home now costs an average $100,101, the survey said. Semi-private rooms cost considerably less. As a comparison average costs for private one-bedroom units in assisted living centers, according to the Genworth survey for such a unit is $36,090. The study surveyed more than 10,000 nursing homes, assisted living facilities and home care providers in all 50 states.

Who pays for these costs? Individuals pay for a large portion of their nursing home costs. Medicaid, the payment source for people without sufficient income and assets to pay for themselves, accounts for about 45% of all long-term care spending. Medicare, medical insurance for people age 65 and older and those on Social Security disability, accounts for only 11% of nursing home costs since Medicare does not pay for nursing home care for the “long-term,” as some people mistakenly believe. Individuals who receive long-term care in a nursing home not covered by Medicare must pay the entire cost themselves whether it is from their Social Security check, pension, or savings. If individuals don’t have sufficient income or savings to pay for long-term nursing home costs, they “spend down” their income, savings, and other assets to help pay for their care until they are eligible for Medicaid, a Public Aid payment source.

According to Pacific Life, long term nursing home expenses can have a devastating impact on your retirement savings. Many people over 65 erroneously believe that Medicare will pay most or even all of their nursing home bills, or that their HMO will pick up the cost. That’s simply not true. And, the result is that many people are surprised to discover they will have to pay the greater portion of these costs out of their own pockets. Many consumers do not understand that Medicare and Medicaid provide only limited financial assistance with long-term care needs. While Medicare will cover up to 100 days of skilled nursing home care per benefit period, after 20 days beneficiaries must pay a coinsurance fee. Medicaid provides financial assistance for approximately 70% of nursing home residents, but some are required to deplete their assets before the program will pick up the bill for their care.

The cost of nursing homes, long-term care, retirement communities, and other independent living facilities is extremely variable. It’s important that you research all of these costs and factor them into your retirement planning, and this comes as Baby Boomers are approaching retirement amid worries that they haven't saved enough to cover day-to-day expenses as well as long-term medical care costs. The Genworth report has shown that the costs for nursing homes, assisted living facilities and some in-home care services have increased for a fifth consecutive year, and could rise further if a shortage of long-term care workers isn't resolved. The study also found study found that low wages and benefits as well as a lack of training and career-advancement potential have made it difficult to attract workers to the elder care industry and retain them.

As reported online with Time, an elderly person typically spends 2- 1/2 years in a nursing home, or more than $190,000 on average at today's costs. As an option, adult day health care, sometimes at a community-based center, can monitor medication, provide therapy and ensure that people with cognitive problems are watched and don't wander off. These centers are proving popular with families who have elderly parents living in their homes and need daytime support so they can continue jobs, take care of children or just get a break from caregiving. Adult day health care has an average daily cost of $59; that would work out to about $15,000 a year for participation five days a week.

America’s elderly with special needs and their loved ones have always paid a high price for long-term medical care. The emotional and financial toll of an extended stay in a care facility or nursing home can be extremely costly. Per the folks at The Money Alert, an added possibility is to purchase a Long Term Care plan. Even with the increase in health care costs for the elderly, many consumers don’t realize the benefits of long-term care insurance. Some long-term policies cover not only skilled nursing facilities but also in-home care and companion care. They propose that with healthcare costs rising, long-term care insurance can potentially offer relief from many years of steep bills and debt. Appropriate coverage depends on your financial situation and your retirement plan, so consult with your financial professional for help in selecting the right policy for you.

The greatest advice is to start planning now for the possibility that a nursing home or assisted living could be in your future. Make wise choices for your financial future. Do the right thing when it comes to making plans for the "Golden Years." Don't forget that time passes more quickly than we realize, and you will need to prepare for end-of-life options.

Until next time. Let me know what you think.