Worried about nursing home costs? What you’ll pay now — and why the bill may keep rising
The costs of nursing home care rise rapidly every year, and financial pressure on nursing homes is rising with them.
Over the last four years, nursing home costs in Idaho have risen at least 15%, according to Seniorliving.org, which publishes research about long-term care.
The expenses in Idaho are higher than the national average, with a ranking as the 23rd-least-affordable state. A semiprivate room costs, on average, $93,000 per year across the nation. In Idaho, it costs $104,000. Idaho’s higher costs are, in part, because the state has more stringent regulations and lower regulatory compliance than other states, according to the Idaho Health Care Association.
“It could be one of the most expensive things people pay for in their lives, and it’s really not on people’s radars,” said Cathy McDougall, director of outreach for AARP Idaho, by phone.
“A lot of people might make the assumption that Medicare might pay for long-term care, but unfortunately that’s not the case,” said Ryan McGonagill, director of industry research at Seniorliving.org.
Since 2019, the cost of a private room has risen by 6.6% while the cost of a semi-private room has risen 9.4%, according to Genworth.
“It’s a real problem,” Bruce Longmeier, an insurance agent in Spokane, Washington, who has taught financial planning classes in Idaho, said by phone. “Baby Boomers are aging, and medical technology is so much better (that) they’re keeping people alive a lot longer.”
Over 30 years ago, when Longmeier got into the insurance business, he remembers long-term care costing $45 or $50 a day.
“Here we are now, at $300 a day, and where does this end?”
EXPENSIVE INSURANCE
To prepare for the high costs of nursing homes, a small portion of Americans purchase long-term care insurance. But those policies themselves are expensive, costing around $7,000 a year on average for a healthy married couple in their mid-60s.
After people turn 65, they may find they’re unable to purchase this insurance at all: around 60% of 65-year-old couples who apply have at least one spouse denied a policy, according to the American Association for Long-Term Care Insurance.
“Once you start getting into your 70s … the chances of being declined are enormous,” said Jesse Slome, director of the association. “If you have health conditions, all the money in the world will not get you long-term care insurance. … (It’s) only an option for a very limited section of the population.”
The premiums for long-term care have become expensive in part because many insurance companies underestimated the costs of care when they started offering these policies, according to Robert Vande Merwe, executive director of the Idaho Health Care Association.
“The expenses of those policies are way more than premiums paid, so that whole market has imploded,” he said.
Longmeier sells long-term care insurance, and he said it’s often difficult to persuade people to buy a policy. While expensive insurance plans aren’t affordable for everyone, he said he counsels all his clients to prepare for the possibility that they will need this kind of care.
“If you have a town full of 65-year-olds, half of them are going to end up needing care prior to taking their last breath,” he said. “That isn’t pie in the sky, those are actual statistics.”
“There is a crisis in America and in Idaho for sure, because the Boomers and even younger generations are not saving for their own retirement, not saving for their health care needs,” Vande Merwe said.
For those who opt out of long-term care policies, some life insurance plans have what are called “living benefits,” wherein policy holders can draw from their death benefit to pay for nursing home care.
If they can afford it, Longmeier said he recommends people look into buying a policy when they are in their 50s.
“Yes, they are expensive, but the alternative is astronomically expensive,” he said. “If you’ve got to write a $115,000-a-year check, no matter how much money you have, that’s going to make you pucker.”
Adults who don’t plan for these expenses may face steep costs at the end of their lives.
“People don’t have to buy insurance, but they need to have that conversation with their family before it’s too late,” Longmeier said.
NURSING HOMES ALSO FACE HIGH COSTS
But while patients are facing higher costs, nursing homes are, too.
Many low-income people pay for nursing home care with Medicaid, and the homes tend to receive less money from Medicaid reimbursements than from private funders, which leads some nursing homes to limit the number of Medicaid patients they will accept at a given time, according to Longmeier.
“You cannot sustain and be profitable as a Medicaid-only facility,” he said.
Yet 65% of the state’s long-term care patients are on Medicaid, according to Vande Merwe, and that adds to the strain on facilities.
“For 20-30 years, it was mostly national companies that owned most of the nursing facilities, and just in the last 10 years that has shifted,” he added. Many larger companies have sold off their nursing homes, which have been bought by local companies.
The state’s largest provider, Cascadia Healthcare, is based in Eagle. Founded in 2015, the company has since taken over 10 Idaho nursing homes previously operated by national chains, according to the company.
Long-term care “can be profitable if you do it just right, but it’s really easy to lose money, too, so some of the bigger companies have gotten out of the business,” Vande Merwe said.
COVID AFFECTS FACILITIES
Over the last year, the COVID-19 pandemic has devastated nursing homes. Roughly 40% of deaths statewide have occurred at care facilities, and the need for increased spending on sanitation, overtime pay, and other costs of the pandemic have threatened the survival of many businesses. Two-thirds of nursing homes nationally said they are struggling and couldn’t afford another year of virus-associated costs, according to a survey by the American Health Care Association.
In Idaho, nursing homes have had to increase staffing throughout the pandemic, paying much more than facilities had budgeted in overtime pay, Vande Merwe said. Though nursing homes received relief money from Congress’ coronavirus-relief law passed at the start of the pandemic, much of it has been spent. And some people have put off their entry into a nursing home out of fear of an outbreak, according to McDougall.
“Our costs have increased drastically,” said Steve LaForte, director of corporate affairs for Cascadia Healthcare. “There’s been times when our costs for PPE have been 300% to 400% over what normal is.”
As a result, the industry is concerned about its financial stability.
“With providers dedicating extensive resources in response to COVID and a significant drop in new residents moving in, the financial shortfalls have only worsened,” the American Healthcare Association said in a news release. One analysis by the association estimates that the industry could lose $94 billion through 2021.
“Even though we’ve survived, we’re very nervous about the future, and we’re hoping the state will wisely use the remaining portion of the CARES Act funding for nursing facilities,” Vande Merwe said.
If the costs for nursing home businesses continue to rise, many of those expenses could be passed on to consumers.
“It’s possible that with less competition and more demand, patients could see less availability and even higher prices,” said McGonagill, the SeniorLiving researcher. By 2030, SeniorLiving.org predicts the national average for private rooms will be $142,254 a year.
For many, “if you get ill in America and you need nursing home care … then you are facing poverty,” added McDougall, AARP’s outreach director. “That’s a difficult prospect for Americans who have worked their whole lives.”
This story was originally published April 9, 2021 at 4:00 AM.
