Long-Term Care: Why your location really matters
CHICAGO (Reuters) - Location, location location: Not only is it key to the value of real estate, it's also a big driver of the cost of long-term care.
A study of long-term care costs in the United States released this week shows that the cost of long-term services and support varies dramatically by location. For example, the national median cost of a private nursing home this year is $87,600 - but it's $155,125 in Connecticut, $87,180 in Ohio and $57,487 in Oklahoma.
"The differences are driven by general demand and supply of labor, the cost of living and level of affluence in a particular region - and therefore the ability to pay for services," says Robert Bua, vice president of Genworth, which released the annual Cost of Care survey. Genworth is the nation's biggest underwriter of commercial long-term care insurance policies.
Paying for long-term care (LTC) is the big missing piece of the retirement health expense puzzle for most Americans. Medicare covers much of the non-LTC healthcare expenses retirees face. While it's far from free, it smooths spending on hospitalization, outpatient services and prescription medications.
But Medicare covers only 100 days of care in a skilled nursing facility. And fewer than 8 percent of Americans over 50 have purchased private long-term care insurance, according to LIMRA, the insurance industry consulting and research group. That leaves Medicaid, the nation's largest funder of LTC. But it covers only very low-income patients or those who manage to spend down their assets to poverty levels.
The Genworth survey, which gathers data from nearly 15,000 providers of long-term support and services, found that the cost of long-term care continues to rise at a faster rate than general inflation. Median costs of a private nursing home room rose at a 4.19 percent compound annual rate over the past five years, and assisted living facility prices rose at a 4.29 percent pace (to $42,000). By contrast, the consumer price index rose at an average rate of 1.6 percent from 2009 to 2013.
Although the figures for private nursing rooms are eye-popping, most people won't face those costs.
Roughly two-thirds of seniors will need some form of LTC, much of it is delivered in the home and often by family members or friends. Just 1 percent of people in their late 60s, and 3 percent in their late 70s, lived in nursing homes in 2011, according to the U.S. Census Bureau. (The numbers were much higher for people beyond those ages - 20 percent for seniors in their lower 90s, and nearly 40 percent for centenarians.)
And the Genworth survey shows that home-based care is far less expensive. For example, the median annual national cost for homemaker services is $43,472; for home healthcare aides, the cost is $45,188. Here, too, costs vary widely by region - the annual median cost for home health aid services varied from $58,916 in Minnesota to $34,320 in Louisiana.
It's impossible to predict what long-term care services you might need. But getting a handle on the cost of long-term support and services in your part of the country is a starting point in planning for what you might need.
"It's hard to predict, but the survey offers a way to understand the specific rates in your area and how fast the prices are rising," Bua says. (The survey includes an interactive map that can be used to explore prices for specific services by state: http://bit.ly/PYlZ9R)
How we'll foot the bill for long-term care remains one of the big healthcare policy conundrums.
Private insurance carriers have been dropping out of the LTCI market in recent years, and policyholders have been hit with waves of double-digit rate hikes. This year the American Association for Long-Term Care Insurance reports that prices for couples are up slightly, and have jumped significantly for single women - the result of new gender-based pricing (women live longer). For example, a 55-year-old single woman in good health could expect to pay an initial annual premium of $2,300 for a policy that includes 3 percent annual compound growth in inflation protection for benefits.
Last fall a politically divided Congressional Commission on Long-Term Care offered up two competing visions.. Left-leaning commissioners issued a report proposing expansion of Medicare to cover long-term care, while conservatives advocated tax incentives and regulatory reforms aimed at stimulating wider use of private LTC insurance policies.
Since then, several promising policy initiatives have been launched by insurance industry trade groups, Washington policy experts and professional actuaries that seem to point toward a hybrid solution including expansion of private insurance and some form of public safety net, possibly Medicare expansion.
A common sense compromise is something we should all get behind, no matter our location.
(The opinions expressed here are those of the author, a columnist for Reuters.)