Raw Cost of Care
The chart below shows the average monthly cost of care for skilled nursing (nursing home), memory care (dementia), assisted living and independent living facilities in the Baltimore/Washington region for 2015. It also shows the cost for 24 hour / 7 day a week home health aide care and 24/7 home health aide care supplemented by 7 hours each week of registered nursing (RN) and licensed practical nursing (LPN) care in an attempt to replicate the level of care an individual might receive in an assisted living or skilled nursing facility.
The monthly cost in 2015 of facility-based care in the Baltimore/Washington region ranges from $2,912 in an independent living facility to $5,659 in a one bedroom unit in an assisted living facility to $6,234 in a memory care facility, and $9,990 to $11,270 for care in a skilled nursing facility (nursing home) in either a semi-private or private room. For a resident needing assistance with three or more activities of daily living (bathing, transferring, etc.), or with any significant degree of dementia, an independently living facility would probably not provide adequate care without supplemental home healthcare, so the effective range for the monthly cost of care for a senior needing a moderate to significant level of assistance in a specialized seniors housing and care facility in the Baltimore/Washington region in 2015 was $5,659 to $11,270.
To see description of the various types of senior housing and care facilities see my page Senior Housing Options http://wp.me/P64zBK-w.
Home health aides cost $21.73 per hour in 2015, and would cost $14,603 monthly if provided on a 24/7 basis assuming no differential for night shifts. A licensed practical nurse was $53.94 per hour and a registered nursing was $77.88 per hour. In the above example, I assumed an hour a day of both LPN and RN care in addition to 24/7 home health aide care to estimate the monthly cost of care equivalent to that delivered in a skilled nursing facility to be approximately $18,294 per month. Many families care for seniors with a combination of care by family members supplemented with limited time by home health aides or other paid caregivers. While this type of arrangement can result in lower cost than facility-based care, it is clear that the cost to provide 24/7 aid and nursing care at home far exceeds the cost of obtaining such care in an assisted living, memory care or skilled nursing facility. Even when less than 24/7 paid care is provided the cost of facility-based vs. home care is often closer than families expect once the cost of utilies, home upkeep and forgone rent or sales proceeds are considered.
The other big advantage to facility-based care over 24/7 home care, even if you can afford it, that I believe many families overlook, is socialization. Seniors being treated at home, even by the most dedicated family caregivers and aides, spend a lot of time isolated from human interaction. At well-run senior housing and care facilities, interaction among the residents and between residents a diverse group of staff provide more interpersonal and intellectual interaction and stimulation than can be achieved at home, which can be very important for a seniors’ mental health and emotional well being.
Planning For The Future Cost of Care
If the raw cost of care and learning that the government will not help you pay for it (See prior post “The Government Will Not Pay For You Long Term Care”) are not sobering enough, seniors and families trying to plan for long term care need to understand the probability of needing such care, the likely duration of such care, and its future cost. I hope to explore these issues more fully in a future post on long term care insurance and other financing options. But to illustrate the future cost of care for planning purposes here, I have assumed an average length of stay (LOS) for skilled nursing and assisted living care of 24 month, 36 months in memory care and 39 months in independent living. I have then assumed 2.5% inflation for 35 years because the average entry age in to an assisted living or skilled nursing facility is about 85 and the time many people start seriously considering long term care insurance is age 50.
In the table above, the average monthly costs for 2015 in the Baltimore/Washington Region are mutiplied by an assumed LOS in months to get the cost for an expected episode of care. The future value of this expected episode of care is then calculated for 2050 assuming you are thinking about this today at age 50 and planning for costs when you are 85 and are more likely to enter an assisted living or skilled nursing facility. The LOS assumed above are averages and at two years probably a bit high for long-stay custodial skilled nursing care. The average LOS are about right for assisted living and independent living based on actual turnover rates in buildings today. I did not find good data on memory care facility LOS but it is widely recognized to be higher than assisted living because some residents enter at younger ages with early onset Alzheimers and are in better physical condition. When planning for an individual’s need to finance long term care it may be appropriate to plan for longer or shorter lengths of stays and look at the probabities of these but I believe these averages are useful to illustrate the order of magnitude of possible future long term care costs.
I assume 2.5% inflation to estimate the future cost of long term care. The 2.5% inflation factor is about where costs have been increasing in recent years but with increasing wage pressure and inflation expectations higher now that Donald Trump is President-elect, other higher inflation assumptions may be appropriate.
The bottom line is that a 50 year old today might reasonably plan for between $300,000 and $600,000 of long term care costs (an average of $516,483 for AL through private room skilled nursing) and expected to spend this amount over a two – three year period beginning around 2050.
New York Life, which is a long term care insurance provider affiliated with AARP, has an online cost of care calculator that is updated annually. New York Life’s 2015 Cost of Care Survey was designed and implemented by Long-Term Care Group (LTCG), the nation’s leader in long-term care administration services. Each year LTCG surveys thousands of Skilled Nursing Home, Home Health Care and Assisted Living Facility providers to collect cost of care data. The cost of care averages are calculated from over 30,000 different providers at the national, state and metropolitan statistical area level. Other cost of care calculators, including one from Genworth Financial, are also available online.
The figures above are for the Washington / Baltimore Region and are somewhat higher than the national average. I supplemented and verified the LTCG survey data with information from the National Investment Center for the Seniors Housing and Care Industry’s NIC-MAP database, which surveys seniors housing and nursing care properties on a quarterly basis (see http://www.nic.org). I used NIC-MAP data for the Baltimore region, which shows the cost for skilled nursing facility care and care in an assisted living facility 7% – 8% lower than the LTCG survey but similar enough to confirm the LTCG survey data. NIC-MAP is also able to provide pricing data for independent living and memory care / dementia facilities, which I incorporated in my analysis.