Rise in Assisted Living Costs
The ocregister recently published an interview with Beth Ludden, a long-term care insurance provider about the rising costs of long-term care.
Long-term care costs on the rise
Insurance to cover some of the expense should be a part of retirement planning, expert says.
This comes as no surprise: The cost of long term care in nursing homes, assisted living facilities and in home care has increased for the fifth consecutive year.
Also not surprising is the news that we face a shortage of direct-care workers – which will further increase the cost of long term care.
In 2008, the average annual price of a private nursing facility reached $76,460 nationwide – $86,934 in Orange County – according to a survey by Genworth Financial. Orange County's assisted living home cost is $40, 543 a year, compared to $36,090 nationally, the same survey revealed.
Meanwhile, in-home care costs stayed fairly flat at about $44,000 annually, compared to $43,884 nationally, says Beth Ludden, senior vice president for long-term care products for Genworth, a major long term care insurance provider.
Q: Your study indicates the expense of just a few years of long term care in a facility or at home can quickly wipe out a lifetime of savings.
A: Well, having an insurance policy that pays for this type of service is definitely a benefit. These policies should be part of retirement planning.
Q: The nursing home cost varies widely by region – for instance, Alaska averages $187,902 a year and Louisiana $45,539. Can you explain the variation?
A: In certain urban or remote areas, costs can jump 40 percent above other regions. One interesting thing is demand. The cost for assisted living in Orange County, for example, went up quite a bit, about 16 percent, suggesting that assisted living is relatively popular.
Q: What about adult day care services – where the elder is cared for during the work day and then returns home at night?
A: This is mentioned for the first time in this survey and seems to be growing in popularity. Costs are relatively modest and this is a viable alternative for people who may be living with a family member who works outside the home.
Q: The study mentions a lack of sufficient home care workers in the future. Does this have anything to do with immigration as many of these workers currently are from Hispanic countries?
A: Immigration trends definitely are playing a role in the workforce issue. But we need, as a country, to take a step back to promote caregiving and those types of services as a more attractive career option. We need to advocate for better wages, education and training. While it's a demanding job, it can be rewarding and provide a fair living for workers.
Q: What's new in home care that could reduce costs?
A: Technology is playing a larger role and reducing, to some extent, the need for human intervention. Remote monitoring comes into play. People are able to transmit blood pressure and blood sugar readings. Medication can be dispensed and there is a way to make sure it is actually being taken. Some of the new technology in the pipeline will mitigate the demand for home care workers.
Q: Long term care insurance is still a new product that not too many people buy. Why not and what's the future?
A: At this point, among people in the 50-plus age group, long term care insurance has about a 7 percent penetration and about a third of these people are using their policy. Many people don't understand the need for this insurance.
Q: When does it make sense to buy this insurance and what if I don't use it?
A: We recommend looking at buying the insurance around age 50, because it is cheaper then. There are several products that return the premium in the event no long term care is given and if you can go through life without needing long term care, that's a good thing. It's important to sit down and talk to your financial planner about this.
Q: California has a partnership program for long term care purchasing. I understand policies are available to people as old as 70.
A: Yes but they are more expensive, of course.
Q: Given the current economy, are more family members providing caregiving?
A: We see the workforce component as being a key driver and our policies will pay for a family member to provide care as long as the caregiver was not residing in the home prior to caring for the insured person. We do advocate for some of the proposals giving family caregivers tax incentives to relieve some of their burden.
Long term care insurance doesn't take the place of the family providing care but it does offer caregiving in a different way. It frees the family member to spend quality time with the elder when the person is disabled.
Q: And we need to think about this sooner rather than later?
A: Yes, because we're all getting older and we require different strategies.
