Assisted Living and Nursing Home Costs

    As Americans’ life spans continue to increase, more and more seniors are living out their days in assisted living communities or nursing homes, which are both costly options. There are more than 6,300 professionally managed assisted living communities in the United States, housing more than 900,000 residents. An estimated 3.3 million seniors live in one of the nation’s 16,000 nursing homes.

    Assisted living is an option designed to bridge the gap between home care and a skilled nursing facility. It is for individuals who need assistance with everyday activities, such as eating, toileting, bathing and dressing, and medication management. The average age of an assisted living resident is 86.9, and the median length of stay is just over 2 years. Three-quarters of assisted living residents are women, who outlive men on average.

    A nursing home provides mostly elderly residents with rooms, meals, assistance with daily activities as well as skilled nursing and medical care. Nursing homes also provide care for individuals with chronic health conditions or after a hospital stay. Nursing homes are licensed and regulated at the state level. Care must be provided by registered nurses (RNs) or licensed practical nurses (LPNs), and a physician’s order is required for admission.  According to the U.S. Census Bureau, in 2010, the median age of a nursing home resident was 82.7 years.

    Costs for Assisted Living and Nursing Homes

    According to a MetLife survey, in 2011 the monthly rate for a one-bedroom apartment, or a private room with bath, in an assisted living facility was $3,477, or $41,724 annually. The cost, which included at least two meals daily, housekeeping and personal care, represents an increase of 5.6 percent over 2010 costs. Arkansas had the lowest average monthly base rate ($2,156), while Washington, D.C., had the highest ($5,757).

    Average daily rates for a private room in a nursing home rose from $229 ($83,585 annually) in 2010, to $239 ($87,235 annually) in 2011 — a 4.4 percent increase. Average rates for a semi-private room also increased by 4.4 percent — from $205 daily ($74,825 annually) in 2010 to $214 ($78,110 annually) in 2011. The highest average nursing home rates were in Alaska ($655 per day for a private room), with the lowest in Louisiana ($141).

    Paying for Assisted Living

    Assisted living costs are most frequently paid for out-of-pocket by residents and their families, via personal savings, retirement accounts, veterans’ benefits, pensions and annuities, or and Social Security payments.

    About 5 percent of American seniors carry long-term care insurance, at an average cost of about $2,000 per year for a single person age 55 and $2,400 for a couple. Benefits for assisted living can vary between $1,500 to more than $9,000 per month.

    Medicare does not pay for assisted living rent or services, but will pay for medical expenses incurred at an assisted living facility, just as it would if the care was delivered in a hospital, doctor’s office or private home.

    The Department of Veterans Affairs (VA) covers some assisted living costs for veterans and their spouses via its Non-Service Connected Improved Pension Benefit with Aid and Attendance program. The service member must have served on active duty for at least 90 days and at least one day during wartime.

    As of April 2012, 42 states provide certain Medicaid reimbursements to assisted living facilities, if the resident is financially and medically qualified. Coverage varies from state to state, with some only paying for personal care and others also paying for room and board.

    Paying for Nursing Homes

    About half of all nursing home residents pay with private funds from their own savings, employer group health plans, pensions, veterans’ benefits or with the help of a long-term care insurance policy.

    Medicare will pay for skilled nursing home care under certain circumstances:
    • The care must be medically necessary and ordered by a physician.
    • The care must follow an inpatient hospital stay of at least three days.
    • The facility must be Medicare-certified.
    • The time period is limited.

    For the first 20 days of nursing home care, including a semi-private room, meals, medications, supplies and skilled nursing, Medicare pays the full cost. For days 21-100, Medicare will pay all costs, minus a daily co-payment ($148 in 2013). After 100 days, Medicare will not pay any costs.

    While most Medicare Part C plans, or Medicare Advantage Plans, provide coverage for skilled nursing care, costs and benefits vary. Medigap policies will also help pay for skilled nursing care, but only if the care is covered under original Medicare.

    Veterans can receive nursing home care through three programs: VA-owned facilities, state veterans’ homes and community-based services, each of which has its own eligibility and admission criteria.

    Medicaid will pay most nursing home costs for financially qualified seniors — those with limited income and assets — but only at a Medicaid-certified facility. There are no time limits on payments or the length of stay in the facility. Eligibility varies from state to state.

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    Other Payment Options

    Even though various private and public insurance plans cover a majority of senior health care costs, out-of-pocket expenses can be very high. A recent study by the Employee Benefit Research Institute (ERBI) revealed that a U.S. couple retiring in 2012 needs $227,000 in order to have a 75 percent chance of covering their future medical needs.

    In addition to long-term care insurance, seniors can use the equity in their homes via a home equity loan, a home equity line of credit (HELOC), or a reverse mortgage to help finance assisted living and nursing home costs.

    Bill Fay

    Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at Debt.org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@debt.org.

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