The cost of residing in an assisted living community is steadily climbing thanks in part to the ongoing labor shortage, according to the latest Cost of Care Survey from insurer Genworth Financial (NYSE: GNW).
The national median costs for a one-bedroom unit in a private-pay assisted living community is now $3,750 per month, or $45,000 a year, according to the survey released Tuesday. That’s an increase of 3.36% from 2016 to 2017.
Last year, similar costs for assisted living rose 0.78%. Nationally, the five-year annual growth rate for assisted living costs is currently at 2.59%, according to the survey.
Despite the recent cost hikes, assisted living wasn’t the care setting that saw the sharpest increase, according to Gordon Saunders, senior brand marketing manager for Genworth’s U.S. Life Insurance division.
National median costs for home health aide services shot up 6.17% to $21.50 per hour from 2016 to 2017—the most pronounced cost increase among the different settings, according to the survey. The cost of hiring help for household tasks such as cooking and cleaning became 4.75% more expensive over the past 12 months. Costs for those workers reached a median of $3,994 per month, with a five-year growth rate of 3.08%.
“We have become accustomed to seeing steady increases in the cost of long term care services, but this year, we saw a marked acceleration in the cost of home care over previous years,” Saunders told Senior Housing News. “This is based on external factors in the marketplace related to supply and demand: increasing demand for long term care services as our population ages versus shortage of workers and rising labor costs.”
The vast majority of people prefer to receive some form of care in their homes, Saunders added, citing Genworth’s long-term care insurance claims.
Costs for semi-private room nursing home care increased 4.44% and hit $7,148 per month, and private room nursing home care reached $8,121 per month, a 5.50% increase.
Overall, the annual median cost of long-term care services climbed an average of 4.5% from 2016 to 2017, marking the second-highest year-over-year increase for nursing homes and in-home care since the study began in 2004.
Labor woes crank up costs
Though the ongoing labor crunch isn’t the only factor driving up the cost of care for seniors, it certainly has contributed. A tight labor market and rising wages have impacted the cost of care across all care settings, according to Saunders.
Room and board for assisted living communities has gone up to accommodate residents who are sick, but not sick enough to require nursing home care, Genworth noted. Luxurious amenities commonly found in private pay communities also helped drive up the cost of care overall.
On the home-based services care side, increases in labor costs driven by an ongoing caregiver shortage helped drive up costs for consumers in the past year, but it wasn’t the only reason for the cost increase.
“[U.S. Dept. of Labor] changes have resulted in minimum wage and overtime protections to more domestic service workers who enable individuals with disabilities and the elderly to continue to live independently in their homes and participate in their communities,” Saunders said. “Also contributing to the increase in labor costs is the Affordable Care Act, which requires employers of a certain size to offer some type of health insurance or pay a penalty.”
Nursing homes were hit hard not only by labor woes, but also regulatory changes. Higher labor costs and tightening Medicare rules have resulted in shorter hospital stays and sicker patients being sent to rehab nursing homes for shorter stays, driving up costs, according to Genworth.
It’s clear costs are increasing, but many people don’t believe they’ll ultimately have to pay for senior care services.
About two-thirds of respondents in a companion survey to this year’s Cost of Care report said they “expect government programs to cover all or part of their long-term care costs.” And although there are government programs in place to aid seniors, those programs are limited, Genworth notes.
Medicaid has income and functionality requirements, for example. Medicare will pay for limited skilled nursing care following a three-day hospital inpatient stay.
“Medicaid is the single largest payor of long term care costs because so many people can’t afford to cover the costs themselves, but what many people often don’t realize is, they have to spend down much of their assets to qualify and their options for how and where they receive care may be limited,” Saunders said. “It usually takes personal experience caring for a parent or other family member for people to realize the enormous costs associated with long term care and wake up to the fact that they themselves need to do a better job of planning ahead for how they will cover these costs.”
Written by Tim Regan