Spurred by the continuing shortage of skilled labor in senior living and exacerbated by Covid-19, the costs to reside in assisted living in 2020 are significantly higher than the previous year, according to the latest Cost of Care Survey from insurer Genworth Financial (NYSE: GNW).
Assisted living costs rose 6.15%, the highest spike among all care segments. The national median cost for a one-bedroom unit in a private-pay assisted living community is now $4,300 per month, or $51,600 per year. The increase from 2018 to 2019, by comparison, was only 1.28%. The five-year compound annual growth rate for assisted living costs rose to 3.62%, according to the survey.
National median costs for home health aide services rose 4.35% in the past year, to $24 per hour, while the cost of homemaker services inched slightly upward to $4,481 per month.
Genworth facilitated online discussions with 79 owners and administrators in home health companies, assisted living facilities and nursing homes for the survey.
Labor shortage, higher wages remain concerns
A shortage of skilled labor continues to be the primary driver of the increase. Higher minimum wages and difficulty in attracting and retaining qualified workers have been compounded by the pandemic, Genworth Senior Brand Marketing Manager Gordon Saunders told Senior Housing News.
“The pandemic put increased pressure on businesses to be innovative and to be able to put in new processes — specifically technology, training procedures, PPE, cleaning supplies, employee perks and benefits to be able to run their businesses,” he said. “Many of the participants that we’ve talked to have said they see some of these expenses continuing.”
Operators expect the lack of skilled labor to continue for the foreseeable future, narrowing operating margins and forcing them to embrace innovations such as telehealth and telemedicine in order to balance cost and care.
“It’s definitely been eye opening for the industry,” Saunders said.
The pandemic is impacting another factor driving costs higher: a tendency for seniors to postpone a move to assisted living until they have developed chronic illnesses requiring intensive levels of care.
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Covid-19 is forcing families to choose between moving loved ones to assisted living and seeking out other avenues of care, postponing moves until the virus is under control.
The cost of care is expected to continue trending upward in subsequent years — 67% of respondents see demand rising for assisted living, 62% of survey participants plan on increasing costs in the next six months, and 43% expect clients’ costs to rise by more than 5%.
These findings are in keeping with what some senior living leaders, such as Frontier Management CEO Greg Roderick, have said about rate increases. They have emphasized that it may seem difficult to raise rates given that occupancy is at historically low levels across the industry, providers must charge appropriately in order to cover their increased costs and still deliver a higher-quality product.
If these upward trends continue, more operators will seek out ways to rein in costs faster.
“These companies are having to take on [added] payroll taxes and workers compensation, so their operations are getting more expensive,” Saunders said. “Innovation in the care delivery space will allow these providers to be more efficient, provide hands-on care in a safe environment, and reduce the amount of work that they’ve had to do in the past.”