Assisted living costs up 11% over 5 years
Year-over-year costs for assisted living rose just 0.8% from 2015 to 2016, according to the Genworth 2016 Cost of Care Study, but the picture doesn't look as rosy when one takes the long view.
Small annual increases add up over time, Gordon Saunders, a brand manager for Genworth, told McKnight's Senior Living. The five-year compound annual growth rate of costs in assisted living, Saunders said, is about 2% per year, “probably a little more than inflation costs.” Comparing costs today with those of five years ago, however, reveals an 11% increase in that time, which could be “a pretty big shock” for consumers, he said.
The annual median cost of assisted living is $43,539, according to the study.
The year 2016 marks the 13th year of the annual report from the Richmond, VA-based insurance holding company. It details care costs on a national and state-by-state basis across the spectrum of long-term care settings — homemaker services, home healthcare, adult day care, assisted living and skilled nursing semi-private room and skilled nursing private room.
Year over year, the national median cost of care from 2015 to 2016 rose across all care settings, except adult day care, which decreased slightly. Of all categories studied, homemaker services costs are up 2.56% from 2015, marking the highest year-over-year increase across all care categories, according to Genworth.
The monthly cost of a private nursing home room is up 1.24%, to $7,698, from 2015, and the monthly cost of a semi-private room is up 2.27%, to $6,844. Home care aide services rose 1.25%, and adult day care costs fell 1.25%.
Overcapacity may have contributed to the findings related to assisted living, Debapriya Mitra, senior vice president of business strategy for Genworth's U.S. Life Insurance Division, told McKnight's Senior Living. “There's been a lot of buildup on the assisted living side, so has that increased competition, increasing drive amongst providers to get that cost low?” he asked.
Results also speak to “how the assisted living providers have positioned themselves as a lower-cost provider,” Mitra said. Nursing home costs have increased 16.5% to 18.5% over five years, he said. “For the assisted living providers, that's one good thing. It's an 11% increase over five years [for assisted living] versus an 18% increase for nursing homes.”
The study was conducted in January and February with about 15,000 senior living and LTC providers in the United States.
What might next year's results hold? Mitra said he expects costs to continue to rise in general and costs for home care to increase in particular because of high demand and a limited workforce. Despite not increasing this year, costs will go up for adult day care, too, Mitra predicted, adding that the service still will be more cost-effective than a nursing home.
Mitra said that potential residents and their families need to be made aware of real costs, which they “grossly underestimate,” the likelihood that they might need care and services (75% of those aged 65 or more need long-term care at some point) and the strategies they can put in place to be able to afford the care and services they may need. Through its “Let's Talk” online platform, Genworth offers a suite of tools and advice to assist families in beginning the planning discussion.