Planning for Long Term Care is key

The cost of long term care is steadily rising, in part because the world is aging at a faster rate than ever before, partly becuae people are living longer. Ten thousand (10,000) baby boomer are turning 65 every day until 2030, and seven out of ten will need some sort of long term care. People who reach the age of 65 years without a catastrophic health event can usually count on another 20 years of life. So planning or budgeting for the cost of long term care expenses is important.

The cost of long term care is rising

Since the COVID-19 pandemic, thanks to inflation, new regulations, labor shortages, higher minimum wage laws and increased required benefits, the cost of long term care has been rising steadily, with most people paying for that care out of pocket or with long term care insurance. The Genworth Cost of Care Survey shows that the cost of in home care, one factor in the cost of long term care, has risen 30% since 2016. At the same time, a tight labor market and constrains on legal immigration have created a shortage of quality care providers.

Who needs long term care?

It’s estimated that 70% of people over 65 will need some type of assistance with the loss of independence due to age, mental, or physical health changes. Generally, Medicare and typical health insurance coverage does not cover long term care, although Medicaid may provide assistance for low income Americans.

What kind of long term care is needed?

People who face injury, illness, or age related decline may need help with bathing, dressing, meal preparations, incidental transportation, medication management, care management, help with toileting, exercising, shopping and errands. Paid care providers, such as caregivers with At Home Nursing Care, are an excellent option, but families must have some means for paying for that care, either out of pocket or with long term care insurance. Caregivers can promote wellness and help avoid loneliness and isolation of seniors.

The cost of long term care survey

Each year for the past 17 years, Genworth has conducted a cost of care survey to get a nationwide perspective on the cost of long term care expenses throughout most metropolitan areas in the United States.  The latest survey was released December 20, 2021. It showed that the cost of assisted living care rose 6.15% over 2019 rates while the cost of in home care rose 4.44%.   Nationally, the median monthly rate for assisted living was $4300, and the hourly rate for in home care was $23.50.

The cost of long term care in California

California, a high cost of living state with many more employer mandates and higher worker’s compensation and payroll costs, has much higher long term care expenses than the national average.  The Genworth report on California reveals the state currently has a median hourly rate of over $33.50 hourly for in home care.

The cost of nursing home care, which includes more medical care than assisted living, has risen by just over 3% since 2019. In California, a semi-private room costs $9,247 on average per month, while a private room costs $11,437 per month, according to the Genworth survey. Most families don’t realize that Medicare only covers a portion of nursing home expense, with 88% of the cost generally falling onto the patient and their family.

Given that seven out of ten people over age 65 need long term care, and that many have not budgeted or planned for that care, it’s common for older Americans to end up depending on family as caregivers. 

How are people funding the cost of long term care?

For those who hire professional in home care, Genworth reports that 61% of families pay for that care out of retirement accounts and personal savings, and those families must be careful to avoid paying caregivers illegally.  Other families may rely on filing a long term care claim if they purchased long term care insurance or other benefit programs.