Understanding the Costs of Home Healthcare and Long-Term Care in the United States
According to Morningstar, 70% of people who turn 65 will develop a severe long-term care need in their lifetimes, and 48% will need some type of paid long-term care services. While the average stay in a long-term care facility is just over 3 years, only 24% of older adults receive more than two years of paid long-term care, and only 15% spend more than two years in a nursing home.
Many older people with severe long-term care needs rely on unpaid caregivers, such as family. As the population ages, more individuals and families are grappling with the financial realities of home healthcare and long-term care. Understanding these costs is crucial for planning a comfortable and secure future. This article will delve into the costs associated with these services and offer some financial planning tips to help manage these expenses.
Home Healthcare Costs in the United States
Home healthcare includes a range of services provided in a person's home to treat an illness or injury. These services can include nursing care, physical therapy, occupational therapy, and assistance with daily activities. This type of care is intended for those who are recovering from an illness or injury and who are likely to resume independent living.
According to Genworth's 2023 Cost of Care Survey, the national median monthly cost for a home health aide ranges around $4,576. However, costs can vary significantly based on the level of care required, location, and duration of services.
Long-Term Care Costs in the United States
Long-term care involves a variety of services designed to meet a person's health or personal care needs over an extended period. These services are typically provided in nursing homes, assisted living facilities, or at home. It is important to understand that Medicare does NOT cover long term care expenses. Medicaid does, however, receiving Medicaid benefits requires a minimal asset base that precludes many Americans from being able to receive government assistance.
Genworth's 2023 survey indicates that the median monthly cost for an assisted living facility is approximately $4,500, while the cost for a private room in a nursing home ranges around $9,034 and for a semi-private room, about $7,908.
California, known for its higher cost of living, also has higher-than-average costs for home healthcare and long-term care. The Genworth survey highlights that the median monthly cost for a home health aide in California is approximately $5,529. The cost for an assisted living facility is around $5,250, while a private room in a nursing home can cost about $11,437 and a semi-private room approximately $9,917.
Financial Considerations for Aging Comfortably
Given the substantial costs associated with home healthcare and long-term care, it is essential to plan ahead to ensure a comfortable and secure retirement. Here are some financial planning tips:
Start Saving Early: The earlier you start saving for long-term care, the better. Consider setting aside a portion of your retirement savings specifically for healthcare costs.
Consider Long-Term Care Insurance: Long-term care insurance can help cover the costs of services not covered by regular health insurance. Evaluate different policies and choose one that fits your needs and budget. Another, often less expensive option, is to add a long-term care rider to your life insurance policy.
Create a Comprehensive Financial Plan: Work with a financial advisor to develop a comprehensive plan that includes projections for healthcare costs. This plan should also consider other retirement expenses, income sources, and potential risks.
Because long-term care policies can be extremely expensive, with premiums that increase over time, our first step with planning clients is to determine if they are “self-insured” by their own asset base in the event they needed to spend $150K/year (adjusted for inflation) for 3 years at the end of their life. If a client’s financial plan suggest that they would be able to afford long-term care, we do not generally recommend a long-term care policy unless there is a history of Alzheimer’s or another degenerative disease in the family history. The second strategy we discuss with many clients is utilizing their home equity.
Leverage Home Equity: If you own a home, consider how you might use its equity to help pay for long-term care. Options include selling the home, taking out a reverse mortgage, or renting it out. While a reverse mortgage would help pay for in-home care expenses, reverse mortgages will not protect people who need long-term care in a facility, as you must remain in your home in order to have a reverse mortgage.
Invest in Your Health: Maintaining a healthy lifestyle can reduce the need for extensive healthcare services. Regular exercise, a balanced diet, and routine medical check-ups can contribute to better long-term health.
Conclusion
The costs of home healthcare and long-term care are significant, especially in states like California. By understanding these expenses and incorporating them into your financial planning, you can help ensure that you or your loved ones age comfortably and with peace of mind. Start early, stay informed, and seek professional advice to navigate these complex and crucial aspects of aging.
If you have any questions about planning for long-term care or need personalized advice, feel free to reach out. Planning today can make all the difference tomorrow.
