Nursing home costs may work their way into your retirement plan. You may have to help pay nursing care expenses for an aging parent, for example. Or long-term care may be necessary for your spouse or yourself as you grow older. Understanding nursing home costs and how they may vary can help you prepare for the expense.
A financial advisor can help you create a financial plan to pay for nursing home costs in retirement.
What’s the National Median Cost of a Nursing Home?
The median cost represents the middle ground between the high and low ends of nursing care expenses. Here’s how the national median cost of nursing care services compare, according to Genworth’s 2021 Cost of Care Survey:
- Median annual cost for a semi-private room in a skilled nursing facility: $94,900
- Median annual cost for a private room in a nursing home: $108,405
Overall, Genworth reported that “the average annual increase for these services has been in the 2% to 6% range” over the past five years (2016-2021).
What Types of Services Do Nursing Homes Provide?
Nursing home care is for people who need a high level of care around the clock. Nursing home costs can cover:
- Room and board.
- Personal care expenses.
- 24/7 skilled nursing care.
- Rehabilitation and therapy
- Recreational activities.
It’s important to keep in mind that nursing home care isn’t always a permanent situation. While some elderly residents are permanent, others may stay in a nursing home temporarily while recovering from a surgery or serious illness.
For a comparison with other types of care services, homemaker services can include assistance with cooking, cleaning, running errands and other hands-off tasks. While a home health aide can offer help with bathing, dressing, eating and other hands-on personal assistance.
Nursing Home Costs By State
Nursing home costs can vary greatly, based on where you live. According to SeniorLiving.org, the median monthly cost for a private nursing home room in Alabama is $7,026, but in California it can go up to $12,167.
The size of a state’s population can affect nursing home care costs. Similarly, where senior populations are grouped, the availability of nursing care facilities, facility ownership, and cost of living factor in as well. The overall health of the elder population in a particular area can also affect nursing home costs.
For example, if a group of seniors in a particular area considered high risk for certain health conditions based on their genetic history, their nursing home costs may be higher.
Nursing Care Cost Trends
Nursing home costs continue increasing year over year. The median annual cost of a semi-private room in a nursing facility has up from $82,128 in 2016 t0 $97,747 in 2022. And SeniorLiving.org projects that it could go up to $123,823 in 2030.
For a comparison, the median annual cost for a private room in 2016 was $92,376. This went up to $111,657 in 2022 and is projected to jump to $141,444 by 2030.
Here’s how median annual costs compare for other senior care options, based on the 2021 Genworth survey:
- Median annual cost for an assisted living facility: $54,000
- Median annual cost for homemaker services: $59,488
- Median annual cost for a home health aide: $61,776
The main difference between homemaker services, home health aides, and assisted living facilities is location. The level of care services provided across all three is comparable. But with homemaker services or a home health aide, seniors receive care at home.
Those costs can also vary by state. The most expensive assisted living facilities are located in the District of Columbia, Rhode Island, Massachusetts and New Jersey. The least expensive are in Missouri, South Dakota and Mississippi.
Do Medicaid and Medicare Cover Nursing Care?
In short, yes and no. Seniors can apply for Medicaid to help pay for the cost of long-term care. But, they must be financially eligible to receive aid. That can mean spending down savings or selling off property and other assets to fall within the financial guidelines.
Medicare, on the other hand, doesn’t pay anything toward long-term care. You can tap into Medicare benefits to pay for a short-term stay in a nursing facility of up to 100 days if you need rehab or physical therapy after an injury or illness. You can also use Medicare benefits to pay for up to 35 hours per week of home health services but they don’t carry over to a permanent nursing home facility stay.
Assistance for veterans is available outside of Medicaid or Medicare. If you receive care through the Veterans Administration ,you could be eligible to get financial help for assisted living, residential, or home health care. That includes physical therapy and 24/7 skilled nursing care in your home, at an adult day care, or in a nursing home.
Planning for Nursing Care Expenses
If you think that you, your spouse, or parent will need nursing care at some point, there are a few things you can do to plan financially. The first is to consider whether purchasing long-term care insurance makes sense.
Long-term care insurance is designed to pay benefits to help with managing nursing home costs. Investing in a policy could be a good option if you’d prefer not to spend down assets to become Medicaid-eligible. But long-term care insurance can be costly. If you don’t need care, for example, then you’ve paid money for a benefit you can’t use.
An alternative is to consider a hybrid policy that incorporates both life insurance and long-term care insurance. The advantage there is that if you need benefits for long-term care, you’ll have access to them. And if you don’t, then you can leave behind a death benefit to your beneficiaries when you pass away.
A third option is to add saving for nursing home costs into your financial plan. You can do this inside or outside of a tax-advantaged savings account, such as a Health Savings Account. These accounts are linked to high deductible health plans and allow you to save money for future health care expenses on a tax-deferred basis. Withdrawals are tax-free when used for qualified medical expenses, including long-term care insurance premiums or long-term care out of pocket costs.
When budgeting for how much to save, look at the projected estimates for the cost of care when you think you’ll need it. If you’re 30 right now, then you may not face nursing home costs for another 50 years. Therefore, you’ll want to factor inflation into your calculations for saving to account for rising health care prices.
Nursing home costs can be expensive and more so in some states than others. Researching the median costs on a national basis, then looking at the costs of care in your state can give you perspective on what you might pay for nursing care as you age.
Taking steps now to plan. That could mean purchasing long-term care insurance or creating a separate savings cushion. Either can help keep the costs from burdening your financial future.
- Consider talking to your financial advisor about the implications of saving and paying for nursing home costs. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you’re considering long-term care insurance or a hybrid life insurance/long-term care policy, shop around with different insurers to compare premiums and coverage amounts. SmartAsset’s life insurance guide can tell you how much you’ll need and provide quotes. Like other types of life insurance, long-term care insurance is typically more affordable the younger and healthier you are when you buy it.
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