Have you ever wondered how much nursing-home care really costs? Perhaps you are worried that you or a loved one might need to go into one and are wondering how you are going to fit it into your budget. Or perhaps you are considering long-term health-care insurance. In any case, you may be unpleasantly surprised by the real costs of nursing-home care.
Costs are on the rise
Nursing-home costs have been on the rise for several years. In 2006, a study commissioned by the New York Life Insurance Co. reported that costs for nursing-home care in the United States increased 6 percent over 2005 prices to reach $204 per day for single-occupancy rooms and $180 per day for double-occupancy rooms. That equates to $74,460 annually for a private room or $67,500 annually for a semi-private one. A similar study in 2001 by the Metropolitan Life Insurance Co. reported that private room rates rose to $239 daily, or $87,235 annually, in 2011, with semi-private rooms averaging $214 per day, or $78,110 per year.
Major worries about retirement income
With a $10,000 to $12,000 increase in room rates over a five-year period, it is plain that nursing-home care costs are growing at a rate that far outstrips the average consumer's ability to pay. Not surprisingly, a report by Scottrade Inc., a national investment firm, reports that 56 percent of Americans worry about retirement income -- making it the second-greatest financial worry after concern about the general state of financial markets. About half of all baby boomers and Generation-Xers (those born between 1945 and 1982) are nervous about or afraid of retirement. Yet worries about medical expenses are overshadowed by concerns that Social Security either won't pay enough for retirees to live on or will run out entirely.
Paying for nursing-home care
If you still have time on your side, your best bet is to include the estimated costs of nursing home care in your retirement planning, saving accordingly from a young age. If you're staring retirement in the face and it isn't feasible to put that kind of lump sum aside, consider taking out long-term health-care insurance. It might cost a few thousand dollars per year, but the likely costs of insurance over the remainder of your life are less than the cost of a single year in a nursing home. Don't rely on Medicare to meet nursing-home costs, as it will only meet the costs of a short-term stay. If all else fails and you need nursing-home care but have limited funds, Medicaid will meet most of the cost, but this is means-tested -- meaning that you must pay any excess income or savings you have to contribute toward your own care. You also may end up in a cut-rate nursing home approved by Medicare rather than one chosen by you or your family.