Nursing home care can be one of the most expensive costs for the elderly. Most people don’t expect to have to stay in a nursing home. However, when you get, or a loved one gets sick, this unexpected expense can devastate your finances.
The cost of nursing home care is expensive, but it’s because of the high cost of staffing, medications, facility cost, and more. Nursing homes need to charge higher rates to cover the cost of doing business as well as make a profit.
The insurance companies pay the nursing homes based on the fee schedule set by the nursing home. If they set the fee schedule too low, they stand to be reimbursed at a lower rate.
Prices of nursing homes have increased year after year. It doesn’t look like the price of nursing home stay is going to decrease in the near future. Rents for the homes, staffing costs, and medication prices go up year after year.
There are also ancillary charges that get passed onto the consumer. The homes provide health insurance and benefits to their employees. The cost of health insurance has increased for many insurances by greater than 10% year after year. There is also an increase in workman’s cost insurance and liability insurance.
Some nursing homes have their rates set by the state. Mandated rates usually result in lower prices than other states that are not regulated.
Why does it cost so much?
There are many things that the nursing home must provide for the resident. The high cost of delivering care includes medications and medication management, housing costs, television, food/beverage, 24/7 nursing, CNA support, and so much more.
There is also entertainment provided by the nursing home at no additional cost such as bingo, arts and crafts, and more. There are also movie nights and group dining events on holidays.
When you consider the price of staying at a hotel, the cost isn’t so extravagant. Some people have said, “I’ll just go stay on a cruise ship all year and have access to a doctor, food, and a place to stay.”
There is also the high cost of medications that are usually covered by medical insurance. However, there are sometimes secondary insurance issues or lapses in coverage. With a short term stay at a nursing home, the medications are considered part of a “bundle” package. The more medications you are prescribed, the less the facility makes.
According to the national conference of state legislators, “In 2018 the average annual premium for employer-based family coverage rose 5% to $19,616 for single coverage, premiums rose 3% to $6,896. Covered workers contributed 18% of the cost for single coverage and 29% of the cost for family coverage, on average, with considerable variation across firms.”
According to Genworth financial, Every day until 2030, 10,000 Baby Boomers will turn 65, and 7 out of 10 people will require long term care in their lifetime. In Connecticut, the yearly cost of nursing home care is $152,388 for a semiprivate room.
Not only is their nursing support, but you also have access to physical therapy, occupational therapy, dietary, speech therapy, advanced practice nurses, and doctors while you are in the nursing home. Getting access to care like this is possible but very challenging in the home setting.
The private cost of having these services in your home can quickly add up to thousands of dollars when done similar to a nursing home level of care.
With the majority of the cost of nursing home stay going to cover the cost of the medical staff, you can see how the pricing of staying at a nursing home won’t be cheap.
Some other ancillary things driving up the cost of care are placement agents that can often charge the facilities a “referral fee.” These “finders fees” that are charged by the placement agency’s can range from $2000-$10,000.
These placement agencies are usually for assisted living facilities. However, some nursing homes use their services when the census is low with open beds.
Nearly 70 percent of today’s 65-year-olds will need long term care at some point according to the US Department of Health and Human Services. With so many of use potentially needing services, this means that many of us will need to find a way to pay for services.
Medicare will pay for short term stays but not long term. Medicaid, on the other hand, will provide long term care coverage, but only if you qualify.
There is also long term care insurance, which can help you pay for your long term care stay. According to Clark Howard, there are different forms of long term insurance.
- Traditional stand-alone long-term care insurance
- Hybrid life/long-term care products
- Life insurance with an acceleration rider
- Annuities with a long-term care rider
Your room at the nursing home:
Most people who stay in a nursing home will have a roommate or two, depending on the facility. Fewer facilities have rooms with three to four people compared to the recent past.
As nursing homes increased their competition of Medicare A beds, they shifted their model to either one roommate of single rooms.
Most rooms will include a closet and a dresser that can usually often be locked for privacy and security. You will also have a bed, which depending on the facility, will vary from manual to electric. There are other bed options based on your specific ailment (i.e., Air mattress).
Some facilities will provide a TV with cable, while others will charge you additionally for cable TV.
Many younger residents bring in DVD or gaming systems to help pass the time. Gaming systems and DVD players are not usually included in the cost of the stay.
There isn’t a refrigerator in the rooms unless it is a higher-end nursing home. Not having a fridge isn’t an issue because there usually is a refrigerator on the floor that is shared by residents. Hopefully, nobody takes or eats your food and drink which happens from time to time.
You will also want to make sure you have the ability to have a family be able to stay the night. Make sure there will be room for a lounge chair so that your family member can sleep over sometimes. If you want to learn more, check out the article “Do nursing homes allow overnight guests?“
With most short-term stays, if you have Medicare and right secondary insurance, the bulk of your stay will be covered.
Occasionally there may be extra charges for medical services:
- Medications that are not covered by your insurance
- Requests for specific OTC remedies
- Vitamins and minerals not commonly prescribed in this setting
- Homeopathic remedies
- High-end medicines
- Extra physical therapy and occupational therapy after you have completed your regular therapy.
Many medical services are included with your general stay under your Medicare insurance benefits such as physical therapy, occupations therapy, speech therapy, dietary consultants, access to licensed practical nurses, and registered nurses.
There will also be a medical director that oversees the care provided to the residents. This medical director may or may not be assigned to you during your stay. You will be assigned an attending physician to oversee your medical care during your stay.
Additional costs of medical care include:
- IV therapy (IV antibiotics and hydration)
- Laboratory and diagnostic testing
- Medications for treatment including many over the counter medications
- Tube feedings
- Oxygen therapy, along with suctioning in some facilities.
There is also the cost of personnel that provides medical care for the residents. Each facility is required to provide specific medical staff.
- Director of nurses: average salary per salary.com $109,358/year
- A registered nurse who usually acts as a supervisor: $79,893/year
- Licensed practical nurse: Multiple nurses on any given shift with average salary $48,722/year
- Certified Nursing Assistants: $29,429/year with multiple employees working each shift
- The Administrator of the nursing home: $115,050/year per Salary.com
- Social workers: $51,852/year average nationwide
These are just national averages, with some staff making more and some less than the national average. Some of the larger nursing homes have assistant administrators.
Most of the homes have assistant directors of nursing with average yearly salaries of $74,781.
There are other specialty roles in nursing homes, including infection control nurses, wound nurses, and other ancillary medical staff.
All this staffing is valuable to the care of the resident but drives up the total cost for the nursing home.
Advanced Practice Nurses (APRNs):
If you are lucky enough, you will have access to Advanced Practice Registered Nurses, who are at the nursing home to provide medical care to the residents. APRNs work collaboratively with the doctors to care for the sick residents. Advanced practice registered nurses are often in the facilities more often than attending physicians.
They provide many of the same services as the doctor. They work hand in hand with the attending physician, keeping them aware of what is going on with their residents. This team approach allows for increased care for the resident at no additional charge to the nursing home.
The APRN’s services are billed through the patient’s insurance company. The doctors will also charge the patient’s insurance when they see the patient for medical visits. The doctors sometimes are paid a “stipend” to provide services by the nursing home.
There are cases when the nurse practitioner is employed by the nursing home to provide medical services. When they are employed, it is an additional staffing cost that the nursing home will need to cover.
Due to the high salaries, APRNs are paid, most homes chose to use third-party companies such as InHouse Care LLC. The APRN companies provide services at no additional cost to the nursing home.
There will be costs to the nursing home that they will need to pass on to their customers in the form of ancillary personal. These are the people who cook the food, clean the facilities, provide operational support, billing personnel, admissions staff, liaisons to hospitals, front desk clerical staff, laundry workers, maintenance staff, and more.
Not taking into account the level of care, facilities that have union workers will have higher labor costs when compared to nonunion facilities. Unionization can result in higher per cost per day to the resident to cover the higher labor costs.
There are high costs of turning on the lights, heating and cooling the facility and providing electricity to the building.
The maintenance staff is continually repairing rooms, roofs, windows, and more. Not only does this increase labor costs, but also the cost of materials to do the repairs add to the price of running the business.
Since nursing homes are commercial businesses, they often have to pay a premium to use licensed plumbers, electricians, and other tradespeople.
The price of medical supplies has gone up year after year. The facilities need to purchase these supplies to provide care to the resident. These supplies include
- Wound dressings
- Diabetic testing supplies
- Wound cleaning supplies
- Eye drops
- Sharps containers (you would be amazed at how much it cost to handle medical waste and sharps)
- Adult undergarments
- Hoyer lifts
- Scales for weighing patients (rarely the cheap scales you buy at the local Walmart)
- IV supplies
Workman’s company insurance, health insurance, and liability insurance all drive up the cost of doing business. Workman’s comp and health insurance for the employees are a couple of the largest expenses to the nursing home.
There are other types of insurance that many facilities pay for, such as cyber insurance, medical director insurance, and more.
There is also the price of the electronic health record (EHR) that is used by the facility for documentation, medication management, and more.
Many of the electronic health record systems cost thousands of dollars each month and increase labor costs for documentation time and effort.
The cost of staying in a nursing home can be high if you do not have insurance. Try to plan ahead when you are younger or not sick when it comes to planning for your future.
The price of a nursing home stay appears on the surface to be expensive. However, when you take into account all the costs associated with running a nursing home, you can see why the price is what it is, and probably should be higher.
All businesses need to make a profit, and it has become harder and harder for nursing homes to make a profit. Insurance companies are not increasing reimbursement for medical care at the same rate of increases for other services.
Many nursing homes are going out of business because of the low reimbursement rates that state insurance pays. The reimbursement rates from state insurance barely cover the cost of room and board, never mind the price of medical care.
The nursing homes need to charge higher rates to offset the services for which they are not reimbursed.
Some people’s insurances lapse, or they are not updated correctly, while other private pay residents don’t pay their bills. There are also incidents of residents who’s insurance is maxed out, and they refuse to leave. The facility now needs to go through the process of getting them out of the facility. This costs time and money spent on attorneys or staff following the legal process.
Medicare offers limited coverage (up to 100 days per benefit period) for some beneficiaries. If you are worried about the price of a stay at a nursing home will deplete your resources, you should look into Long Term care insurance. There are many options available to the public, and you will need to research your options.
Make sure to investigate payment options long before a major health event occurs. If you wait too long, many of the options for coverage assistance will no longer be available. There will be secondary insurances that can cover what Medicare will not cover.
They’re also ways to protect your finances as you get older. You will need to speak with a professional with knowledge of long-term care prior to making decisions.
If you or your spouse is a veteran, there are programs set up to assist you with financial aid if you qualify. Some companies will help you with getting support but do your research to see if they are reputable companies.
Finally, you can always negotiate a reduced private pay rate with some nursing homes. Especially if they do not have a waiting list or they have a low census. The nursing homes would rather have some money coming in to cover the operating cost and may be willing to come up with a fair rate for all.
Carol Marak. Nursing Home Costs, Nursing Home Costs by State. https://www.skillednursingfacilities.org/resources/nursing-home-costs/ Retrieved December 3, 2019
Cost of Care. Find your path Forward, US Department of Health and Human Services. https://longtermcare.acl.gov/costs-how-to-pay/costs-of-care.html Retrieved December 3, 2019
David Levine. (July 10, 2019) How to Pay for Nursing Home Costs. https://health.usnews.com/best-nursing-homes/articles/how-to-pay-for-nursing-home-costs. Retrieved December 3, 2019
Maryalene LaPonsie. (March 22, 2017). 5 scary facts about nursing home costs (and what to do about them). https://clark.com/insurance/facts-about-nursing-home-costs/ Retrieved December 1, 2019
Victoria Sackett, AARP, (October 24, 2018). Nursing Home Costs Top $100,000 a Year, Survey: As charges skyrocket for long-term care facilities, increases in home-care costs are more moderate. https://www.aarp.org/caregiving/financial-legal/info-2018/nursing-home-costs-rising.html Retrieved December 3, 2019