The 2008-2009 recession led to smaller cost increases at many long-term care facilities and forced some to close altogether, according to a study released today by Prudential Financial Inc. (NYSE). The bi-annual report, 2010 Long-Term Care Cost Study, measures trends in costs associated with the major forms of long-term care services. And, for the first time, the research includes consumer views that measure sentiment around the cost of services and levels of awareness and concern about the future need for long-term care and how to fund it.
“While consumers understand the importance of planning for their financial future, they need to learn more about long-term care services and the role of long-term care insurance in retirement planning”
"Consumer misperceptions continue to exist about long-term care services and coverage options," said Malcolm Cheung, vice president, Prudential Long-term Care Insurance. "Of those surveyed 25 percent said they had no idea what a day in a nursing home costs and more than a third continue to believe private health insurance and Medicare will cover their future extended care costs."
Increases in long-term care costs slowed somewhat since 2006. However, from 2004 to 2010 the compound annual growth rate averaged six percent according to Prudential's report. By comparison, the consumer price index increased at a rate of just 2.5 percent during this same period, emphasizing the importance of choosing the appropriate type of inflation protection when purchasing long-term care insurance.
The study found that home health care costs grew by 13 percent since 2008 largely due to a 17 percent increase in costs to $54 per hour for Licensed Practical Nurses, which represents only about one-quarter of home service usage. The national average cost for a Home Health Aide or Certified Nursing Assistant remained flat at $21 per hour. Assisted living facilities saw the smallest increase with the average annual cost for a room rising only 2 percent in the last 2 years, compared to a 13 percent increase in the prior two-year period. The average daily cost for a private nursing home room in 2010 is $247, or $90,155 annually, a 14 percent increase since 2008.
At the same time, fewer than 1 in 4 mention long-term care insurance as a potential source of paying for any long-term care they may require. Seven in 10 Americans expressed concern about needing extended care in the future. "And with good reason," Cheung said. "The fact remains, over the next 20 years, baby boomers will greatly impact the demand for long-term care services." In the next 10 years, the number of Americans age 65 and older will increase by 35 percent to 55 million. And by 2030 that number will more than double according to the U.S. Census Bureau, 2010.
Prudential's Cost of Care study provides State-specific average costs associated with nursing homes, assisted living facilities, and home health care services. The study results show the costs of long-term care services vary widely based on a variety of factors including geographic area, facility size and services. People who live in Alaska, Connecticut, Massachusetts, Hawaii and New Jersey can expect to pay the most for nursing homes and assisted living facilities, while Louisiana, Arkansas, Alabama, South Dakota and Mississippi remain among the least expensive.
In addition to the report being available to consumers, Prudential offers an interactive consumer cost of care mapping tool on its website, designed to provide more in-depth State-specific cost detail aimed at arming consumers with essential facts to help them make better financial decisions. "While consumers understand the importance of planning for their financial future, they need to learn more about long-term care services and the role of long-term care insurance in retirement planning," added Cheung.
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