December 10, 2019
Nursing Homes: Why They Cost So Much
One of retirees’ biggest fears is that they will have to go into a nursing home. This fear isn’t just psychological – it’s also financial.
Roughly half of older Americans will find themselves in a nursing home at some point, according to a 2015 estimate. These stays usually last months, but sometimes years, and the costs add up quickly for those who have to pay for them out of their own pockets.
At an average price of at least $225 per day for a semi-private room, a nursing home stay can put a big dent in retirees’ savings.
A new study in the journal Medical Care Research and Review on how much seniors pay out-of-pocket for facilities in eight states – California, Florida, Georgia, New York, Ohio, Oregon, Texas, and Vermont – found that prices across the board are rising at about two times the general inflation rate.
Some of the fastest price increases are in California and Oregon – 5 percent to 6 percent a year. There is also a large disparity between high- and low-cost states: the price tag for a typical New York nursing home is more than double the cost in Texas.
Yet little is understood about what’s behind the disparities. In this study, conducted for the Retirement Research Consortium, the researchers begin to uncover some of the things that determine whether an individual happens to live in a high-cost state.
One factor affecting the prices is the competitiveness of each nursing home market, which works in ways one would expect. When a small number of operators dominate in local markets, they can charge more. The results also suggest that prices are higher in markets where limited competition is combined with a high demand for beds.
Another important factor is who owns the nursing homes, and each state has a different mix of private and non-profit chains and smaller operators. For-profit companies own about 70 percent of U.S. nursing homes. More than half of the for-profit facilities are chains, and these chains charge the lowest prices.
The non-profit chains are the most expensive. Their prices, adjusted for staffing levels, location and other facility-level factors, are about 6.6 percent more than the for-profit chains – or about $4,160 more annually – the study found. …Learn More