The term “long-term care” includes many different types of medical and non-medical services. These services help aging and ill people manage their personal and health needs. The level of care and costs associated with that care can vary widely.
Many people underestimate the need for long-term care when crafting their financial plan. But the fact is, nearly 7 in 10 people will need some form of long-term care during their life. As you might expect, these services can be expensive, and the prices are rising rapidly. But with careful planning, and the help of an experienced financial advisor, you can be prepared for long-term care costs if the need arises.
What is long-term care and who needs it?
Long-term care refers to ongoing care for those who need assistance performing daily living tasks. Long-term care needs can be temporary, such as rehabilitation services after surgery, or permanent, such as ongoing care needed for Alzheimer’s disease. For some, long-term care needs develop slowly throughout the aging process. For others, a sudden stroke or heart attack can bring long-term care needs unexpectedly.
Just as needs vary widely between people, long-term care services vary. Most commonly, these services are divided into residential care and in-home care. Long-term care can be provided by a health care professional, non-medical personnel, or a combination of the two.
An average of 69% of people need some form of long-term care during their life and will use these services for an average of 3 years. Often, long-term care services aren’t covered by Medicare, so most individuals need to factor these costs into their financial plan.
Long-Term Care Costs in A Residential Setting
On average, 37% of people receive long term care in a residential setting during their lifetime and this type of care is needed for an average of 1 year. There are two main types of residential long-term care facilities — assisted living and skilled nursing.
Assisted Living
Assisted living facilities are typically for people who need help with daily care, but not ongoing medical treatment. In most cases, assisted living homes are apartment style where each resident has their own room or suite. Care in these facilities is typically limited to helping with daily living tasks like meals, personal care, and medication management. On average, 13% of people use this type of long-term care for an average of 1 year.
Nationwide, the annual cost for an assisted living home in 2021 was $54,000. While newer data is not available, the cost in 2023 can be estimated using inflation data. PCE inflation increased at an annual rate of 5.0% in 2022 and is projected to increase at an annual rate of 3.3% in 2023. Using these figures, the 2023 national median cost of an assisted living home is projected to be about $58,571.
In Alabama, assisted living costs are lower than the national average. Using the methodology above, the estimated cost for residential long-term care in an assisted living home is approximately $45,588 this year.
Skilled Nursing
Skilled nursing facilities, also called nursing homes, provide medical care in addition to assistance with daily living tasks. Some people stay in a nursing home after a hospital stay for rehabilitation services, but many residents live there permanently due to ongoing physical or mental conditions. About 35% of people will need this type of care during their lifetime and receive care for an average of 1 year.
Based on past costs and inflation data, the national median cost for a semi-private room in a nursing home could rise to around $102,933 in 2023 and the cost for a private room could increase to around $117,581. In Alabama, the cost for a semi-private room is projected to grow to about $86,900 while the cost for a private room is expected to reach approximately $91,452 when estimated using the same methodology.
Costs for Long-term Care Services at Home
Many older adults need assistance to complete their daily living tasks but do not require the constant oversight that is provided by residential facilities. So, there are several types of care that can be provided in-home. These services are widely used and 65% of people use some form of in-home care during their lifetime. On average, these services are needed for 2 years.
Unpaid care provided by a friend or family member is the most common type of at-home long-term care with 59% of people receiving this type of care for an average of 1 year. For those that don’t have family or friends nearby, paid services like home health aides and homemaker services are an alternative. On average, 42% of people use paid services to provide long-term care at home and typically use these services for less than 1 year.
Home Health Aide
Home health aides provide “hands-on” personal assistance with activities such as bathing, dressing, and eating. The use of a home health aide is common after a surgery or injury that reduces mobility but can also be used by aging adults who have trouble completing these daily tasks alone.
In the past several years, the rates for in-home long-term care services skyrocketed amid increased demand and higher costs associated with COVID-19 safety measures. For 2023, costs are expected to continue to rise to a national average cost of about $67,005. When estimated using PCE Inflation as detailed above – Alabama costs are projected to increase to around $50,130 this year.
Homemaker Services
Homemaker services provide “hands-off” help with things like cooking, cleaning, and running errands. These services are often used by the elderly who have trouble completing these tasks without assistance. When estimated again using PCE Inflation, the cost of homemaker services is projected to increase to around $64,524 in 2023. In Alabama, prices for these services are projected to rise to approximately $49,634.
With long-term care costs on the rise, it is more important than ever to include these costs in your financial plan. An experienced financial advisor, like those at Meld Financial, can work with you to estimate the cost of care and find solutions for paying for long-term care should the need arise.
Planning for Long-Term Care Costs with Financial Fingerprint™ by Meld Financial
There are many options when it comes to planning for long-term care costs and an experienced financial advisor is crucial to determining how these options fit into your financial plan. At Meld Financial, our team of tax, legal, and investment professionals can help you forecast long-term care costs and determine which funding solution meets your needs. Through our decades of helping clients grow and maintain their wealth, the Meld team has developed a proprietary wealth management process called Financial Fingerprint™. This comprehensive financial plan is quick to assemble, easy to understand, and simple to modify as your circumstances change. Best of all, it accounts for potential threats to your financial future, including long-term care costs. To get started with Financial Fingerprint™, contact the team at Meld Financial today.
