There are more than 60,000 assisted living and nursing home properties throughout the United States. More than 2,000,000 people reside in these properties, but throughout the last 10 years, the differences between assisted living and skilled nursing have become less distinct. There are a number of contributing factors to consider: pressure on Medicare and Medicaid budgets, private pay services such as Alzheimer's care, personal tastes of the aging baby boomers, and the economics of the facilities themselves.
Assisted living facilities have increased the level of service and care provided to be more competitive, and nursing homes have added private pay services and higher end living arrangements to be more competitive, as well. The baby boomers are driving much of this evolution, because they are a more affluent cohort than generations past, and their lifestyle expectations are very high.
Released in 2009, the annual MetLife Mature Markets study highlighted the continuing increase in the costs of senior housing and care. The national average cost of staying in a semi-private room in a nursing home grew from $189 per day ($68,985 annually) in 2007 to $191 per day ($69,715 annually) in 2008. The national average cost of living in an assisted living facility grew from $2,969 per month ($35,628 annually) in 2007 to $3,031 per month ($36,372 annually) in 2008.
As the growing population of baby boomers and seniors hits in concert with a shrinking economy, the pressure on the federal budget to support entitlement programs such as Social Security and Medicare and on state budgets to fund Medicaid programs is creating push back on citizens to carry more of the load.
Medicaid pays the vast majority of costs associated with the almost 1.5 million people receiving housing and long term care in skilled nursing facilities. Medicaid is now moving in the direction of operating more like health insurance, and by charging premiums, will deflect a portion of the costs back on the individual. And by charging higher co-pays, they hope to motivate people to be more cost conscious when spending Medicaid dollars. Each state runs its own Medicaid program and will have discretion to set premium and co-pay amounts as they wish.
A report tracking Medicaid spending going back over the last seven years showed that Medicaid underfunded payments for services to all patients by $14.17 every day in 2009. Projections are that this alarming underfunding trend will get worse in 2010 and 2011. The economic crisis has robbed state budgets of funds available to support Medicaid funded programs and as a result, there was a national deficit of almost $5 billion.
Medicaid funds at least two-thirds of all spending for nursing home care. Spending shortfalls of this magnitude threaten the ability of nursing homes to offer the highest levels of care for the most vulnerable populations. Frustratingly for nursing homes and those in their care, state governments were given money in 2009 via the American Recovery and Reinvestment Act to make up this deficit. But guess what? Governments diverted the money away from providing the health care it was intended, and instead used the money to shore up their own budget deficits.
My readers know that I strive to bring awareness to the unavoidable trend of reducing the amounts of money that are available for Medicare and Medicaid. And why is that? Because we are now in the throes of an explosion of baby boomers who are reaching retirement age at the same time that our country's economy is under siege and entering unfamiliar territory. Washington, D.C. and 50 state capitals have no choice but to figure out how to make do with less.
They have two tools to work with:
- Make it harder for people to qualify for Medicare and Medicaid
- Reduce what is available for those who do qualify
What tools do seniors and their families have to work with?
People need to arm themselves with information about how the system works and what kind of funding options (and limitations) they have to work with. And, they need to stop waiting until the last minute to plan for their inevitable time in long term care. In one form or another, (home- or facility-based) as people age and/or become frail, they will need someone to help care for them. That care will cost money, and that money has to come from somewhere. As the government makes it harder and harder to access funding, people need to prepare to bear much of the financial burden on their own. To ensure quality of life and dignity when the time for long term care arrives, people must make the effort today to understand what kind of financial options are out there, such as the VA benefit, life insurance settlements, credit programs, reverse mortgages, long term care insurance and other sources of private funding.
It is important that people understand these early warning signs of what is to come. Federal and state budgets can only accommodate so much, and when dollars are shrinking at the same time that the population is growing, it becomes pretty simple math to see that something has to give. If history is our guide, then it will be the individual who ends up giving the most. For people to come even close to meeting their expectations for a high level of senior housing and care, it will require a firm grasp of the various options available -- and how to pay for it. Now is the time to prepare by understanding the funding options that are available to help cover these costs as they become more and more the responsibility of the individual.
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