Closures and smaller cost increases at many long-term care facilities were brought on by the 2008-2009 recession, according to Newark, N.J.-based Prudential Financial Inc.'s bi-annual 2010 Long-Term Care Cost Study. The report includes consumer views that gauge sentiment regarding the cost, awareness, funding and future need for long-term care.
"Consumer misperceptions continue to exist about long-term care services and coverage options," says Malcolm Cheung, vice president of 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."
Since 2006, increases in long-term care costs have decelerated, but, according to Prudential's report, the compound annual growth rate averaged 6 percent from 2004 to 2010. During this time, the consumer price index grew by 2.5 percent, underlining the importance of selecting the proper inflation protection for long-term care insurance.
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The study also found a 13 percent growth in home health care since 2008. Mostly, this is because a 17 percent increase in costs for licensed practical nurses, though that represents only about one-quarter of home-service usage. For a home health aide or certified nursing assistant, the national average cost remained at $21 per hour.
The average annual cost for a room in an assisted-living facility rose 2 percent over the last two years, as opposed to the 13 percent increase over the prior two-year period. In 2010, the average rate for a private nursing home room is $247 daily – or $90,155 annually – representing a 14 percent increase since 2008.
Fewer than one in four note long-term care insurance as a potential financial source for any needed long-term care, and seven in 10 Americans stated concern about requiring extended care in the future.
"And with good reason," Cheung says. "The fact remains, over the next 20 years, baby boomers will greatly impact the demand for long-term care services."
The number of Americans age 65 and older will grow to 55 million in the next 10 years, a 35 percent increase, and that figure is projected to more than double by 2030, states the U.S. Census Bureau, 2010.
State-specific average costs for nursing homes, assisted-living facilities and home health care services are outlined in Prudential's Cost of Care Study. According to the study, the costs of long-term care services widely vary based on a range of factors, including geographic area, facility size and services. Alaska, Connecticut, Massachusetts, Hawaii and New Jersey have the most expensive nursing homes and assisted-living facilities, while Louisiana, Arkansas, Alabama, South Dakota and Mississippi are among the least expensive.
Although the report is available to consumers, Prudential also offers an interactive consumer cost of care mapping tool on its website for a more in-depth, state-specific cost.
"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," Cheung says.
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