If you’ve shopped for groceries recently, you may have noticed higher prices. USDA forecasts show grocery costs are expected to rise about 3 percent this year. Beef leads the increase, projected to be up roughly 8 percent compared with 2019, while pork is up about 4.5 percent and poultry around 3 percent.
Such increases are notable — this is among the largest annual rises in grocery costs since 2011 — but gradual price growth is typical over time. Workers often expect cost-of-living adjustments in pay, and retirees anticipate Social Security increases (the 2020 cost-of-living adjustment was 1.6 percent).
One expense people frequently overlook, though, is the steady rise in long-term care and custodial care costs. Many underestimate how much care can cost and are surprised when they see the actual figures.
The ever-rising cost of care
The future cost of care can be striking when you add it up. Genworth, a leading long-term care insurance provider, reported the median annual cost of a private nursing-home room in the U.S. in 2019 was $102,200. Regional daily rates varied widely, from about $185 per day in some areas to nearly $1,000 per day in others. In a post-pandemic environment, demand for private rooms may increase, but those rooms carry a higher price.
For assisted living, Genworth calculated a median annual cost of $48,612 in 2019. Monthly assisted living rates also vary significantly by location, from under $3,000 in some states to more than $11,000 in higher-cost areas.
These figures reflect costs today — but care prices typically rise each year, just like groceries. What will assisted living or nursing care cost five, 10, or 15 years from now?
Over the past 15 years, U.S. facility-based and in-home care services have increased annually. Home care costs rose about 2.06 percent per year on average, adding roughly $892 a year. Assisted living costs increased about 3.64 percent per year on average, about $1,321 more per year. Private nursing-home room costs rose roughly 3.07 percent annually, an average increase of $2,468 per year. These increases have generally outpaced U.S. inflation, which has averaged near 2.1 percent per recent federal reports.
>> Related: Examining Key Figures on Long-Term Care Insurance
Won’t Medicare cover it?
Many people assume Medicare will cover long-term care, but Medicare coverage is limited. Medicare Part A may pay for medically necessary skilled nursing care, but only for a short period: up to 20 days at full coverage and then a reduced share from days 21 through 100; after day 100, the resident is responsible for all nursing-home costs.
Medicare coverage for skilled nursing care also requires specific conditions:
- Care must be provided in a Medicare-certified facility. Medically necessary home health services from a Medicare-certified agency may also qualify.
- The beneficiary must have had an inpatient hospital stay of at least three days before admission to a skilled nursing facility.
- Admission to the skilled nursing facility must occur within 30 days of the qualifying hospital stay.
- A physician must certify that daily skilled nursing care or rehabilitation is necessary.
If care needs fall outside these conditions, costs are typically paid out-of-pocket. Current national averages show semi-private skilled nursing care around $247 per day and private rooms about $280 per day, and those rates increase annually depending on the level of service.
Not every skilled nursing facility accepts Medicare; some are private-pay only, meaning residents must cover full costs from day one.
>> Related: Long Term Care: How Much Does Medicare Actually Cover?
How a CCRC may save you money
Given the high costs and Medicare limitations, some people choose a continuing care retirement community (CCRC), also called a life plan community, as a potentially more economical option. While CCRCs often require a substantial entry fee and contract terms vary, the lifetime cost of care at a CCRC can, in some cases, be lower than paying for home-based care over many years. In addition, the social and wellness benefits of living in a CCRC may reduce future care needs for some residents.
CCRC residency contracts differ and those differences affect future care costs. A “lifecare” contract is an all-inclusive model: residents generally pay a steady monthly fee and, if they later require skilled nursing care, their monthly payment typically remains the same. In such cases, Medicare may reimburse the CCRC for eligible services if the facility is Medicare-certified. When Medicare reimbursement ends, the CCRC often absorbs the difference between actual care costs and the resident’s unchanged fee.
Other CCRCs use a fee-for-service model, where monthly fees increase when care is needed. Some offer modified fee-for-service arrangements that reduce financial impact — for example, by providing a set number of care days at no extra charge or applying a discount to care services. Under those models, Medicare reimbursement for qualifying skilled care can offset costs for up to 100 days if the community’s healthcare center is Medicare-certified.
>> Related: A Primer on CCRC Residency Contracts
Calculating your future cost of care
No one can predict with certainty whether or when they’ll need long-term care, and it’s natural to avoid thinking about future health decline. Still, preparing for possible care needs reduces financial and emotional stress. Understanding current costs, expected inflation in care services, and how Medicare and CCRCs work can help you plan.
Tools such as cost-of-care calculators can estimate likely future expenses in your area and help you explore options for financing care, from savings and insurance to community-based solutions. Knowing your likely cost scenarios allows you and your family to make informed decisions well before care becomes necessary.