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When people refer to “dying broke,” they typically are envisioning spending their retirement nest egg on creating experiences and memories for themselves, family, and friends. They usually aren’t talking about outliving their financial resources because of long-term health care costs.
Unfortunately, the second version of “dying broke” is the more likely reality, according to a series of articles in The New York Times in November 2023. The articles, a joint project of The Times and KFF Health News, explored the intricate, expensive, and often confusing web of the long-term care industry.
According to A Home For Mom, of more than 55.8 million adults in the U.S. aged 65 or older, 1.3 million live in nursing homes, representing 2.3% of the elderly population. An additional 818,800 reside in assisted living facilities. Assisted living centers serve those who do not need skilled nursing care but require assistance with daily tasks like dressing, bathing, and managing medications.
Assisted living facilities turn out to be quite profitable. A recent industry survey revealed that half of the operators in this business see returns of 20% or more than operating costs. That's much more profitable than most other health sectors.
Most assisted living facilities charge a base fee from around $4,500 a month for an individual to over $10,000 a month for a couple, then add charges for many services. It’s common to group additional services, like therapies and medication disbursement, into different payment tiers. Other facilities consider themselves all-inclusive, but still may have add-on fees that can increase a resident’s monthly bill by several hundred or even thousands of dollars.
Take dressing, for instance – fees may be charged for both helping someone dress in the morning and helping them undress at bedtime. Bathing is another nuanced area, with varying fees for full shower assistance or being present while a resident showers. Bathroom and incontinence care fees may vary for aid with various tasks like sitting, standing, wiping, and changing adult diapers.
Additional medical expenses that might catch you off guard include medication management (from reminders to administering), on-site pharmacy or doctor access, and fees related to treating temporary wounds or illnesses. Keep an eye out for hidden charges like blood pressure monitoring, blood glucose monitoring, and insulin injections, as they might be discreetly bundled into monthly "facility fees."
While some other countries seemingly keep a tight leash on out-of-pocket costs, citizens usually pay higher taxes to cover the “free” portion of long-term health care. Taxpayers in the U.S. pay lower overall taxes (as a percent of GDP) in exchange for letting the market operate more freely. This gives the appearance that the situation in the U.S. is worse, which is largely because most Americans have not funneled the savings from paying lower taxes into saving for their long-term care needs.
Even for those with financial resources, negotiating our long-term health care system is not easy. It's not just about the prices; the issues with long-term care run deep. Our aging population, exorbitant long-term insurance costs, confusing insurance plans, lack of sources or subsidies for home care, and a generally inefficient health sector are all contributing to the problem.
The economic costs of aging in the United States are real, and it's hitting the middle class hard. The escalating costs of long-term care, along with the failure of many Americans to save enough for their final years, pose a severe threat to the financial well-being of many seniors. With no long-term health care plan or funding in place, families are left scrambling to navigate a confusing and costly array of solutions, often depleting their wealth in the process.
Rick Kahler, MS, CFP®, CFT-I™, CeFT®, CCIM, is the founder of Kahler Financial Group, a Rapid City, SD-based fee-only Registered Investment Advisor.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
