Long-term care: Why your location really matters

Location, location location: Not only is it key to the value of real estate, it’s also a big driver of the cost of long-term care.

A study of long-term care costs in the United States released this week shows that the cost of long-term services and support varies dramatically by location. For example, the national median cost of a private nursing home this year is $87,600 – but it’s $155,125 in Connecticut, $87,180 in Ohio and $57,487 in Oklahoma.

“The differences are driven by general demand and supply of labor, the cost of living and level of affluence in a particular region – and therefore the ability to pay for services,” says Robert Bua, vice president of Genworth, which released the annual Cost of Care survey. Genworth is the nation’s biggest underwriter of commercial long-term care insurance policies.

Paying for long-term care (LTC) is the big missing piece of the retirement health expense puzzle for most Americans. Medicare covers much of the non-LTC healthcare expenses retirees face; while it’s far from free, it smoothes spending on hospitalization, outpatient services and prescription medications.

But Medicare covers only 100 days of care in a skilled nursing facility. And fewer than 8 percent of Americans over 50 have purchased private long-term care insurance, according to LIMRA, the insurance industry consulting and research group. That leaves Medicaid, the nation’s largest funder of LTC. But covers only very low-income patients, or those who manage to spend down their assets to poverty levels.

The Genworth survey found that the cost of long-term care continues to rise at a faster rate than general inflation. Median costs of a private nursing home room rose at a 4.19 percent compound annual rate over the past five years, and assisted living facility prices rose at a 4.29 percent pace (to $42,000). By contrast, the Consumer Price Index (CPI-U) rose at an average rate of 1.6 percent from 2009 to 2013.

It’s impossible to predict what long-term care services you might need. But getting a handle on the cost of long-term support and services in your part of the country is at least a starting point in planning for what you might need. “It’s hard to predict, but the survey offers a way to understand the specific rates in your area and how fast the prices are rising,” Bua says. (The survey includes an interactive map that can be used to explore prices for specific services by state).