ElderWeb

by Karen Stevenson Brown, CPA, CMA

How has the source of payment for nursing home services changed over the years?  I've collected statistics which show the increasing role of Medicaid (now covering 48% of all costs) and Medicare (covering 12%), and the resulting decline in the portion paid out of pocket from 1960 to 1997. The percentage paid by insurance is creeping up, but is still only 5%. Don't relax just yet, though. Over 30% of the cost is still paid out-of-pocket! 

Aggregate Nursing Home Expenditures
(Millions of Dollars)

Source: Health Care Financing Administration, Office of the Actuary: National Health Statistics Group

See the supporting data at http://www.hcfa.gov/stats/nhe-oact/nhe.htm

When planning for nursing home costs, it helps to know what they charge! Although many people are using $50,000 a year as an estimate of current Nursing Home charges, recent data suggests the average may now be nearing $60,000 a year.

Many of the national averages for nursing home charges combine charges for Medicare or Medicaid along with the amounts charged to Private Pay residents (those who are paying for their stay out of their own funds or using private insurance.) However, many facilities charge Private Pay residents a higher rate than Medicaid residents to offset the poor reimbursement rate they get for those Medicaid residents. Since the vast majority of people in nursing homes are covered under Medicaid, "average" charges understate the amount that is charged to people whose care is not covered by that program.

The national averages are also badly out of date. Inflation rates for nursing home charges far exceed the average increase in the consumer price index, so nursing home charges must be inflated at those higher rates to estimate what current (and future) charges will be.

In addition, there is wide disparity in nursing home charges by region, with the Northeast and West showing significantly higher charges than in the Midwest and South. Note that the charges in the West are skewed by very high charges in Alaska (averaging nearly $100,000/year in 2001) and Hawaii ($86,000/year for skilled care in December of 2000).

The following table summarizes the most current information available from the CDC for rates charged to residents whose care is NOT covered by Medicare or Medicaid. I have used the historical rate of inflation to estimate charges for the year 2002.

Private Pay Nursing Home Charges
By Year and Region

* 2002 charges estimated using 1999 charges increased by annualized rate of change for the 1995-1999 time period.

** Consumer Price Index (CPI) increase for 1975-1999 used instead of 1977-1999 period

Source: Health, United States, 2001, Department of Health and Human Services CDC, compiled by ElderWeb (www.elderweb.com) from data available from http://www.cdc.gov/nchs/hus.htm