From the December 2008 issue of Investment Advisor • Subscribe!

Nursing Home Costs Stay Level

But advisors should caution clients on some hidden costs

"This year, increases were very minimal," notes Sandy Timmermann, director of the MetLife Mature Market Institute, referring to nursing home costs found in the 2008 MetLife Market Survey of Nursing Home & Assisted Living Costs. Average rates for a private room in a nursing home for 2008--$212/day--remained essentially unchanged nationally from 2007. Semi-private rates increased 1.1%, from $189 daily or $68,985 annually, in 2007, to $191 daily, or $69,715 annually in 2008. Average assisted living rates increased by 2.1%, from $2,969 monthly, or $35,628 annually, in 2007, to $3,031 monthly, or $36,372 annually, in 2008.

When it comes to state-specific data, the study found that the highest daily rates for nursing homes are in Alaska, $577 for a private room and $566 for a semi-private room. In 2008, the non-metropolitan and non-suburban areas of Louisiana had the lowest daily rates for a private room in a nursing home, averaging $127 per day. The non-metropolitan and non-suburban areas of Minnesota and Oklahoma had the lowest semi-private room nursing home, averaging $121 per day. For assisted living communities, southern Maine had the highest average monthly base rate at $4,708 and North Dakota had the lowest average monthly base rate at $1,980.

The study also found that advertised base rates for assisted living may not comprise the total cost families will pay when additional charges, like those associated with providing additional assistance, are factored in. "What 'base rate' really means is something advisors may want to talk to their clients about," Timmermann says, since once they need assistance, they may be charged extra for medication management or to deliver meals to the room or to help that person get out of bed in the morning. These additional costs could average $386/month for assistance with instrumental activities of daily living, such as dressing and toileting.

Timmermann points out the three categories assisted living facilities usually fall into: 22% of assisted living facilities have a basic rate that includes five services or less; 59% have a standard rate, which is more expensive than the base and includes six to nine services; and 19% have even more inclusive services. According to the survey, assisted living communities in the basic category cost an average of $2,873, while those in the standard category have an average base cost of $2,985, a 3.9% increase. Communities in the inclusive category have an average base cost of $3,354, a 12.4% increase over "standard" and a 16.7% increase over "basic."

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