Long-term care cost increases have slowed in recent years, but they started to speed up this year.
The average increase for six types of care rose 4.5% this year, according to CareScout, an arm of Richmond, Virginia-based Genworth Financial Inc.
The average rate of increase for 2017 is up from just 1.1% in 2016, and it’s up from a five-year average of 3%.
In 2016, changes in national median prices ranged from a decrease of 1.2%, for adult day care, to an increase of 2.6%, for homemakers, or aides who help people with tasks such as cooking and shopping.
This year, changes ranged from a 3% increase, for adult day care, to an increase of 6.2% for home health aide services.
A home health aide helps people with activities such as bathing, or transferring from a bed to a wheelchair.
The median national cost of the services of a home health aide is now $22 per hour.
CareScout bases the data in the report, which is available here, on a survey of 47,000 long-term care providers.
Long-Term Care Planning Strategies
Fifteen years ago, issuers of long-term care insurance typically encouraged clients to buy coverage with 5% compound annual inflation protection, or at least 5% simple inflation protection.
In recent years, low interest rates and high long-term care insurance claim rates have reduced insurers’ ability to offer policies with 5% inflation protection at an affordable price. The insurers that still offer new stand-alone long-term care insurance policies have been encouraging consumers to buy policies with 3% inflation protection.
The 4.5% increase in long-term care services costs for 2017 means that, for many long-term care insurance benefits users, increases in care costs may have outstripped growth in policy benefits for the first time in several years.
Genworth is using the long-term care cost report to draw consumers’ attention to the fact that Medicare does not pay for long-term care, and that Medicaid pays for nursing home care only for people who meet strict income limits.
Genworth is encouraging consumers to consider buying stand-alone long-term care insurance and single-premium immediate annuities.
— Read John Hancock’s best and worst cities for LTC costs on ThinkAdvisor.