Where Does My Money Go When I Pay for a Nursing Home?

Nursing homes are expensive and becoming more so. A private room in a nursing home facility costs $297 per day on average nationwide, according to the 2021 Cost of Care Survey conducted by Genworth. A semi-private room carries a rate of $260 per day. As a nursing home resident or the responsible family member, what exactly are you paying for?

The majority of U.S. nursing home residents — somewhere between 65% and 70% — pay under with the Medicaid system, says Bob Lane, president and CEO of the American College of Health Care Administrators.

“But for private pay, room and board is the main thing,” Lane says.

Standard Nursing Home Costs

Your monthly bill won’t spell out most of these items, which are folded into the daily rate. However, standard costs, which are detailed on the admission agreement when a resident moves into a nursing home, typically include these basic care services:

Room with functional furniture. A bed, bedside table and dresser are basic furniture pieces, along with some closet space for the resident’s belongings.

Dietary services. Menu planning and meal preparation to meet the resident’s individual dietary needs and restrictions, with three daily meals, beverages and snacks all fall under room and board.

Personal care services and supervision. Certified nursing assistants provide day-to-day care such as helping residents with their hygiene, dressing, toileting and transferring or walking them as needed.

Nursing services. Licensed practical or licensed vocational nurses provide higher-level care such as monitoring vital signs, administering medications and wound care. Registered nurses develop residents’ treatment plans for identified health issues, and optimize their activities of daily living. They are responsible for advanced care such as starting intravenous infusions, monitoring blood glucose levels, giving oxygen, collaborating with physicians and supervising other nursing staff.

Activities. Recreational, spiritual and other types of group programs are standard nursing home activities.

Bedding and linens. Sheets, pillowcases, towels, washcloths and gowns are all provided.

Housekeeping. The residence provides room and facility cleaning and sanitation services.

Personal hygiene items. Nursing homes stock routine items such as hand soap, bath soap, shampoo, toothbrushes and toothpaste.

In-house laundry. Residents’ personal clothing items are laundered as needed.

Prescription drug administration. Medication management and administration are essential nursing home services.

Behind-the-scenes costs such as trash and lawn services are also built into the budget, Lane notes. Transportation services, often using facility-run vans or minivans, may be incorporated into the basic rate. However, transportation may be limited to certain purposes or destinations, like doctor’s office visits.

What’s considered a standard feature can vary among individual facilities or nursing home companies.

“After room and board, some of this is going to depend on the provider,” Lane says. “Some providers actually will build their room rate inclusive of supplies.”

For instance, he says, “common things that we all take for granted in terms of what we use on a daily basis,” such as facial tissues and toothbrushes, are often incorporated into the standard rate. Certain other supplies like incontinence briefs may also be included, he says.

However, other providers may apply a markup to supply costs charged by their vendors, Lane says. “It’s usually more prevalent with a proprietary provider,” he says. Proprietary means a for-profit provider. “Not-for-profit providers may not apply a markup. Then again, they might, simply because you obviously at least want to cover your costs, from a business perspective.”

[READ: Nursing Homes vs. Assisted Living.]

Special Services

Although many long-term care residents receive them, the following are typically considered extra or special services involving add-on costs:

— Dental or oral care beyond basic dental hygiene, like visits to the dentist for cleanings, fillings or other services.

Eye exams, hearing evaluations and podiatry services.

— Medical supplies like feeding tube catheters.

Prescription medications and some over-the-counter drugs.

— In-room cable TV or individual phone lines.

— Beauty salon or barber services.

— Physical therapy.

— Private duty nursing, in which the family hires a nurse to provide one-on-one care to a resident with special needs like frequent, complex wound care.

— Dry-cleaning.

Field trips or outings, such as concerts or shows, are offered in some long-term care facilities. “Generally, you’ll see this with higher-end properties that may have assisted or independent living,” Lane says. “If there are tickets associated with that, some communities will charge. Others will absorb that as part of the fees they get for room and board.”

[SEE: 24 Gift Ideas for Nursing Home Residents.]

Operating and Capital Costs

Another way to break down nursing home pricing is to consider the operating costs versus capital costs that are all typically passed on to residents. Operating costs are day-to-day expenses that a company sustains to keep the business running. Capital costs are major expenditures a company incurs for long-term benefit.

“Examples of operating costs include the cost of providing care such as nursing staff and supplies, medical staff, medical supplies, lab, pharmacy, therapeutic art staff and supplies, dining staff and food costs,” says Luz Liebeskind, chief financial officer for RiverSpring Living, the parent organization for the Hebrew Home at Riverdale, a nonprofit long-term care community located in Riverdale, New York.

“Other non-direct costs include, but are not limited to, security, building maintenance, housekeeping, finance, administration, information systems and human resources,” Liebeskind explains. “Capital costs include interest on mortgages, leases and rentals, and depreciation on buildings.”

Individual residents may have additional direct expenses for their care needs. “For rehabilitation patients, there are costs related to providing physical and occupational therapy,” Liebeskind notes.

Nursing home facilities themselves may have unique extra costs. “For a faith-based organization, add-on costs include clergy and additional costs of kosher food, for a kosher community like ours,” she says.

Cultural activities can factor in, as well. “We have additional quality of life programs that are not always available at every long-term care community,” Liebeskind says. “At the Hebrew Home of Riverdale, our patients and residents experience art lectures at our on-campus Derfner Judaica Museum, a robust art program and other activities.”

Climbing Costs

Over a single year, private room rates in nursing homes increased by about 2.4% on average nationwide, or to an average cost of more than $108,000 per year, according to the 2021 Genworth survey. Semi-private room rates increased by nearly 2% on average, to a yearly cost of $94,000. A private room only holds one resident, while a semi-private room is shared, often with a divider like a wide curtain between residents.

Climbing long-term care costs is not a new problem. A large study evaluated nursing home rates in eight states between 2005 and 2010. Yearly out-of-pocket costs increased substantially, for instance, a 30% hike in California during the overall study period, according to findings published in the April 2021 issue of Medical Care Research and Review.

“It’s been rising across the board and rising faster than the Consumer Price Index and also the Medical Care Price Index,” says lead study author Sean Huang, an associate professor in the department of health systems administration at Georgetown University. Released by the Bureau of Labor Statistics as part of the CPI, the MCPI excludes major payers such as Medicaid and can be used to focus on out-of-pocket expenses.

Location affects nursing home prices. For the final study year, Texas had the lowest out-of-pocket costs, whereas New York state costs were the highest.

COVID-19 and Inflation Impact

The COVID-19 pandemic helped escalate the cost of care in 2020 in several ways, a follow-up Genworth study concluded. Labor shortages, employment challenges and wage pressures, as well as supply and demand issues, all contributed to rising costs. And now, in late 2022, inflammation isn’t helping matters.

“Labor costs are the single highest component of any operating budget,” Lane says. Now, he says, providers are paying higher wages to try to keep staff positions filled. “When that happens, unfortunately, there’s an element of cost-shifting that has to occur. Ultimately, private-pay patients pay the brunt of that.”

Complying with regulatory changes such as infection-control guidelines from the Centers for Disease Control and Prevention also boosted costs. Personal protective equipment such as masks and gloves was another escalating expense for facilities. “With supply chain issues, this pandemic has wrought havoc on pricing for supplies for a lot of providers, too,” Lane says.

“There are additional costs related to PPE, which have increased during the pandemic — additional paper goods costs, among others,” Liebeskind also points out. “More importantly, we are experiencing increased costs due to inflation, notably in supplies and utility costs.”

[READ: Medicare vs. Medicaid: What Is the Difference?]

Cost Breakdowns

You receive a breakdown of costs as you make initial arrangements and go over the contract for long-term care.

“Typically, when you sign up to go into a facility, the director or financial person will sit down with you and go through everything that’s included and not included, and what the costs are for the stuff that’s not included,” says Shanna Tingom, a financial planner and co-founder of the investment firm Heritage Financial Strategies in Gilbert, Arizona. “Then you’ll get an invoice.”

You can’t assume that rates will remain the same indefinitely, particularly for an extended nursing home stay. “Typically on an annual basis, they’ll reevaluate if you need more services or not,” Tingom says. “Sometimes that happens as we age. Sometimes that happens as maybe somebody has a fall or an illness and they may need more care.”

It’s not uncommon for a resident’s care needs — and costs — to grow over time. “As a resident becomes more frail, costs increase to ensure the health, safety and well-being of the individual,” Liebeskind says. “Additional staff, costs for therapy, prescriptions and medical supplies are all impacted.”

Rate increases with increased care are to be expected. “They’re a business just like any other business,” Tingom says. “So, if they’re seeing that they’re providing more services than you’re paying for, they’re absolutely going to say: Hey, you know, we need to increase your service level.”

Make sure you understand how you’ll be paying those bills on your end. “Many people believe that long-term care is covered by Medicare,” Liebeskind says. “It is not. (Medicare) covers a limited number of rehabilitation days. If the person is below the poverty level, they may be eligible for Medicaid.”

Transparency

With nursing home costs disclosed on admission agreements, you shouldn’t face hidden costs or major unexpected charges with monthly invoices. “Things are so regulated from the standpoint of either state or federal laws in terms of the level of transparency, there really should be no surprises,” Lane says.

That said, there’s little room for bargaining on basic nursing home costs. “In terms of the negotiability, I don’t know that it’s really, truly an option,” he says. “Most providers’ margins are so thin that even if they wanted to, they probably wouldn’t have the ability to negotiate.”

[READ: How Much Does 24/7 In-Home Care Cost?]

Quality

Quality is a crucial factor when choosing a nursing home. You can locate facility possibilities and find inspection data by searching the U.S. News Best Nursing Homes rankings.

“Cost, of course, is a leading consideration,” Lane says. “But it’s about quality of care and peace of mind. For families that are looking at placement for a loved one, it’s not just looking at numbers.”

With COVID-19 restrictions easing, he says, it’s once again becoming possible to visit potential nursing home choices in person, sit down with administrators or nursing directors and have an in-depth conversation about what the facility offers.

“Before deciding on a long-term care community, visit the campus, ask questions, understand staffing ratios and programming levels,” Liebeskind says. “The answers will help you better understand how it truly takes a village to provide excellent care for older adults.”

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Where Does My Money Go When I Pay for a Nursing Home? originally appeared on usnews.com

Update 11/29/22: This story was previously published at an earlier date and has been updated with new information.

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