Archive for the ‘Alzheimer’s’ Category

EXECUTIVE SUMMARY

Most seniors and their families see the monthly cost of a senior housing facility as much higher than the monthly cost of living at home with family care, or even with part-time or full-time home healthcare.   But the math that most seniors and families use to make this comparison assumes no implied cost for occupying a home without a mortgage, much less paid care than is provided in a seniors housing facility and places no value on the companionship and social interaction that a seniors housing community can provide.

This analysis, using data from a variety of sources, attempts to make a fair apples-to-apples comparison, before and after taxes, of the cost for a senior living at-home without care, living at-home with a modest amount of paid care and living in an independent living, assisted living or memory care facility.

The chart below shows the comparison on a pre-tax basis of living at home with a modest level of care to the cost of various types of seniors housing communities.   Bottom Line – The cost of living in a $150,000 home with even a modest level of home healthcare can easily exceed the cost of an independent living community and approaches the cost of assisted living.  In addition, a senior living at home with part-time care does not get the companionship and social interaction that a seniors housing community can provide and which many studies show are beneficial for a senior’s mental acuity and well being.

Please read below for details and I welcome your comments and questions.

 

THE COST OF A SENIOR HOUSING COMMUNITY

The cost of various seniors housing settings is easy for seniors and their families to see because most facilities charge a monthly fee for housing and care.   The average monthly cost for this care according to a recent survey by the National Investment Center for the Senior Housing and Care Industry (NIC) is as follows:

  • Independent Living – $3,076 per month
  • Assisted Living – $4,722 per month
  • Memory Care – $6,082 per month

To these costs, we need to add some additional expenses for a senior living in a seniors housing community for social and entertainment activities, transportation and non-housing living expenses.   I have estimated these at half the estimated cost of someone living at home based on data from the “A Place for Mom.com” website, at a total of $475 per month.  I assume half the cost of a senior living at home for someone living in seniors housing because many of these services are provided in a typical seniors housing facility and are included in the monthly rate. I add another $183 per month for a senior living in a seniors housing community for utilities, cable television, wifi and phone and renters insurance. Adding a combined $658 per month for things like phone, cable TV, some outside meals, transportation and other living expenses to the monthly fee for seniors housing communities brings the total monthly cost for living in senior housing rounded to the nearest $100 to:

  • Independent Living – $3,700 per month
  • Assisted Living – $5,400 per month
  • Memory Care – $6,700 per month

 

AT HOME LIVING AND HOME OPERATING COSTS

When the total monthly cost for senior housing and care at the above settings are compared to the out-of-pocket costs for a senior living in a $150,000 home without a mortgage they certainly appear formidable.     A Place for Mom estimates the monthly out-of-pocket cost for a average senior living at home (in a home we assume is worth about $150,000) without a mortgage to be approximately $2,400, broken down as follows.

Maintenance costs $272
Utilities including phone and cable $265
Property Taxes $149
Property Insurance $78
Three meals per day $494
Housekeeping services $118
Emergency alarm system $50
Transportation $715
Social and entertainment $235

It is this $2,400 figure (or something lower because the senior in question has curtailed her social, entertainment and transportation expenses) that most seniors and their families compare to the $3,700 to $6,700 monthly cost of facility-based senior housing and care.   Therefore, seniors and their families generally see facility-based care as 50% to 275% more expensive than having a senior live at home.

But the above comparison ignores the value of the house in which a senior is living and ignores the cost of caregiving and the socialization benefits that a senior would receive if she were living in a seniors housing facility.   Let’s deal with each of these separately.

 

ESTIMATED HOUSING COSTS FOR $150,000 HOME

To account for the value of the home itself, I estimate implied rent (essentially an estimate of the amount you could earn from renting the house) using a 7% cap rate on the assumed $150,000 value of the home, at $875 per month ($150,000 x .07 / 12), which seems very modest for many U.S. housing markets.

When you combine the above monthly costs for home maintenance, taxes and operation and living expenses of $2,400 per month with the implied rent, we get an estimated monthly housing and living cost for a senior living in a $150,000 home of $3,275 (approximately $2,400 for living and home operational expenses, plus $875 in implied rent).

From the above analysis you can see that the cost of living expenses, home maintenance and operation and implied rent/housing costs for a senior living on one’s own $150,000 home, calculated in what I believe is a conservative fashion, is nearly 90% of the average cost of a senior living in an independent living facility.   And in the independent living facility the senior is getting much more interaction with other people, much more socialization and mental stimulation than most seniors get when living at home alone.

 

ESTIMATED HOUSING COSTS FOR $500,000 CONDOMINIUM

Doing the same math for a senior living in a $500,000 condominium yields estimated monthly living and home operating expenses of $4,449 broken down as follows:

Condo Fees $2,000
Maintenance costs
Utilities including phone and cable $165
Property Taxes $542
Property Insurance $130
Three meals per day $494
Housekeeping services $118
Emergency alarm system $50
Transportation $715
Social and entertainment $235

The implied rent calculation for a $500,000 condo is $2,917 per month ($500,000 x 7% / 12). Combining monthly living and home operating expenses with the implied rent for a $500,000 condo indicates a total monthly cost of living at home, including implied rent, without care at approximately $7,400.

When the above figure is compared to the cost of seniors housing, you can see that the estimated monthly cost of a senior living in a $500,000 condo is almost twice the cost of independent living and 36% higher than the cost of assisted living. You can argue that comparing the cost of a $500,000 condo with the average cost of seniors housing is an unfair comparison because these facilities would cost more in an expensive real estate market. But I believe the calculation on a $500,000 condo is fair for the Baltimore market, where I Iive, and I believe it is fair to say that when a true apples-to-apples comparison of housing, home operation and living costs for senior is made to the cost of living in a seniors housing facility, the difference is smaller than most seniors and families realize before even taking into account the cost of care.

 

HOME CARE COSTS

From the above analysis, we see that the cost of a senior remaining at home is less than the cost of any type of seniors housing community, even independent living, for a senior in a modest $150,000 home.   However, as soon as any degree of paid home healthcare is provided the cost advantages of living at home disappear.

According to A Place For Mom and other surveys conducted by insurance companies offering long term care insurance, the cost of in-home care ranges from $14 – $24 per hour.   Certainly at the lower end of this range we are talking about a companion or an aid, not a trained nursing. If you assume only four hours of care per day and only five days per week with family providing care on weekend, the monthly cost of this much home healthcare would range from $1,120 ($14 x 4 hours x 5 days x 4 weeks) to $1,920 per month ($24 x 4 hours x 5 days x 4 weeks).   If we use the average of these two figures, the monthly cost for four hours of home healthcare five days a week is $1,520.

When you add the cost of four hours of home care during the week to the cost of housing noted above, the monthly cost of housing plus a modest level of home health would be approximately:

$150,000 Home $4,800
$500,000 Condo $8,900

No cost is assumed for family care on weekends.

As the chart at the beginning of this post indicates, as soon as a modest level of home care, in this case four hours per day five days a week, is added to the cost of a home, home operation and living expenses, the cost of living at home with home care, even for a modestly priced home, easily exceeds the cost of independent living and is nearly 90% of the cost of an assisted living facility.

 

TAX CONSIDERATIONS

In general terms, healthcare costs exceeding 7.5% of income of a senior’s income are deductible. This includes long term care costs if the senior is chronically ill and is is being cared for pursuant to a plan of care prescribed by a licensed health care practitioner.

If a family member younger than age 65 is paying for care, healthcare costs exceeding 10% of the income of the family member paying for care are deductible.   This can apply to home care prescribed by a licensed health care practitioner but not a senior’s housing costs while living at home.

In a seniors housing facility the cost of healthcare provided in assisted living or a memory care facility that exceeds 7.5% of income may be deductible if required by a senior’s medical condition and it is possible that the full cost of facility-based care including housing component may be deductible if living in such a facility is considered essential for medical reasons.   See IRS Publication 502 https://www.irs.gov/publications/p502/ar02.html for more information and consult with an accounting professional for more complete information.

 

AVAILABILITY OF GOVERNMENT ASSISTANCE

While many people believe it does, Medicare does not pay for long-term custodial care at home or in a seniors housing facility.   It may pay for short-term home health, therapy or nursing care at-home or in a facility if is prescribed by a physician in response to a particular medical need.

Medicaid will pay for long-term custodial care in skilled nursing facility but only after all other resources are exhausted.   Some states have waiver programs that allow Medicaid to be used for assisted living and memory care or at-home community-based care, but as is the case with nursing home care, Medicaid will pay only after all other resources are exhausted. In addition, the last proposed Republican repeal and replace of the Affordable Care Act included significant cuts to Medicaid that could potentially reduce the availability of Medicaid funds for long term care for seniors.

Veteran’s benefits include increased Veteran’s Aids and Attendance Pensions payment for care in a seniors housing or long term care facility under certain circumstances and seniors who qualify for Veteran’s benefits should investigate this option.

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Posted in Alzheimer's, Dementia, Finance, Paying For Care, Senior Housing & Care | 7 Comments »

The Cost of Care

Raw Cost of Care

The chart below shows the average monthly cost of care for skilled nursing (nursing home), memory care (dementia), assisted living and independent living facilities in the Baltimore/Washington region for 2015.    It also shows the cost for 24 hour / 7 day a week home health aide care and 24/7 home health aide care supplemented by 7 hours each week of registered nursing (RN) and licensed practical nursing (LPN) care in an attempt to replicate the level of care an individual might receive in an assisted living or skilled nursing facility.  cost-of-care

The monthly cost in 2015 of facility-based care in the Baltimore/Washington region ranges from $2,912 in an independent living facility to $5,659 in a one bedroom unit in an assisted living facility to $6,234 in a memory care facility, and $9,990 to $11,270 for care in a skilled nursing facility (nursing home) in either a semi-private or private room.   For a resident needing assistance with three or more activities of daily living (bathing, transferring, etc.), or with any significant degree of dementia, an independently living facility would probably not provide adequate care without supplemental home healthcare, so the effective range for the monthly cost of care for a senior needing a moderate to significant level of assistance in a specialized seniors housing and care facility in the Baltimore/Washington region in 2015 was $5,659 to $11,270.

To see description of the various types of senior housing and care facilities see my page Senior Housing Options http://wp.me/P64zBK-w.

Home health aides cost $21.73 per hour in 2015, and would cost $14,603 monthly if provided on a 24/7 basis assuming no differential for night shifts.   A licensed practical nurse was $53.94 per hour and a registered nursing was $77.88 per hour.   In the above example, I assumed an hour a day of both LPN and RN care in addition to 24/7 home health aide care to estimate the monthly cost of care equivalent to that delivered in a skilled nursing facility to be approximately $18,294 per month.   Many families care for seniors with a combination of care by family members supplemented with limited time by home health aides or other paid caregivers.   While this type of arrangement can result in lower cost than facility-based care, it is clear that the cost to provide 24/7 aid and nursing care at home far exceeds the cost of obtaining such care in an assisted living, memory care or skilled nursing facility.    Even when less than 24/7 paid care is provided the cost of facility-based vs. home care is often closer than families expect once the cost of utilies,  home upkeep and forgone rent or sales proceeds are considered.

The other big advantage to facility-based care over 24/7 home care, even if you can afford it, that I believe many families overlook, is socialization.   Seniors being treated at home, even by the most dedicated family caregivers and aides, spend a lot of time isolated from human interaction.   At well-run senior housing and care facilities, interaction among the residents and between residents a diverse group of staff provide more interpersonal and intellectual interaction and stimulation than can be achieved at home, which can be very important for a seniors’ mental health and emotional well being.

Planning For The Future Cost of Care

If the raw cost of care and learning that the government will not help you pay for it (See prior post “The Government Will Not Pay For You Long Term Care”) are not sobering enough, seniors and families trying to plan for long term care need to understand the probability of needing such care, the likely duration of such care, and its future cost.   I hope to explore these issues more fully in a future post on long term care insurance and other financing options.  But to illustrate the future cost of care for planning purposes here, I have assumed an average length of stay (LOS) for skilled nursing and assisted living  care of 24 month, 36 months in memory care and 39 months in independent living.  I have then assumed 2.5% inflation for 35 years because the average entry age in to an assisted living or skilled nursing facility is about 85 and the time many people start seriously considering long term care insurance is age 50.

future-cost-of-care

In the table above, the average monthly costs for 2015 in the Baltimore/Washington Region are mutiplied by an assumed LOS in months to get the cost for an expected episode of care.    The future value of this expected episode of care is then calculated for 2050 assuming you are thinking about this today at age 50 and planning for costs when you are 85 and are more likely to enter an assisted living or skilled nursing facility.   The LOS assumed above are averages and at two years probably a bit high for long-stay custodial skilled nursing care.  The average LOS are about right for assisted living and independent living based on actual turnover rates in buildings today.    I did not find good data on memory care facility LOS but it is widely recognized to be higher than assisted living because some residents enter at younger ages with early onset Alzheimers and are in better physical condition.   When planning for an individual’s need to finance long term care it may be appropriate to plan for longer or shorter lengths of stays and look at the probabities of  these  but I believe  these averages are useful to illustrate the order of magnitude of possible future long term care costs.

I assume 2.5% inflation to estimate the future cost of long term care.   The 2.5% inflation factor is about where costs have been increasing in recent years but with increasing wage pressure and inflation expectations higher now that Donald Trump is President-elect, other higher inflation assumptions may be appropriate.

The bottom line is that a 50 year old today might reasonably plan for between $300,000 and $600,000 of long term care costs (an average of $516,483 for AL through private room skilled nursing) and expected to spend this amount over a two – three year period beginning around 2050.

Technical Notes

New York Life, which is a long term care insurance provider affiliated with AARP, has an online cost of care calculator that is updated annually.   New York Life’s 2015 Cost of Care Survey was designed and implemented by Long-Term Care Group (LTCG), the nation’s leader in long-term care administration services. Each year LTCG surveys thousands of Skilled Nursing Home, Home Health Care and Assisted Living Facility providers to collect cost of care data. The cost of care averages are calculated from over 30,000 different providers at the national, state and metropolitan statistical area level.   Other cost of care calculators, including one from Genworth Financial, are also available online.

The figures above are for the Washington / Baltimore Region and are somewhat higher than the national average.   I supplemented and verified the LTCG survey data with information from the National Investment Center for the Seniors Housing and Care Industry’s NIC-MAP database, which surveys seniors housing and nursing care properties on a quarterly basis (see http://www.nic.org).   I used NIC-MAP data for the Baltimore region, which shows the cost for skilled nursing facility care and care in an assisted living facility 7% – 8% lower than the LTCG survey but similar enough to confirm the LTCG survey data.    NIC-MAP is also able to provide pricing data for independent living and memory care / dementia facilities, which I incorporated in my analysis.

 

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A Wall Street Journal article on Tuesday, July 26, 2016 entitled “Can This Brain Exercise Put Off Dementia?” hitp://on.wsj.com/2arSPfA reported on the results of a new study, called “ACTIVE” for Advanced Cognitive Training in Vital Elderly, that were presented the previous Sunday at the Alzheimer’s Association International Conference in Toronto, the world’s largest gathering of Alzheimer’s researchers.    The article immediately attracted attention within a group of my close Baby Boomer friends who have known each other since elementary school.  The New Yorker also published an article on the same study on July 24, 2016 http://www.newyorker.com/tech/elements/could-brain-training-prevent-dementia.

According the Journal “The study results showed that speed training—computer exercises that get users to visually process information more quickly—beat out memory and reasoning exercises, two other popular brain-training techniques sometimes suggested for improving cognitive function and reducing dementia. Researchers found that a total of 11 to 14 hours of speed training has the potential to cut by as much as 48% the risk of developing dementia 10 years later.”

As reported by the WSJ, the ACTIVE study, which was funded by the National Institute on Aging and the National Institute of Nursing Research, included 2,832 healthy subjects, ages 65 to 94, at six study sites around the U.S. Participants were randomized to get one of the three cognitive-training programs or be in a control group.  Since 1998 the study has received a total of $33.8M in funding and is still in touch with all but 4o of the original participants.

Prior to release of the ACTIVE results there was no evidence that computerized brain training had any effect on cognitive ability or dementia prevention.   The New Yorker cites a consensus statement by more than 70 academics in 2014 that “playing brain games has been shown to improve little more than the ability to play brain games.”  And in January of this year the Federal Trade Commission fined Luminosity, the largest and best known provider of brain games, two million dollars for making unsubstantiated claims of cognitive improvement for its games.   Thus, the large and well-funded ACTIVE study is likely to provide a big credibility boost for the use of computer mind stimulation games to combat cognitive decline and dementia.

The speed training component of the ACTIVE study used a computer game in which, for the briefest instant, two images appear, one in the middle and one on the periphery of the screen (see below).   The computer then prompts you to identify whether the central image is a little car or little truck along with which edge the second image appeared.   The more accurate you get, the more quickly the images appear and the more complex the background becomes.

Double Decision Image

Double Decision is a more user friendly version of the speed training game used in the ACTIVE research that was acquired by Posit Science, of San Francisco, in 2007 and is now part of the company’s BrainHQ online service, a cognitive-training program. A monthly subscription, which includes access to Double Decision, is $14 a month, or $96 a year. Posit Science says the company intends to file a medical-device application to the Food and Drug Administration based on the recent clinical trial findings.

After reading the WSJ article my friends and I were immediately tempted to purchase Double Decision through the Brain IQ service, as would any Boomers concerned about their future cognitive abilities.   However, our group of friends includes Mitchell Clionsky, Ph.D. who is a clinical neuropsychologist and has worked extensively on dementia testing and evaluation.   Dr. Clionsky, or Mitch as we know him, pointed out that, unfortunately, these kinds of stories hit the news with some regularity, always look really great, but sometimes aren’t.

Mitch points out that the ACTIVE research was presented at AAIC as a talk. It has never been subjected to peer review or published in a journal, which the WSJ and The New Yorker also mention. In other words, lotsa sizzle, maybe not so much steak. It also defies reason that 10 sessions of training would impact cognitive functioning 10 years later.  Finally, the 48% difference in the frequency of dementia in the ACTIVE study is the calculation of decline from a conversion rate after 1o years of 14% for healthy adults with an average initial age of 73 to a conversion rate of 8% for the subgroup undergoing computerized speed brain training for 10 hours and receiving just four more hours of training. In a large group this is statistically significant. However, it may be less meaningful when applied to individuals.

Mitch is hoping that there is something to the ACTIVE research and looks forward to a replicated study, with a more varied dosing schedule of exposure to training, and better measures of cognitive functioning 1, 2, 3, 5, and 10 years later. In the meantime, he thinks it the impact of using computerized speed training exercises on dementia are way overblown.

Mitch believes it would be better for us Boomers to take home the message: Don’t retire entirely or, if you do, stay mentally and physically active (by writing a blog, playing golf and exercising for example). Get yourself a cool gaming station and play some intense shoot em up games or other video games that require lots of visual processing and reaction time. That way, at least you will be having fun. Control your diet, keep your BMI at about 25, don’t drink too many margaritas at one sitting, take a 30 minute walk every day.

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Posted in Alzheimer's, Dementia, Lifestyle Choices, Senior Housing Innovation | 2 Comments »