Extra fees drive assisted living profits
Facilities’ costs rising faster than inflation
Assisted living centers have become an appealing retirement option for about 850,000 boomers who can no longer live independently, promising a cheerful alternative to an institutional nursing home.
But their cost is so crushingly high that most Americans can’t afford them.
There are now 31,000 assisted living facilities nationwide – twice the number of skilled nursing homes. They have become one of the most lucrative branches of the long-term elder care industry. Investors, regional companies and international real estate trusts have jumped in. Half the operators earn returns of 20% or more than it costs to run the sites, an industry survey shows. That is far higher than the money made in most other health sectors.
These highly profitable facilities often charge $5,000 a month or more – and then layer on fees at every step. Residents’ bills and price lists from a dozen facilities offer a glimpse of the charges: $12 for a blood pressure check; $50 per injection, more for insulin; $93 monthly to order medications from a pharmacy not used by the facility; $315 a month for daily help with an inhaler.
The facilities charged extra to help residents get to the shower, bathroom or dining room; to deliver meals to their rooms; to have staff check in for daily “reassurance” or simply to remind residents when it’s time to eat or take medication. Some even charge for routine billing of a resident’s insurance for care.
In a public opinion survey conducted by KFF, almost half of the respondents who either lived in a long-term care residence or had a loved one who did encountered unexpected add-on fees.
“They say, ‘Your mother forgot one time to take her medications, and so now you’ve got to add this on, and we’re billing you for it,’ ” said Lori Smetanka, director of the National Consumer Voice for Quality Long-Term Care.
Costs have been rising faster than inflation, and since the start of 2022, rent increases have been the highest since at least 2007, according to the National Investment Center for Seniors Housing and Care. And rents are often rivaled or exceeded by charges for services, which are either packaged in a bundle or levied à la carte.
Prices escalate greatly when a resident develops dementia or other serious illness. At one facility in California, the monthly cost of care packages for people with dementia or other cognitive issues increased from $1,325 to $4,625 as residents’ needs grew.
Members of racial or ethnic minority groups account for only a tenth of assisted living residents, even though they make up a quarter of the population 65 or older.
Assisted living is part of a broader affordability crisis in long-term care for the swelling population of older Americans.
Over the past decade, the market for long-term care insurance has virtually collapsed, covering just a tiny portion of older people. Home health workers are generally poorly paid and hard to find.
And even older people who can afford an assisted living facility often find their life savings rapidly drained.
Unlike most residents of nursing homes, where care is generally paid for by Medicaid, assisted living residents or their families usually must shoulder the full cost. Most centers require those who can no longer pay to move out.
Mark Bonitz explored multiple places in Minnesota for his mother. He considered assisted living “profiteering at its worst.” With a fixed number of rooms, “the way you make the most money is you get so many add-ons,” he said.
The industry says its pricing pays for increased staffing that helps more infirm residents, and avoids saddling others with costs of unneeded services.
LaShuan Bethea, executive director of the National Center for Assisted Living, a trade association of owners and operators, said the industry would require financial support from the government and private lenders to bring prices down.
“Assisted living providers are ready and willing to provide more affordable options, especially for a growing elderly population,” Bethea said. “But we need the support of policymakers and other industries.” Offering affordable assisted living “requires an entirely different business model,” she said.
Others defend the extras as a way to appeal to the waves of boomers who are