Extra fees drive assisted living profits
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 retiring. “People want choice,” said Beth Burnham Mace, an adviser for the National Investment Center for Seniors Housing & Care. “If you price it more à la carte, you’re paying for what you actually desire and need.”
Yet residents don’t always get the heightened attention they paid for. Class-action lawsuits have accused several assisted living chains of failing to raise staffing levels to accommodate residents’ needs or of failing to fulfill billed services.
“We still receive many complaints about staffing shortages and services not being provided as promised,” said Aisha Elmquist, until recently the state-funded deputy ombudsman for long-term care in Minnesota. “Some residents have reported to us they called 911 for things like getting in and out of bed.”
‘Can you find me a money tree?’
Florence Reiners, 94, adores living at the Waters of Excelsior, an upscale assisted living facility in suburban Minneapolis with a theater, library, hair salon and spacious dining room.
“The windows, the brightness and the people overall are very cheerful and very friendly,” said Reiners, a retired nursing assistant. Most importantly, she was just a floor away from her husband, Donald, 95, a retired water department worker and veteran with severe dementia. She resisted her children’s pleas to move him to a less expensive facility available to veterans.
Reiners is healthy enough to be on a floor for people who can live independently, so her rent is $3,330 plus $275 for a pendant alarm. When she needs help, she’s billed an exact amount, such as a $26.67 charge for the 31 minutes an aide spent helping her to the bathroom one night.
Her husband’s care cost much more: $6,150 a month on top of $3,825 in rent.
The couple started out with about $550,000 in savings and assets, and a retirement income of $6,600 per month. Month by month, it dwindled. Her children warned her that she would run out of money if her health worsened. “She about cried because she doesn’t want to leave her community,” said daughter Anne Palm.
In June, the children moved Donald Reiners to a Department of Veterans Affairs home. His care costs $3,900 a month. But his wife is not allowed to live there. After nearly 60 years together, she was devastated. When an admissions worker asked if she had any questions, she answered, “Can you find me a money tree so I don’t have to move him?”
Heidi Elliott, vice president for operations at the Waters, said employees carefully review potential residents’ financial assets with them, and explain how costs can increase. Sometimes they lose prospective residents because they realize they won’t be able to afford the facility down the road, she said.
Potential buyers from the Bahamas
The median annual price of assisted living has increased 31% faster than inflation, nearly doubling to $54,000 from 2004 to 2021, according to the insurance firm Genworth. Monthly fees at memory care centers can exceed $10,000.
Diane Lepsig, president of CarePatrol of Bellevue-Eastside outside Seattle, warns those seeking advice that they should expect to pay at least $7,000 a month. “A million dollars in assets really doesn’t last that long,” she said.
Prices rose even faster during the pandemic as wages and supply costs grew. Revenue per occupied unit at Brookdale Senior Living, one of the nation’s largest assisted living owners and operators, rose 9.4% in 2023 from 2022, primarily because of rent increases, financial disclosures show.
In a statement, Brookdale said it worked with prospective residents and their families to explain pricing and care options, both when moving in and as their needs changed.