Moving a parent or loved one into senior living is a tough decision. And it’s something you only want to do once, so you want to get it right. But choosing the right facility is becoming harder due to changing demographics and economics.
One of the biggest paradoxes facing health care in the U.S. today is that the number of nursing homes is shrinking just as the senior population is expanding. From my position, where I work to help senior care centers succeed in the current environment, I predict the number of U.S. nursing homes could fall by as much as 20 percent within the next five to 10 years as deteriorating economics force operators to close and consolidate.
The problem is that with many Americans living longer, the economics of elder care have made it harder to run a nursing home profitably. Short-term rehabilitation services provided by nursing homes are typically covered by Medicare, while lengthier stays for chronic conditions are not. Many individuals simply can’t afford the cost of long-term nursing care, which averages about $7,000 a month, requiring them to enroll for Medicaid assistance. Medicaid payment rates to nursing homes vary significantly between states but typically fall short of the cost of care provided.
By 2030, some 20 percent of the U.S. population will be 65 or older; the number of 85-year-olds will rise more than 50 percent, and the centenarian cohort will almost triple.
Meanwhile, changes in how senior facilities interact with medical insurance providers, both public and private, have made it more important than ever that you choose the right place so that you won’t have to move – something that can be costly and distressing for all involved. For instance, Medicare and Medicaid are increasingly shifting their enrollees to health insurance plans to provide these benefits – and the health plans may require enrollees to select from a panel of approved network providers.
Seniors and families should ask some crucial questions:
- What insurance networks a facility participates in — or if it has any intention of joining one. This gives you a view into the facility’s ability to navigate new health-care trends.
- Ask your mother or father’s primary doctor what facilities are in their insurance network. Is the physician or the practice considering joining a larger regional network that might include preferred nursing home partners?
- If your loved one is already enrolled in a Medicare Advantage plan, ask about specific network coverage before committing to a home, and then be sure to verify it again annually during Medicare’s open enrollment period.
The new math of medical insurance
The economics of elder care have been hit by both macro and micro forces. Many skilled care centers have lost money for years on patients covered by state-run Medicaid programs, which pay for long-term care for the chronically or terminally ill poor. And more seniors are depending on Medicaid because their savings were unexpectedly depleted by the 2008 financial crisis.
In addition, consumers who do have savings have access to many other alternatives -- for example, aging in place and assisted living facilities, and other home and community-based services. As a result, nursing home construction and spending has slowed in many areas.
It’s a recipe that is weeding out the weakest operators and forcing many nursing homes to merge. Many mom-and-pop nursing homes will likely sell or close, and the sector will become dominated by chains with some high-end, niche operators.
Networks become problematic
As baby boomers seek the right place to live, increasingly they should consider the insurance implications should they someday need to move into a nursing home or assisted living facility. Network referrals for Medicare reimbursement are becoming more restrictive — thanks to efforts to contain costs and the Affordable Care Act — especially at senior living facilities with on-site nursing and in-home health care.
Physicians are also forming new referral networks called Accountable Care Organizations, or ACOs, where patient care is managed with the intention of controlling costs. The end result is that understanding your “network choices” is increasingly important. For example, a resident of a continuing care retirement community could fall and break a hip only to discover that the skilled nursing facility unit of that community is now in fact no longer “in network,” resulting in extra out of pocket costs for the rehabilitation services.
Some senior living facilities are trying to prevent such costly disruptions. They may poll residents after open enrollment to determine the most popular plans and ensure that their facility is included in certain ACOs. But it’s worth remembering that the onus is on the patient to avoid out-of-network surprises.
Betsy Rust, CPA, is a consulting partner with Plante Moran’s senior care and living practice.