US Nursing Home Costs Increased by the Largest Amount Since 1997

Care giver walks with nursing home resident at a Quality Life Services facility in western Pennsylvania. Courtesy of the Pennsylvania Health Care Association

The costs for U.S. nursing homes and adult day services increased dramatically in July to the highest rate in 25 years, new data shows.

A Bureau of Labor Statistics report for August showed that prices in the sector soared by 2.4 percent last month compared to June, the largest monthly increase since 1997 and well above the average.

Overall, U.S. consumer prices were up 0.2 percent month over month in July.

Senior care has been rising for nursing homes and assisted living facilities for years and is expected to worsen as the Baby Boomers start to age.

Assisted Living Prices Rise as Boomers Retire

Nursing home costs increased by an average of 2.4 percent every year between 2012 and 2019, for a cumulative increase of 20.7 percent, according to the health research group Altarum Institute.

Meanwhile, some experts hope that the surge in prices may just be a hiccup and not just a trend,

“We will need to wait and see if this was a one-time aberration or part of a longer-term trend,” Beth Mace, an economist and senior adviser at the National Investment Center for Seniors Housing & Care, told Yahoo Finance.

“Keep in mind that the unusually large July increase followed three months of declines in April, May, and June. It’s certainly something to watch but not to be alarmed by at this time,” she said.

However, Edward A. Miller, Chairman of the Department of Gerontology at The University of Massachusetts Boston, told Yahoo Finance that health and medical expenses typically rise faster compared to other sectors of the economy.

He said that the rise in assisted living costs “could very well be illustrative of that tendency” and that "the rise in prices could reflect, in part, a rebound in demand as occupancy rates rise once again [after the pandemic].

Mr. Miller said that demand will likely grow even further due to the aging of the “large baby boom cohort,” which will mean that price gains will accelerate going forward.

Unfortunately, more than 40 percent of baby boomers do not have enough retirement savings to cover the cost of living, according to 2020 Census data.

Many depend solely on Social Security, as Medicare does not cover nursing home or assisted living facility stays.

Staff Shortages Plague Industry as Costs Rise

According to the American Health Care Association (AHCA), about 800,000 Americans live in an assisted living facility in approximately 30,600 communities today, with a total of 1.2 million licensed beds.

The average size of an assisted living community is 39 licensed beds and many of them already suffer from chronic staffing issues.

KFF reported 1.157,714 million residents across 15,076 different Medicare and Medicaid-certified nursing facilities in 2022 alone.

A major reason why costs are rising in the assisted living industry is partially due to growing demand and staff costs at these facilities.

AHCA’s State of the Nursing Home Industry survey (pdf) from December found that 80 percent of U.S. nursing homes faced a staffing shortage, and 96 percent struggled to hire new employees.

Thousands of nursing homes also failed to obey federal staffing guidelines, and many go days without a registered nurse, USA Today reported last December.