Genworth, one of the larger long term care insurers, recently released their 2016 cost of healthcare data. It is based on surveys or interviews with over 3800 licensed home healthcare providers, 1400 adult day health facilities, 6200 assisted living facilities, and 3600 nursing homes across the U.S.  What’s especially useful is the breakdown of costs by location.  In the Bay Area that means San Francisco, San Mateo, San Jose, East Bay, and Santa Cruz.  We can now pretty accurately estimate the potential cost of services should we develop some form of dementia or a physical disability resulting in the need for support for basic living activities.

Here’s a brief summary of the different types of services available and the average cost for such services in the San Jose area from Genworth’s study:

• Homemaker services provide help with household tasks that cannot be managed alone such as cooking, cleaning, and running errands. Average annual cost: $65,208. Annual growth rate (based on the previous five years): 4%.
• Home health aide services (offered by non-Medicare certified, licensed agencies) include more extensive hands-on personal care, but not medical care. Average cost: $68,640. Growth rate: 5%.
• Adult day health care (ADC) includes social and support services in a community-based, protective setting offered on a daily basis. Some programs may provide personal care, transportation, medical management, and meals. Often used as a supplement to family-provided support. Average cost: $23,400. Growth rate: 1%.
• Assisted living facilities (ALF) are residential locations providing room and board, personal care, and health services, often as a lower-level alternative to a nursing home. Average cost: $54,000. Growth rate: 4%.
• Nursing homes provide personal care assistance, supervision, medication, therapies and rehabilitation, and on-site nursing care 24 hours a day. Average cost (semi-private room): $118,808. Growth rate: 6%.

As an alternative to the services above, you may have the option of relying on friends and/or family to provide the needed help. However, while that is by far the lowest cost approach, it can be incredibly burdensome on the provider.  According to Genworth’s study, 60% of respondents providing such care said caregiving duties had a negative effect on their jobs.  And a third reported spending more than 30 hours per week on caregiving.  Therefore the expectation that “my daughter will take care of me if I need help” may not be realistic.

There are primarily four ways you can pay for long term care:

• Pay out of pocket as needed (commonly referred to as the self-funding model).
• Rely on friends and/or family (i.e. free).
• Purchase long term care insurance (if you can qualify).
• Rely on government-provided welfare (called MediCal in California).

With the exception of the latter choice, which should only be considered a last resort, you can combine more than one of these solutions to address your long term care needs. Note that Medicare does not cover long term care at all except for limited nursing home care after a hospital stay.

The longer we live, the greater the likelihood that we will experience some form of dementia. At age 90 the probability reaches 50%.  Therefore determining the possible cost and funding model for long term care should be part of every comprehensive retirement planning activity.

Here’s the link to Genworth’s 2016 cost study: https://www.genworth.com/about-us/industry-expertise/cost-of-care.html .