Tuesday, January 6, 2015

Why Does Assisted Living Cost More in Certain Areas?

And How to Use this Information to Lower Care Costs
Photo by Abbeyfield Kent

The monthly cost of assisted living in the US ranges from a low of $750 / month to a high of over $10,000 / month. This means some families are paying over 13 times as much for care than other families. This seems extraordinary and, in fact, it is when compared to range for home care (5 times) and nursing home care (9 times). In this post, we examine why such a dramatic variation in the cost of assisted living exists, the factors that affect assisted living costs, and how families can best use this information to their financial benefit.

Factors Affecting Assisted Living Costs

Some of the cost variance can, of course, be attributed to the non-care related amenities provided in a specific assisted living residence. Or said another way, how luxurious the residence is. However, we can effectively neutralize this factor by looking at average state data for assisted living costs. When we do so, we still see a range from $2,500 to $6,890 between the least expensive and the most expensive state. So what other factors affect monthly assisted living costs?

Level of Care - Most assisted living communities offer 3-5 different levels of care for their residents. Within the same community this can account for several thousand dollars difference in monthly expenses between the lowest and highest levels of care.

Population Density - How rural or urban the location of an assisted living residence is makes a large difference in the overall monthly cost for residents. A combination of factors contribute to this. Cities have higher rent prices and generally salaries are higher in urban areas. Both of these factors drive up expenses for the business and, therefore, drive up prices for the residents.

State Regulation - Each state has a different level of assisted living regulation. These laws may affect costs, for example, through staffing ratios, fire safety codes and other rules that incrementally increase expenses for organizations providing care. Having said that, it is difficult to isolate and quantify exactly how much state laws impact care costs.

Number of Residents - In industry speak, this is called the "bed size" of the assisted living residence. Larger residences, counter to the "economies of scale" concept, tend to have higher rates than smaller ones. This is likely due to two reasons, the amount of non-care related amenities provided in larger residences and different state regulations that apply to larger residences.

Personal Space - Within most assisted living communities, residents have options with regards to their "apartments." Private apartments, shared apartments, private rooms with shared bathrooms, studios vs. one bedrooms can all impact one's monthly expenses.

Negotiations - Another factor that surprisingly affects the monthly rate for assisted living is how effectively a family negotiates the cost. Knowing how much services cost and having options are ways that can help family negotiate better rates. Using a search service can help families find and compare communities.

How Families Can Use this Information

Knowing what factors affect the cost of assisted living can be an advantage for those families looking to reduce their aging care costs. Our organization recommends the following and provides free assistance to help families find the most affordable care.

  1. Look for assisted living communities outside of urban areas. Finding a rural or suburban residence can both decrease costs and increase the amount of personal space and common space the resident has.
  2. Elderly individuals who prefer a home-like environment should consider a smaller, adult family care style residences. These typically house 5 or fewer seniors and cost 10% - 20% less than larger communities.
  3. Search in neighboring states or communities that may have different regulations that make the cost of assisted living more affordable. Use of our Cost of Care Calculator to see costs by state and region.
  4. Consider a shared room, shared bathroom or smaller layout apartment—doing so can reduce costs by 15% - 25%.
  5. Look for brand new assisted living communities. They have a lot of rooms to fill very quickly and are more likely to negotiate discounted rates as a result.
  6. Consider using tools and technology not provided by the assisted living residence to keep the level of care low. For example, assisted living residences can charge $300 - $500 / month for medication management and assistance. Could your loved one's medication needs by met by purchasing an electronic medication management system? Such devices cost significantly less and modern systems send alerts to Smartphones if doses are missed. Read more about medication management technologies.
  7. Learn about a community's occupancy rate and use that as a negotiating tactic. Assisted living residences need about a 90% occupancy rate to be profitable. Residences with a lot of "empty beds" are much more likely to negotiate on the monthly rent. While many communities may be hesitant to tell you their occupancy rate, you might ascertain that information in subtle ways. For example, you can ask about how long the community's wait list is. If there is no wait list, one can presume the community is not at capacity. Another approach one can use when touring a community is to ask to see several types of each type of room. If the residence has 40 apartments and you are able to visit 5 different unoccupied rooms, you may be in a strong negotiating position.
  8. While it is time-consuming to shop around, it is absolutely worth your effort. The more communities you visit and the more quotes you receive the stronger the position you are in to negotiate. Be sure to let the marketing directors of the residences know that you are shopping around as well. They are more likely to give you a competitive quote if they are aware you are considering other options. A time effective way to gather information about multiple communities is to use a search service.
While it can be difficult to find the right assisted living community that meets your budget, the afford is certainly worth it as you gain the peace of mind of knowing that your loved one is well taken care of. Should you have any further suggestions for helping to find more affordable assisted living, please enter them in the comments below.