What Drives the Cost of Long-Term Care — and How Can We Improve Value?

The cost of long-term care can be startling. Whether families are planning for the future or making decisions during a health crisis, they often find themselves asking the same question: Why is it so expensive?

The answer isn't simple. Long-term care is a complex combination of housing, skilled medical care, personal assistance, meals, transportation, activities, maintenance, safety and around-the-clock support for people whose needs often change from day to day.

While the public conversation often focuses on affordability, professionals in the field know that long-term care costs are driven by a mix of care needs, regulations, payment systems and operating expenses. Understanding those factors helps explain why improving affordability isn't as simple as lowering prices.

Around-the-Clock Care Requires Significant Resources

Unlike a doctor's office or hospital, long-term care is someone's home. Residents need support 24 hours a day, seven days a week. Depending on the setting, that may include help with bathing, dressing, eating, taking medications, managing chronic conditions or responding to medical emergencies.

Facilities also provide services that are easy to overlook because they're expected every day. Meals are prepared and served. Buildings are cleaned and maintained. Laundry is done. Activities are planned. Transportation is coordinated. Medical records are maintained. Every one of these services requires people, equipment and ongoing investment.

As people live longer, many residents also arrive with more complex medical conditions than in previous decades. Dementia, multiple chronic illnesses and mobility challenges often require specialized expertise and individualized care plans, adding another layer of complexity.

Superior Care Comes with Real Costs

Families understandably want long-term care communities that are clean, safe, welcoming and well-staffed. Those expectations are essential to quality care, but they also require significant investment.

Facilities must maintain buildings, meet infection prevention standards, purchase medical equipment, prepare nutritious meals, train employees and comply with extensive state and federal regulations. Staffing standards and reporting requirements are intended to improve resident safety and quality of care, but they also increase operational costs for providers.

Many of these investments happen behind the scenes. Residents may never notice upgraded air handling systems, emergency preparedness plans, cybersecurity measures or staff education programs, yet each plays an important role in creating a safe environment.

Paying for Long-Term Care Isn't Straightforward

Another reason long-term care can be confusing is that payment doesn't work like it does for many other healthcare services.

Many people assume Medicare will pay for ongoing long-term care. In reality, Medicare generally covers short-term skilled nursing or rehabilitation following a hospital stay, but it does not pay for most ongoing custodial long-term care. Instead, many residents eventually rely on Medicaid after spending down their personal assets, while others pay privately or use long-term care insurance if they have it.

Because facilities serve residents with different payment sources, administrators must balance multiple reimbursement systems, each with its own rules and financial realities. In many cases, reimbursement rates do not fully reflect the actual cost of providing care, making financial sustainability an ongoing challenge.

Investments Impact Quality of Life

Rising costs affect providers, too. Long-term care organizations must continually make decisions about where to invest limited resources. Should they renovate aging buildings? Expand memory care services? Adopt new technology? Increase staff training and compensation? Add specialized programming?

These aren't simply budget decisions. They directly influence residents' quality of life and the organization's ability to provide high-level care over time.

Of course, families are feeling increasing financial pressure, too. A recent AARP report found that the cost of long-term services and supports has risen faster than both inflation and the incomes of many older adults, making care increasingly difficult for middle-income families to afford. Home care and assisted living costs, in particular, have increased sharply in recent years.

Managing Expenses Without Lowering Standards

The conversation about long-term care shouldn't be limited to whether costs are too high. An equally important question is how organizations can manage those costs while continuing to provide excellent care.

Many organizations are exploring new approaches, including technology that reduces administrative work, better coordination across care teams, preventive health strategies that reduce avoidable hospital visits and operational improvements that help staff spend more time with residents and less time on paperwork.

None of these solutions eliminates the cost of care. But they can help organizations use resources more effectively while maintaining or improving quality.

Sources

• Long-Term Services and Supports Are Becoming Even More Unaffordable for Middle-Class Americans, AARP Public Policy Institute
• Long-Term Care Costs Outpace Income, AARP
• Long-Term Care Coverage: Medicare long-term care coverage, Medicare.gov 
• Minimum Staffing Standards for Long-Term Care Facilities: CMS staffing standards fact sheet, Centers for Medicare & Medicaid Services (CMS)
• Long-Term Care Hospital Reform Principles: AHA reform principles, American Hospital Association