Assisted-living centers have become an appealing retirement option for hundreds of thousands of baby boomers who can no longer live independently, promising a cheerful alternative to the institutional feel of a nursing home.
But their cost is so crushingly high that most Americans can’t afford them.
These highly profitable facilities often charge $5,000 a month or more and then layer on extra fees at every step. Residents’ bills and price lists from a dozen facilities offer a glimpse of the charges: $12 for a blood pressure check; $50 per injection (more for insulin); $93 a month to order medications from a pharmacy not used by the facility; $315 a month for daily help with an inhaler.
The facilities charge extra to help residents get to the shower, bathroom or dining room; to deliver meals to their rooms; to have staff check-ins for daily “reassurance” or simply to remind residents when it’s time to eat or take their medication. Some even charge for routine billing to a resident’s insurance for care.
“They say, ‘Your mother forgot one time to take her medications and so now you’ve got to add this on and we’re billing you for it,’” said Lori Smetanka, executive director of the National Consumer Voice for Quality Long-Term Care, a nonprofit.
About 850,000 older Americans reside in assisted-living facilities, which have become one of the most lucrative branches of the long-term care industry catering to people 65 and older. Investors, regional companies and international real estate trusts have jumped in: Half of operators in the business of assisted living earn returns of 20% or more than it costs to run the sites, an industry survey shows. That is far higher than the money made in most other health sectors.
Rents are often rivaled or exceeded by charges for services, which are either packaged in a bundle or levied a la carte. Overall prices have been rising faster than inflation, and rent increases since the start of last year have been higher than at any previous time since at least 2007, according to the National Investment Center for Seniors Housing & Care, which provides data and other information to companies.
A public opinion survey conducted by KFF, the organization formerly known as the Kaiser Family Foundation, found that 83% of adults said it would be impossible or very difficult to pay $60,000 a year for an assisted-living facility. Almost half of those surveyed who either lived in a long-term care residence or had a loved one who did encountered unexpected add-on fees for things they assumed were included in the price.
And even older people who can afford an assisted-living facility often find their life savings rapidly drained.
Unlike most residents of nursing homes where care is generally paid for by Medicaid, the federal-state program for the poor and disabled, assisted-living residents or their families usually must shoulder the full costs. Most centers require those who can no longer pay to move out.
The industry says its pricing structures pay for increased staffing that helps more infirm residents and avoids saddling others with costs of services they don’t need.
Prices escalate greatly when a resident develops dementia or other serious illnesses.
“It’s profiteering at its worst,” said Mark Bonitz, who explored multiple places in Minnesota for his mother, Elizabeth.
LaShuan Bethea, executive director of the National Center for Assisted Living, a trade association of owners and operators, said the industry would require financial support from the government and private lenders to bring prices down.
“Assisted-living providers are ready and willing to provide more affordable options, especially for a growing elderly population,” Bethea said. “But we need the support of policymakers and other industries.” She said offering affordable assisted living “requires an entirely different business model.”
Potential Buyers From the Bahamas
For residents, the median annual price of assisted living has increased 31% faster than inflation, nearly doubling from 2004 to 2021, to $54,000, according to surveys by the insurance firm Genworth. Monthly fees at memory care centers, which specialize in people with dementia and other cognitive issues, can exceed $10,000 in areas where real estate is expensive or the residents’ needs are high.
Diane Lepsig, president of CarePatrol of Bellevue-Eastside, in the Seattle suburbs, which helps place people, said that she warned those seeking advice that they should expect to pay at least $7,000 a month. “A million dollars in assets really doesn’t last that long,” she said.
Many assisted-living facilities are owned by international real estate investment trusts. Their shareholders expect the high returns that are typically gained from housing investments rather than the more marginal profits of the heavily regulated health care sector. Even during the pandemic, earnings remained robust, financial filings show.
Ventas, a publicly traded real estate investment trust, reported earning revenues in the third-quarter of this year that were 24% above operating costs from its investments in 576 senior housing properties, which include those run by Atria Senior Living and Sunrise Senior Living.
Ventas said the prices for its services were affordable. “In markets where we operate, on average it costs residents a comparable amount to live in our communities as it does to stay in their own homes and replicate services,” said Molly McEvily, a spokesperson.
In the same period, Welltower, another large real estate investment trust, reported a 24% operating margin from its 883 senior housing properties, which include ones operated by Sunrise, Atria, Oakmont Management Group and Belmont Village. Welltower did not respond to requests for comment.
The median operating margin for assisted-living facilities in 2021 was 23% if they offered memory care and 20% if they didn’t, according to David Schless, CEO of the American Seniors Housing Association, a trade group that surveys the industry each year.
Brandon Barnes, an administrator at a family business that owns three small residences in Esko, Minnesota, said he and other small operators had been approached by brokers for companies, including one based in the Bahamas. “I don’t even know how you’d run them from that far away,” he said.
Rating the Cost of a Shower, on a Point Scale
To consistently get such impressive returns, some assisted-living facilities have devised sophisticated pricing methods. Each service is assigned points based on an estimate of how much it costs in extra labor, to the minute. When residents arrive, they are evaluated to see what services they need, and the facility adds up the points. The number of points determines which tier of services you require; facilities often have four or five levels of care, each with its own price.
Charles Barker, an 81-year-old retired psychiatrist with Alzheimer’s, moved into Oakmont of Pacific Beach, a memory care facility in San Diego, in November 2020. In the initial estimate, he was assigned 135 points: 5 for mealtime reminders; 12 for shaving and grooming reminders; 18 for help with clothes selection twice a day; 36 to manage medications; and 30 for the attention, prompting and redirection he would need because of his dementia, according to a copy of his assessment provided by his daughter, Celenie Singley.
Barker’s points fell into the second-lowest of five service levels, with a charge of $2,340 on top of his $7,895 monthly rent.
Singley became distraught over safety issues that she said did not seem as important to Oakmont as its point system. She complained in a May 2021 letter to Courtney Siegel, the company’s CEO, that she repeatedly found the doors to the facility, located on a busy street, unlocked — a lapse at memory care centers, where secured exits keep people with dementia from wandering away. “Even when it’s expensive you really don’t know what you’re getting,” she said.
Singley, 50, moved her father to another memory care residence. Oakmont did not respond to requests for comment.
When the Money Is Gone
Jon Guckenberg’s rent for a single room in an assisted-living cottage in rural Minnesota was $4,140 a month before adding in a raft of other charges.
The facility, New Perspective Cloquet, charged him $500 to reserve a spot and a $2,000 “entrance fee” before he set foot inside two years ago. Each month, he also paid $1,080 for a care plan that helped him cope with bipolar disorder and kidney problems, $750 for meals and another $750 to make sure he took his daily medications. Cable service in his room was an extra $50 a month.
A year after moving in, Guckenberg, 83, a retired pizza parlor owner, had run through his life’s savings and was put on a state health plan for the poor.
For those with some retirement income, Medicaid isn’t free. Nancy Pilger, Guckenberg’s guardian, said that he was able to keep only about $200 of his $2,831 monthly retirement income.
In September, Guckenberg moved to a nearby assisted-living building run by a nonprofit. Pilger said his costs were the same. But for other residents who have not yet exhausted their assets, Guckenberg’s new home charges $12 a tray for meal delivery to the room; $50 a month to bill a person’s long-term care insurance plan; and $55 for a set of bed rails.
Even after Guckenberg had left New Perspective, however, the company had one more charge for him: a $200 late payment fee for money it said he still owed.