Long Term Care Costs Rise, But at a Lower Rate

The cost of long-term care insurance rose again over the last year, but at a fairly moderate 4.4%, according to an annual MetLife survey. For a long time, the costs rose at 7% or more annually, well above the rate of inflation. In recent years the rate of increase has declined, but so has overall inflation. There’s still a large gap between LTC inflation and the Consumer Price Index. It’s also a faster increase than over the last two years and than core medical inflation.

The really bad news is the absolute cost of LTC.

Private nursing home care rose 4.4 percent to $239 daily or $87,235 a year in 2011, reports the MetLife Mature Market Institute, which produces the annual survey. Adult day services rose 4.5 percent to $70 a day. Hourly rates for LTC services provided by home health aides and companions remained unchanged at $21 and $19 an hour, respectively.

You could hedge against the cost of LTC by purchasing long-term care insurance. A relatively small part of the population, however, purchases the insurance. It’s fairly expensive, and insurers have a history of underpricing it and socking policyholders with substantial rate increases down the road.