Considering in-home care in retirement? Here’s what it may cost.

Updated: March 31, 2023

Many retirement planning discussions start with a simple question: Where does the retiree wish to spend their golden years? The common answer is probably not surprising – 88% of people ages 50 to 80 want to remain in their homes as they age.¹ A follow-up question for the retiree may be whether they would also like to receive long-term care (LTC) in the home. Long-term care is support for the six activities of daily living – bathing, continence, dressing, eating, toileting, transferring.² About 70% of current 65-year-olds are expected to require some type of long-term care, with 1 in 5 needing it for more than five years.³

For those who do hope to receive in-home care in retirement, technology may make that desire more realistic in coming years. In fact, in-home care for LTC needs can sometimes have significant financial benefits when compared to facility-based care, especially if that assistance is provided by uncompensated loved ones with little or no cost to the retiree.

Even if a family caregiver is not available, professional home care has typically been lower than the price of a room in a nursing home or the fees at continuing care retirement communities.⁴ However, prices are likely to increase. One 2020 study estimated that in-home care costs could rise 20% by 2030,⁵ and there’s also concern that a potential shortage of workers could drive up costs even further.⁶ There are other costs typically associated with aging in place, such as home improvements that may be needed to make the home safer and more accessible.⁷ As a result, financial professionals and their clients may need to readjust their expectations around the cost of long-term care, even for those planning to receive in-home care.

Technology Will Remove Common Barriers to In-Home Care

 

The primary barrier to aging in place has typically been the challenges that come with older adults living independently. For example, as people age, slowing motor reflexes could affect their ability to drive safely, preventing them from getting their groceries or traveling to a doctor’s appointment.

Technology advancements, including the boom in telemedicine and the increased capabilities of connected devices, are expected to continue to make it easier to do a number of tasks without leaving the home. These can range from having groceries delivered to meeting with and providing data to a doctor, making living independently a more viable option despite limitations that come with age.

Telemedicine Thrust Into the Spotlight

Telemedicine, also sometimes called telehealth, uses technology to virtually connect health care providers and their patients. It’s the modern-day version of an old-fashioned idea: Bring the doctor to the patient instead of requiring the patient to visit the doctor.

The COVID-19 pandemic has had a tremendous impact on the use and acceptance of telemedicine, says Christine Calouro, a policy associate with the Center for Connected Health Policy.⁸ During the spring of 2020, the federal government changed the Medicare rules governing telemedicine in response to the public health crisis. As a result, more providers are now able to offer telemedicine services to their patients, and more people enrolled in Medicare have gained access to covered telemedicine services.⁹

The Coronavirus Pandemic Sparks Increase in Telehealth Use

Percentage of medical claims in the U.S. that included telehealth

Source: Monthly Telehealth Regional Tracker. FAIR Health, as of March 2023.

“A lot of patients weren’t even aware that [telemedicine] was a possibility. Now, everyone has become aware,” Calouro says, adding that consumer demand could drive more use of telemedicine as well as additional changes to how it’s covered by providers like Medicaid.

The percentage of health insurance claims that included a telehealth visit grew dramatically from 2019 to 2020.¹⁰ Although reports from over two years after the start of the pandemic show that in-person care is often still preferred, telehealth services remain very popular with high patient satisfaction due to convenience and safety.¹¹ It’s estimated that the telemedicine market could reach $1.5 trillion by 2030.¹²

Connected Health Care Also Plays a Role

Can telemedicine really replace visiting a physician’s office where the staff takes patients’ vital signs and other critical measurements? As connected health care improves, that may be the case. Connected health care refers to medical equipment with remote monitoring capabilities, such as blood pressure cuffs and pulse oximeters. The equipment, which medical professionals provide or, in some instances, patients can purchase over the counter, delivers data back to the provider usually via Wi-Fi or Bluetooth. This enables physicians to monitor patients who are in the comfort of their homes.

In the future, connected health care and enhanced versions of connected devices that already exist – such as refrigerators, scales, and medicine dispensers – could collect our health and behavior data to help keep us healthy. Remote monitoring, combined with advancements in artificial intelligence (AI), offers other potential applications. For instance, video surveillance technology can help physicians monitor people at risk of seizure or falling in their homes, even if a caregiver isn’t present.¹³

Physicians will be able to use the increasing amount of data from connected health care devices and telemedicine appointments to create more detailed patient profiles. Advanced analysis of the data using artificial intelligence may allow physicians to identify trends that help prevent health conditions or treat them more effectively and efficiently.

Technology Could Help Retirees Spend Less

In addition to reducing office visits, the expansion of telemedicine may also decrease hospitalization. Frederick Health Hospital in Maryland found that its telemedicine program for patients with chronic conditions reduced ER visits by half and decreased hospitalizations by 90%.¹⁴ The telemedicine program included weekly calls and monitoring patients using special software, identifying health issues before they became serious enough to require a hospital visit.

Reducing Hospital Stays Could Help Lower Out-of-Pocket Costs

Sources: Percentage of U.S. population with a hospitalization in past year from 1997 to 2019, by age; Statista, September 13, 2022. Consumer Expenditure Surveys; U.S. Bureau of Labor Statistics; September 2022. NHE Projections 2019-2028, Table 6: Hospital Care Expenditures; Centers for Medicare & Medicaid Services, April 15, 2020.

Total out-of-pocket payments for hospital services across all age groups are expected to increase 50.5% between 2018 and 2028.¹⁵ If telemedicine and connected technology continue to help reduce the number of in-person physician visits and hospitalizations that someone requires, the cost savings could be significant. How much of a financial impact could a lower number of hospitalizations have? The average cost of a non-critical virtual visit is $93 less expensive than an in-person provider visit.¹⁶ In addition to these savings, telehealth users may also save money in travel costs and time spent seeking care.

The 2023 Medicare Part A deductible is $1,600, which must be met before insurance begins covering a hospital stay.¹⁷ Using that figure, eliminating 15 of these stays over a 30-year retirement, or one every other year, could save a retiree $24,000. Reducing the number of hospital stays plus utilizing telemedicine appointments could lead to significant health care savings. 

Home Care Costs Are Growing Quickly

 

While retirees receiving care at home may expect to spend less on hospitalizations or doctor’s visits if technology can reduce their need, the cost of caregiving itself is increasing due to supply and demand as the aging population requires more long-term care services.⁴ The need for home care services has increased with new demand resulting in the number of home care workers growing to 4.7 million. This growth trend is expected to continue with an estimated 1.2 million new direct care jobs from 2020 to 2030.¹⁸

Long-Term Care Cost Increases, 2004-2021

Source: Cost of Care Trends & Insights. Genworth Financial, as of March 2023.

Home Health Costs Have Been Rising Faster in Recent Years

Source: Cost of Care Trends & Insights. Genworth Financial, as of March 2023.

Home health spending was projected to be $129 billion in 2022 and expected to continue to rise to over $139 billion in 2023. In 2024, this analysis is expected to be over $148 billion, and by 2030, that number is likely to reach $226.4 billion.¹⁹

Ways to Manage Costs

Technology may enable retirees to reduce the number of hours they need for a caregiver. Mobile apps, for instance, can help retirees schedule transportation, order meals, shop for groceries, receive medication reminders, and manage their finances. Wearables and remote monitoring are already making it safer for older adults to live independently.²⁰

Additional innovations could improve this even more. Companies are developing robots and other devices that monitor health indicators and can offer recommendations for improvement. Although technology solutions may have upfront or ongoing costs to patients, using them to enable extended home care may allow someone to need fewer hours with a caregiver and be less costly than the fees for room, board, and basic care at a nursing home.

Initial Planning Should Focus on Desired Lifestyle

Retirees who wish to receive home care as they age should work with their financial professionals early on and discuss what they would like their care setup to look like, as that will have a major influence on the overall cost of care and their retirement lifestyle. For example, where does the person want to live? Living with a family member who will serve as a caregiver may reduce housing costs dramatically, but it could come at the expense of some independence. Would the person prefer to keep their home and have a combination of family and professional caregivers to help them?

Staying in an existing home could require accessibility renovations. The national average cost for home improvements for seniors aging in place is $9,500, which is far less than what you might spend on a nursing home or assisted living facility.²¹ Homeowners making accessibility improvements may focus on remodeling projects to build ramps, widen hallways and doorways, install nonslip flooring, add walk-in or roll-in showers, modify toilet and sink heights, and replace doorknobs with handles.²¹

There could be other costs to consider associated with family caregivers. Nearly half of caregivers reported facing their own financial challenges, such as loss of income, as a direct result of providing care.²² Financial professionals and their clients may want to discuss options for providing financial assistance for the caregiver, such as an annual financial gift or even a legal contract for compensation. While it may feel strange to have a contract with a family member, the arrangement would set clear financial expectations, which may help avoid family conflict and tax consequences for both the person making the payments and the person receiving them.

Once preferred living arrangements have been determined, financial professionals and their clients may have a better idea about how much caregiving may be required and build that into future expense projections.

Because Medicare does not currently cover most long-term care costs, retirees may want to consider several options to save for and prepare for long-term care expenses. For instance, annuities may help provide guaranteed income that retirees can use to pay for out-of-pocket expenses. Those with a health savings account can use the funds to cover long-term costs (confer with a tax professional to understand any tax consequences).

On the insurance side, traditional long-term care insurance allows the policyholder to claim benefits if they need long-term care, but if long-term care is not needed, no benefits are paid. Hybrid life insurance and long-term care policies can provide long-term care coverage for both home care and community care expenses if the policyholder needs it and a cash value that can convert to a death benefit if long-term care isn’t required.

Managing health care from the home will be more realistic for a larger percentage of retirees – even those requiring long-term care – as a result of technology advancements, changes in the marketplace, and a range of financial instruments to help manage health care expenses. Financial professionals and their clients should regularly discuss goals and financial strategies to properly plan for a successful retirement.