HACKER Q&A
📣 sam345

Why is senior care so expensive?


For example a dementia patient might pay $11,000 a month in the US for memory care. Staff members are very sparse maybe five people on the floor at any given time serving say 20 clients. Staff members may be making $50,000 a year. Medical Care is minimal it's all almost manual labor ADLs (activities of daily living) washing them bathing, dressing, feeding, behavioral redirection,etc. Staff complains that they don't have enough people to do one-on-one care which dementia patients often require. But with that kind of funding they could probably afford it at least a two to one ratio. Even given overhead which is minimal real estate cost and that's about it. We are not talking ICU or even general hospital care we are talking about ADLs for the most part. Please no complaints about greedy insurance companies etc. greedy insurance companies should want lower cost too plus long term senior care is normally funded mainly by patient themselves as I understand it. I am truly interested in the economics. Surely if it could be done cheaper people would do it to compete.

  👤 mikewarot Accepted Answer ✓ 

  $50,000 / year
  * 5 care takers at a time
  * 3 shifts 
  * 2 (staff, food service, laundry, billing, social services, etc.) 
  * 1.2 (employers part of taxes)
  ------
  $18,000,000 / year
  ÷ 20 patients
  ------
  $90,000 / year
  ÷ 12 months year
  ------
  $7,500 / month
That's just in labor/staff costs, let alone the fact that this is a highly regulated medical establishment.

Edit/correction - thanks subtra3t!

👤 Spooky23
Most of the cost is borne by Medicaid because people exhaust their insurance and assets.

It’s a nasty business, the operators extract money through various means and labor costs are high. The facilities “lose” money but the owners make money through kickbacks from rehab, OT and other providers, who get better reimbursements from Medicare.

The way to lower cost is in-home care. A modern, well run operation providing at home care, rehab and other value ad services deliver higher quality care at lower cost and higher margins.

👤 giantg2
Benefits are a significant cost not included in your salary number. Those are just the workers. You also have salary and benefit costs for administration. You have costs for contracted services such as food, maintenance, billing, legal. You have liability insurance, utilities, taxes, etc.

No joke, my dad has told me that if he ever gets as far gone as my grandma was, to just buy him a one-way ticket to Nome Alaska. It's unsurprising that the majority of the people I know who committed suicide were diagnosed with dementia and decided to end it.

👤 h2odragon
Seems like an opportunity to build a business providing lower cost, higher quality Senior care, right?

Amazon and Uber have shown the way: ignore laws you don't like, taxes you'd rather not pay, and build your business in spite of the regulations that distort the current market. Once you've absorbed all the competition you're legal "by default" and accepted as an Institution that cannot be challenged. (Payoffs to politicians prolly help a lot here, too).

Imagine a Day Care facility for those under 5 and over 65. Let the kids take care of the old folks and vice versa. Most of the real work will be done by the customers and all you gotta do is sit back and let nature take its course. The real job an administrator at such a place would have would be keeping busybody regulators from destroying the shop.

👤 aborsy
I’m curious, what happens to such patients in USA, when they have no one and no funding?
👤 tucaz
I recommend the book “Being Mortal” by Dr Atul Gawande. He is the same author of “The Checklist Manifesto” which I also recommend.

The book doesn’t touch the economics of elderly care but it offers a comprehensive explanation about how we got here. It also talks a lot about the operational details of dying which is something that the majority of people never thought about and is certainly eye opening.

👤 howard941
> Staff members may be making $50,000 a year

That's high. Figure closer to $20/hr. And that doesn't buy someone who's able to dispense medication.

Memory care is not ADL - it's a 24x7 custodial job.

👤 toomuchtodo
Because human time is expensive, and when this work is done uncompensated in the developed world, you don’t know it unless you’re in the situation.

I encourage you to make an attempt to deliver a cheaper model to understand the experience and the challenge. You either win or you learn. Find a senior care facility and volunteer for a week to understand the need.

https://www.aarp.org/pri/topics/ltss/family-caregiving/valui...

https://www.aarp.org/content/dam/aarp/ppi/2023/3/valuing-the...

> An AARP report from 2023 showed that the estimated economic value of uncompensated family caregiving was $600 billion in 2021, up from $470 billion in the previous study in 2017.

To note, this is estimated economic value of uncompensated. To understand the situation, you would need to add to this compensated care paid for by either Medicare or Medicaid in aggregate at the national level.

https://www.cms.gov/newsroom/fact-sheets/national-health-exp...

> Nursing Care Facilities and Continuing Care Retirement Communities (4% share): Spending for services provided at freestanding nursing care facilities and continuing care retirement communities rose in 2022 by 5.6% to $191.3 billion, compared to a decline of 7.8% in 2021. Medicaid, out-of-pocket, and Medicare account for over three quarters of total payments to these facilities and, in 2022, spending for these payers had strong growth following low growth or reduced spending in 2021.

> Home Health Care (3% share): Spending for services provided by freestanding home health care agencies increased 6.0% in 2022 to $132.9 billion, accelerating from growth of 0.3% in 2021. Private health insurance, out-of-pocket, and Medicaid home health spending contributed to the faster growth, while Medicare spending growth for home health care services slowed.

So, we're at close to ~$1T in annual spend, very roughly speaking. At the same time, there is a constant shortage of CNAs and other folks who do this work, because the work is very hard and underpaid.

Labor shortage citations:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9894029/

https://www.ahcancal.org/News-and-Communications/Fact-Sheets...

https://www.usnews.com/opinion/articles/2023-12-21/proposed-...