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Good Question: Why Does Nursing Home Care Cost So Much?

MINNEAPOLIS (WCCO) -- With the Baby Boomers aging, elder care is a reality that almost every American is going to have to deal with. According to Genworth Financials 2013 Cost of Care study, nearly seven out of 10 Americans older than age 65 will spend time in an elder care facility.

The staff isn't being highly compensated. So why do nursing homes cost so much?

"When I first came, I couldn't walk, couldn't stand, couldn't hardly talk" said Joyce Jackson, a Minneapolis woman who spent more than a month in a coma before being admitted to Benedictine Health Center, a nursing home.

Her care was intense and around the clock.

"You have nurses, physical therapists, respiratory therapists," she said.

Jackson said her insurance covers the $300-a-day cost for Benedictine, which multiplies out to $109,500 a year.

"We're not getting rich, we're covering our bills," said Dave Brennan, an administrator at Benedictine.

"It does, on the face of it, seem very expensive," said Todd Bergstrom, a research director at Care Providers of Minnesota, a trade group of elder care facilities.

According to him, the average nursing home cost is about $170 a day in Minnesota.

"That's about $62,000 a year," he said,

For $170 a day, that's about $7 an hour of around-the-clock care for the frailest of the elderly, he added.

So what drives the cost? About 65 percent of the cost of nursing care goes to pay the staff. At Benedictine, Brennan said he has 200 full-and part-time employees caring for 93 residents.

"It's a lot of people, but it's the amount of people needed to give that amount of care," Brennan said.

But each individual employee isn't making big money. According to data provided by The Longer-Term Care Imperative, a coalition of groups that provide elder care, a nursing assistant in a Minnesota nursing home makes $12.03 an hour. In a hospital, that same employee averages $17.82 an hour.

A registered nurse makes $24.57 an hour in a Minnesota nursing home, while in a hospital that's more like $41.96 an hour.

"It's difficult to provide wage increases if you can't raise your prices," Bergstrom said.

In Minnesota, unlike in most states, the government sets nursing home rates. Different centers charge different amounts (Minneapolis nursing homes charge more than rural homes do, generally); but inside each one, everyone pays the same, regardless of ability to pay or completeness of insurance coverage.

"Minnesota's unique in that the rates that nursing facilities charge for private or Medicaid are set by the state," Bergstrom said.

The money goes for all the medical care, the utilities, rent, insurance, taxes, all the costs of running around-the-clock medical care.

"It's quite significantly less than you'd pay in a hospital," Brennan said.

Minnesota's nursing homes have had their rates frozen for four years. In fact, about a third of them lost money last year.
Assisted living centers are harder to talk about. Some are bare bones, others are like the Taj Majal.

"If you've seen one assisted living center, you've seen one assisted living center," Bergstrom said.

A newer assisted living facility in Maple Grove charges $120 a day for rent, then you pay extra for medical care.

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