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High Profits in Long-Term Care Industry

An assisted-living facility near Minneapolis. Jenn Ackerman and Tim Gruber for The New York Times

Profits Over Incomes

The United States spends an average of about $13,000 per person every year on health care. No other country comes close to spending so much:

Source: KFF Health News | Data is from 2021 or nearest year. | By The New York Times

What do Americans get for all this spending? Our health care system does tend to produce more innovation than many others. U.S. companies developed some of the first Covid vaccines, for example. But much of the spending does little to improve people’s lives. Despite all our spending, the U.S. has the lowest life expectancy of any high-income country:

Source: World Bank | Data is from 2021. | By The New York Times

Twenty years ago, a group of researchers — Gerard Anderson, Uwe Reinhardt, Peter Hussey and Varduhi Petrosyan — published an academic paper that tried to solve the mystery. The title told the story: “It’s the prices, stupid.”

The main reason that U.S. health spending is so high is not that Americans are sicker than people elsewhere or are heavier users of medical care (although both those factors play a role). The main reason is that almost every form of care in the U.S. costs more: doctor’s visits, hospital stays, drug prescriptions, surgeries and more. The American health care system maximizes the profits of health care companies at the expense of families’ budgets.

Dying Broke

You can find a poignant example in a series that The Times and KFF Health News (a nonprofit) have been publishing in recent weeks. It’s called Dying Broke, and it examines the long-term care industry. One major part of the industry is known as assisted living, a name for facilities that are home to about 850,000 older Americans who need help with daily activities — like getting dressed or taking medications — but who don’t need constant nursing care.

These facilities can be highly profitable. “Half of operators in the business of assisted living earn returns of 20 percent or more than it costs to run the sites, an industry survey shows,” Jordan Rau, a reporter for KFF, writes. “That is far higher than the money made in most other health sectors.”

Many facilities, Jordan explains, “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.”

Other countries tend to hold down health care costs through regulation. Their government officials set prices that are high enough for health care providers to operate yet significantly lower than in the U.S. Policymakers here, by contrast, allow the market to operate more freely. But competition often fails to bring down prices because the health care sector is so complex, with opaque pricing and bureaucratic insurance plans.

It’s worth pointing out that the U.S. didn’t always have such high health care prices relative to other countries. The gap began to widen in the 1980s, as Austin Frakt, a health economist at Boston University, has pointed out. That decade also happens to be when the U.S. began moving more toward a laissez-faire economy.

An estate plan can play a significant role in addressing the financial challenges associated with high healthcare costs, especially in the context of long-term care. Here's how:

  1. Asset Protection: One of the primary goals of estate planning is to protect your assets from being depleted by healthcare expenses. Through tools such as trusts, you can structure your assets in a way that shields them from being used solely for medical bills and long-term care costs. This can help ensure that your loved ones inherit your estate intact, rather than seeing it diminished by healthcare expenses.

  2. Healthcare Directives: Estate planning allows you to establish healthcare directives, such as a healthcare power of attorney and a living will. These documents empower trusted individuals to make medical decisions on your behalf if you become incapacitated and unable to express your wishes. By clearly outlining your preferences for medical treatment and end-of-life care, you can potentially avoid unnecessary and costly medical interventions.

  3. Long-Term Care Planning: With the rising costs of long-term care, estate planning provides an opportunity to proactively address these expenses. For example, you can explore options such as long-term care insurance or setting aside funds specifically earmarked for future healthcare needs. By incorporating long-term care planning into your estate plan, you can better prepare for the financial implications of aging and potential medical challenges.

  4. Medicaid Planning: For individuals facing significant long-term care expenses, Medicaid can be a crucial source of financial assistance. However, eligibility for Medicaid is subject to strict asset and income limits. Estate planning strategies, such as asset repositioning and gifting, can be employed to help qualify for Medicaid benefits while preserving assets for heirs. Working with an experienced estate planning attorney can ensure that you navigate Medicaid eligibility rules effectively.

  5. Legacy Planning: Beyond immediate financial concerns, estate planning allows you to create a lasting legacy that reflects your values and priorities. By incorporating charitable giving and philanthropic initiatives into your estate plan, you can support causes that are important to you while potentially reducing estate taxes. Additionally, you can establish trusts or endowments to provide ongoing support for family members' healthcare needs or medical research in the future

(Related: A 2018 investigation in The Washington Post found that care deteriorated at a chain of nursing homes after the Carlyle Group, a private equity firm, took it over.)

Cheaper at home


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