Name: Why Nursing Homes And Hospice Are So Expensive In The U.S.
Uploaded: 2025-03-30T06:33:55.000Z
Duration: 11 min 10 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

America has a population problem, and no, I'm not talking about the baby bust.

I'm talking about the baby boom, the one that happened back in the 1940s.

Baby boomers. There's an estimated 69 million of them in the U.S., making up 21 percent of the U.S.

population and holding more than half of the nation's wealth.

They're soon going to be hitting their long-term care years in a major way.

I think this space is completely underprepared for the number of older adults that are going to need long-term care and end-of-life care.

As baby boomers move toward retirement homes, nursing facilities and hospice care, they're flooding into an already struggling industry, plagued by labor shortages, climbing costs and chronic government underfunding.

has lost more than 62,000 nursing home beds and saw 774 nursing homes close their doors.

has more than 14,000 nursing homes and long-term care facilities to provide for almost 5 million Americans.

We've historically relied heavily on families.

There's not going to be the number of family members that we've had in the past.

We came to the decision that it was time for hospice.

It wasn't a surprise, but it was a very difficult, emotional decision because when you think of hospice, you typically think of death.

Now, Wall Street is looking at the aging cohort as a money-making opportunity, with both public companies and private equity dollars flooding into the space.

Roughly around 25.5 percent of all Medicare beneficiaries that received hospice care receive them from a publicly traded or a private equity-owned hospice.

Between 2015 and 2022, 47 private equity firms bought 124 U.S.

hospices. The market is growing significantly.

Do we have transparency in who owns the building and how they're spending our dollars?

So who is positioned to make money off this massive block of aging baby boomers?

And what does it mean for senior citizens and their families?

senior care space is siloed into two categories.

Long-term care includes services like nursing homes, assisted living and home-based care, valued at $577 billion. Then there's end-of-life care that includes shorter-term services like hospice and palliative care, estimated to be worth $14.5 billion in 2025 and growing.

We believe it is going to grow at 8.7 percent for the next seven years to reach around $26 billion by 2032.

And there's a reason it's seen all this growth, because senior care in the U.S.

is pricey. Between 2009 and 2024, the cost of medical care services in the U.S.

In 2023, the median annual cost for a private nursing home room was over $116,000.

For in-home care, the median annual cost was $75,000.

Now, families can and do fill those care need gaps, but a large portion of the funding for both long-term care and end-of-life care comes from Medicaid and Medicare.

Medicare being federal health insurance for people 65 and older.

Medicaid being state and federal health coverage for people with limited income.

Medicaid makes up 44 percent of all long-term care spending in the U.S.

hospice patients were Medicare beneficiaries.

That means seniors and their families are often at the mercy of Medicare and Medicaid policies, which don't favor at-home health care. Medicaid is not a super generous payer, and it often pushes individuals into nursing homes before they would like to go there, basically.

It underfunds care in the home, in the community, where older adults and their family typically want care to be delivered. And more people aging into the space means more Medicaid and Medicare policies and more money, a lot more money. And that's catching the attention of companies and investors with deep pockets.

Private and public entities have been investing in the senior care space for a while now.

This is nothing new. Big health care players like Vitus, a subsidiary of ChemMed, has been buying up smaller regional hospices and long-term care operations for years.

Insurance companies, REITs and real estate companies are also investing in nursing homes and hospice agencies. All these companies and structures make for a pretty crowded space, especially when it comes to long-term care.

This is highly segregated or highly fragmented market.

The top 10 competitors in this space may not account for more than 10 percent of market share.

What is new is this, the influx of private equity deals in the senior care space since 2020, with a significant uptick happening in the hospice space, a trend that's been picking up steam since the 2010s.

Hospice was started as a grassroots nonprofit movement where the majority of care, you know, a couple of decades back, was provided by strictly nonprofits.

And in this current landscape now, the majority of hospice providers are for profit.

Between 2011 and 2019, there were 409 private equity transactions involving hospice agencies, 58 percent of those transactions involved buying a nonprofit hospice.

Now, 75 percent of hospice agencies in the U.S.

are run on a for-profit model of some kind.

Historically, we've had low interest rates.

So that means that money is cheap to borrow.

Hospice is interesting because you don't need a lot of capital to start one.

You don't need a traditional brick and mortar setting to provide hospice care.

The care can be provided in a person's home, a nursing home, assisted living facility.

Margins for for-profit agencies generally land around 18 to 22 percent, a major uptick compared to nonprofit agencies. There's a lot of factors drawing private investors into the hospice space, but most experts point to

Medicare's fixed payment model as a driver.

Hospice is paid on a daily rate or a per diem rate based on the level of care provided, regardless of the number services rendered in a given day.

So for each patient that is enrolled in hospice, for each day, they're reimbursed a fixed amount.

It doesn't matter how many services that hospice provides to you, they're getting that fixed amount of money.

For-profit owners sometimes cut costs to boost margins in a space that is already grossly understaffed.

This isn't just affecting the hospice sector.

It's also impacting long-term care operations.

We have huge staffing shortfalls in all parts of our end-of-life care system, from nursing homes to assisted living to home and community-based settings to hospice.

There is still a shortage of skilled laborers.

We've seen a lot of inadequate symptom management and support due to the untrained caregivers and insufficient expertise. And less staff means less resources for patients and families.

When a private equity company acquires a nursing home chain, we see an increase in emergency department visits, an increase in hospitalizations.

And then there's some really stark evidence on increased mortality when an individual is cared for in a private equity facility.

That motivation to cut costs also extends to patients.

For-profit hospice agencies are more likely to accept patients based on their profitability.

Studies found these types of hospices prioritized people with neurological diagnoses like dementia over cancer patients who pass away in a shorter time span.

The first couple of days of being enrolled in hospice and the last couple of days until you unfortunately die are the most intensive and costly to the hospice, where in the middle, it's the least costly and the most profitable.

Not every nursing home is equally profitable and not every nursing home resident is equally profitable.

For long-term care, the trend is flipped, with for-profit ownership preferring patients with shorter stays to those with long-term needs.

Medicare is a very generous payer for post-acute nursing home care.

So I'm thinking about an individual that has a stroke or a hip fracture, needs a hospital stay, then followed by some rehabilitation in the nursing home and then hopefully discharged to the community.

So basically, if you're running a nursing home, you want to maximize those short-stay Medicare patients and minimize those long-stay Medicaid residents.

And that's exactly what private equity has done.

They've looked to expand the share of Medicare patients who are maybe a $600, $700 daily payment rate versus a

Medicaid resident that may be $200 or $250 a day.

But for the average family, it can be difficult to get a clear picture of who is in charge of their loved one's care during an already stressful and confusing time.

When family members are looking for a nursing home for a loved one, they typically start on the federal website, nursinghomecompare. Currently, however, you can't tell whether or not the building is private equity owned.

This leads a lot of families to be flying blind when it comes to ownership of nursing homes.

On top of everything, political headwinds could throw the entire space into flux.

The National Council on Aging called long-term care the single largest financial risk faced by older adults and their families, with an estimated 80 percent of seniors unable to absorb the financial shock.

We're completely sticking our heads in the sand and not really investing in the types of policies that are going to lead to good outcomes.

And it's not just the macro environment that can be difficult to navigate.

Personal finances can add unforeseen headwinds to end-of-life care planning.

He was the father that was home at five o'clock, that we'd have dinner, we'd have a catch.

He was always present. He was always there.

He's the CEO of Frisch Financial Planning, a financial advisory firm where he worked with his dad for 20 years.

Now, as a financial planner, he guides clients through another part of the end-of-life sector that can be confusing.