Why Nursing Homes and Hospice Are So Expensive in the U.S.

March 04, 2025   99

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Introduction

The cost of senior care in the United States is skyrocketing, leaving millions of families struggling to afford nursing homes and hospice services. With the aging baby boomer population, the demand for long-term care is at an all-time high, but the industry.

It is plagued by understaffing, underfunding, and rising expenses.

Adding to the crisis, private equity firms rapidly buy up hospice and nursing home facilities, transforming them from nonprofit, patient-centered services into profit-driven businesses. As a result, the quality of care is declining while costs continue to rise.

This article will explore why nursing homes and hospice care have become so expensive, who is profiting from this $600 billion industry, and what it means for seniors and their families.

The Aging Population Crisis: Baby Boomers and the Demand for Senior Care

The U.S. is facing a demographic shift like never before. There are approximately 69 million baby boomers, making up 21% of the total population. This generation owns over half of the nation’s wealth and is rapidly approaching retirement age.

By 2030, all baby boomers will be at least 65 years old, and by 2040, one in five Americans will be a senior citizen. This means millions of people will need long-term care, assisted living, and hospice services, overwhelming a system that is already under strain.

Historically, families provided most of the care for aging relatives. However, with smaller family sizes, increasing dual-income households, and geographic dispersion, fewer people can rely on their families for care. This forces many seniors to turn to nursing homes, assisted living facilities, and hospice care, all of which have hefty price tags.

The Cost of Nursing Homes and Hospice Care

The senior care industry is divided into two main categories:

1. Long-Term Care: Includes nursing homes and assisted living facilities for seniors who need daily support.
2. End-of-Life Care: Includes hospice services for terminally ill patients.

The costs associated with these services are staggering:

• Nursing home care costs an average of $108,000 per year for a private room.
• Assisted living costs approximately $54,000 per year on average.
• Hospice care costs about $14.5 billion annually across the U.S.
• The U.S. healthcare cost has increased by 54.5% from 2009 to 2024.

Most seniors rely on Medicare, Medicaid, or private insurance to cover these costs. However, gaps in coverage often leave families paying out-of-pocket, sometimes forcing them to sell homes, drain savings, or take out loans to afford proper care.

How Is Senior Care Funded in the U.S.?

The funding for nursing homes and hospice care mainly comes from three sources:

1. Medicaid (44% of long-term care funding)
   • It covers nursing home care but has strict eligibility requirements.
   • Often forces seniors to deplete their savings before qualifying.
   • Encourages institutional care rather than home-based alternatives.
2. Medicare (20% of long-term care funding)
   • Primarily covers short-term rehab, not long-term stays.
   • It covers hospice but only under strict conditions.
3. Out-of-Pocket & Private Insurance
   • Many seniors and families pay directly for services.
   • Long-term care insurance is expensive and limited.

Because Medicaid favors institutional care, many seniors are pushed into nursing homes sooner than they would prefer rather than receiving affordable in-home care.

How the Transition of CDPAP to PPL Will Worsen the Quality of Care

The Consumer Directed Personal Assistance Program (CDPAP) has long been a lifeline for seniors and individuals with disabilities. It allows them to hire caregivers of their choice, including family members, to provide care at home. This flexibility and patient-centered approach have helped many elderly individuals avoid institutionalization in nursing homes, ensuring they receive care in a familiar and comfortable environment.

However, the recent transition of CDPAP administration to Public Partnerships LLC (PPL)—a private entity—has raised concerns about how this shift will impact the quality of home care services and the overall accessibility of care for vulnerable populations.

 The Major Issues with Moving CDPAP to PPL

 Lower Wages and Worse Conditions for Caregivers

• Many caregivers under CDPAP could earn a livable wage while caring for their loved ones.
• Under PPL, there are concerns that wages may be reduced, making it harder for caregivers to sustain themselves financially.
• Lower wages and fewer benefits could drive skilled caregivers out of the program, worsening the caregiver shortage.

Increased Bureaucratic Barriers

• PPL has stricter administrative processes, making it more difficult for patients to enroll and hire caregivers.
• Delays in approvals and excessive paperwork may discourage family members from participating in the program.

Payment Delays for Caregivers

• Reports from other states where PPL has taken over similar programs show that delays in caregiver payments are common.
• Many caregivers rely on timely payments as their primary source of income, so delays could force them to seek other employment, leaving patients without care.

Loss of Flexibility for Patients

• CDPAP’s most significant advantage was allowing patients to choose their caregivers based on trust and personal connection.
• The transition to PPL may come with stricter rules on caregiver eligibility, potentially forcing patients to accept state-approved aides rather than trusted family members.

How This Ties Into the Broader Privatization of Senior Care

The transition of CDPAP to PPL reflects a more significant trend of corporate involvement in the senior care industry. Just as private equity firms have taken over nursing homes and hospice care, turning them into profit-driven enterprises, this shift suggests that Medicaid-funded home care programs may also be moving toward a cost-cutting model.

Potential Consequences:

• More seniors may be forced into nursing homes if home care becomes too difficult to access.
• A decline in the quality of home-based care due to staffing shortages.
• Increased corporate control over Medicaid-funded programs, reducing the focus on patient needs and growing emphasis on cost savings.

How the Transition of CDPAP to PPL Will Worsen the Quality of Care

The Consumer Directed Personal Assistance Program (CDPAP) has long been a lifeline for seniors and individuals with disabilities. It allows them to hire caregivers of their choice, including family members, to provide care at home. This flexibility and patient-centered approach have helped many elderly individuals avoid institutionalization in nursing homes, ensuring they receive care in a familiar and comfortable environment.

However, the recent transition of CDPAP administration to Public Partnerships LLC (PPL)—a private entity—has raised concerns about how this shift will impact the quality of home care services and the overall accessibility of care for vulnerable populations.

The Major Issues with Moving CDPAP to PPL

Lower Wages and Worse Conditions for Caregivers

• Many caregivers under CDPAP could earn a livable wage while caring for their loved ones.
• Under PPL, there are concerns that wages may be reduced, making it harder for caregivers to sustain themselves financially.
• Lower wages and fewer benefits could drive skilled caregivers out of the program, worsening the caregiver shortage.

Increased Bureaucratic Barriers

• PPL has stricter administrative processes, making it more difficult for patients to enroll and hire caregivers.
• Delays in approvals and excessive paperwork may discourage family members from participating in the program.

Payment Delays for Caregivers

• Reports from other states where PPL has taken over similar programs show that delays in caregiver payments are common.
• Many caregivers rely on timely payments as their primary source of income, so delays could force them to seek other employment, leaving patients without care.

Loss of Flexibility for Patients

• CDPAP’s most significant advantage was allowing patients to choose their caregivers based on trust and personal connection.
• The transition to PPL may come with stricter rules on caregiver eligibility, potentially forcing patients to accept state-approved aides rather than trusted family members.

How This Ties Into the Broader Privatization of Senior Care

The transition of CDPAP to PPL reflects a more significant trend of corporate involvement in the senior care industry. Just as private equity firms have taken over nursing homes and hospice care, turning them into profit-driven enterprises, this shift suggests that Medicaid-funded home care programs may also be moving toward a cost-cutting model.

Potential Consequences:

• More seniors may be forced into nursing homes if home care becomes too difficult to access.
• A decline in the quality of home-based care due to staffing shortages.
• Increased corporate control over Medicaid-funded programs, reducing the focus on patient needs and growing emphasis on cost savings.

Alternative Solution: Transitioning to PCA (Personal Care Assistant) Services

Given the uncertainties and potential downsides of the CDPAP-to-PPL transition, many families are considering a shift to the PCA (Personal Care Assistant) program as an alternative.

Why PCA May Be a Better Option:

More Stability: Unlike CDPAP, PCA programs are not undergoing significant structural changes, reducing administrative issues.

Faster Payments: Many PCA caregivers experience fewer delays in receiving wages.

Simplified Hiring Process: PCA services often have more explicit guidelines without excessive paperwork.

More Professional Support: Patients can still receive quality home care with trained aides, even if they cannot hire family members.

While PCA does not allow patients to choose family members as caregivers (as CDPAP does), it provides a more structured and reliable o

Private Equity and the Commercialization of Hospice Care

The hospice movement in the U.S. began as a nonprofit effort, focusing on compassionate, patient-centered end-of-life care. However, in recent years, private equity firms and large corporations have aggressively entered the market.

Key Trends in Hospice Commercialization:

• Between 2015 and 2022, 47 private equity firms acquired 124 hospice agencies.
• Today, 75% of U.S. hospice agencies are for-profit.
• Private investors prioritize cost-cutting over patient care.

What does this mean for patients?

 Increased focus on profitability.

 Less personalized and compassionate care.

 Shorter patient stays to maximize Medicare reimbursements.

 Preference for patients with neurological conditions (who live longer) over cancer patients (who require more intensive care).