The cost of nursing homes has reached staggering heights in recent years, leaving families across the country struggling to afford quality care for their aging loved ones. Many have been left wondering: why are nursing homes so expensive?
As a result of his decades-long experience of working with couples and families from all different backgrounds on their retirement and financial planning, Greg Liszka (CFP®, RICP®), President and Advisor at Iron Point Financial, believes that the high cost of nursing homes comes down to four main causes:
- Difficulty finding, hiring and retaining staff,
- An aging population driving overwhelming demand,
- A steep rise in medical inflation, and
- Localized financial challenges that have caused many care homes to close their doors.
Throughout the rest of this blog post, we will explore these issues in greater detail, and then offer four practical solutions that can help families like yours navigate these financial challenges with compassion, understanding and financial efficacy.
IPF's Four Primary Causes of High Nursing Home Costs

1. Difficulty Finding, Hiring & Retaining Staff
The sad reality is that many nursing homes are struggling to attract and retain qualified staff, particularly nurses and caregivers. This staffing shortage can be a critical driver of increasing costs. As Greg explains,
“The cost of care is going through the roof, first and foremost because they have a hard time finding staff. There just aren’t enough nurses. There aren’t enough homes overall, and beds are expensive, but the nurse shortage is a driving factor.”
This isn’t just Greg’s opinion, either: a recent Agency for Healthcare Administration survey found that an enormous 87% of nursing homes have “moderate to high levels of staffing shortages and hiring new staff has been challenging for 98% of nursing homes.” The same source noted that almost all nursing home and assisted living facilities have raised wages and staff bonuses in an attempt to hire new workers and keep existing staff satisfied.
Why is the shortage of nurses so critical? Precisely because nursing homes have to pay more in staff costs to keep their basic medical care operations running, the overall cost of care for residents goes up. It’s a basic part of the equation, but it’s a major contributor to this national issue.

2. Huge Demand + Aging Population = Bed Shortages
Today, there are 71.6 million ‘baby boomers’ in America (people between the ages of 57 and 75). That’s over one-fifth of the entire US population… and it’s also the age range at which the assisted living conversation becomes increasingly important.
While those on the younger side of the baby boomer generation aren’t likely to need a care home any time in the next five or even ten years, this overall demographic trend is creating an unprecendented, ever-increasing demand for nursing home care, and it doesn’t look like stopping any time soon…
The Population Reference Bureau estimates that the number of Americans over the age of 65 is likely to hit 82 million people by 2050, with a corresponding proportional increase to 23% of the overall population. It doesn’t take a genius to see it but, as Greg plainly observes,
“It’s is a supply-and-demand problem. The population thinking about and knocking on nursing home doors is just growing and growing and growing. The baby boomer generation is getting to the start of that line, and who knows where we’ll go from there…”
When demand far outplaces supply — whether that’s in relation to hiring nurses or simply providing bed space — costs ramp up significantly, and that means fewer and fewer people can afford the care and support they are likely to need in their sunset years, especially if they’re left to navigate those challenges on their own.

3. Medical Inflation > General Inflation = Uncomfortable Economics
While it hasn’t been quite as marked in recent years as it has during some periods in the last few decades, the overall cost of medical supplies has risen faster than general consumer inflation. That inflation calculation includes labor — see our first section on nurse shortages — but it goes beyond that to equipment, medicines and other medical operating costs in care homes. Clients keep telling Greg about this state of affairs, hence his assessment that,
“Medical inflation is just higher than normal inflation, and that means everything gets super expensive when you put it together. There’s the cost of specialized equipment, advanced treatments, and the construction and maintenance of facilities. It all adds up.”
In case you’re wondering about the specifics of this increase, the overall cost of medical care has increased 121.3% since 2000 (including services, insurance, drugs and medical equipment), compared to an 86.1% increase in the price for consumer goods and services (per Peterson-KFF’s analysis of the Bureau of Labor Statistics’ available data).
That’s a 35.2% percentage difference, and it likely means that, the older you get, the more you are going to have to fork over for medical costs versus other basic living costs like food, utilities and travel (all of which would be especially important for those who would rather have at-home care instead of in-facility living).

4. Care Homes Going Out of Business
To make all of this worse, the above issues compound for another depressing trend: despite the growing demand, many nursing homes are shutting down, with few, if any, new homes on the horizon. The main reason for that? It’s just too expensive for them to keep running, let alone for the clients they are trying to serve.
In Greg’s words, “There are actually a lot of homes going out of business. It’s a huge problem. Our need is going through the roof, but the availability is plummeting.” He’s joined by people like Mark Parkinson, CEO of the American Health Care Association (AHCA), who opines, “It’s not hyperbole to say access to care is a national crisis. Nursing homes are closing at a rate much faster than they are opening…”
The AHCA’s statistics point to just how stark those numbers are: there are 62,567 fewer nursing home beds, 20% of all nursing homes “have closed a unit, wing, or floor,” and at least 774 homes have closed since 2020, resulting in 28,421 displaced residents with nowhere to go; from January to August 2024, only 7 new facilities opened nationwide.
It’s a sad situation that, despite growing demand, many, if not most, nursing homes are shutting down under the weight of financial pressures. These closures fuel a vicious cycle: fewer available facilities means greater strain for existing ones, so prices there get higher and higher, too.
If we didn’t believe in good news and resourceful solutions, it would be easy to get overwhelmed by the seemingly impending, uncontrollable doom of it all. Thankfully, that’s not in our character, and we’ve found there are a few avenues you can explore to beat these trends and make sure your loved ones get the care they need, when they need it most.
Solutions to Manage Nursing Home Costs

1. Understand Medicare and Medicaid
A lot of people mistakenly believe that they have to pay for all nursing home-related costs themselves, from day one until they die. If that’s you, take this as a sign: there could be a better way! One of the first things Greg explains to new and existing clients who are considering going into a nursing home, or who have relatives nearing that scenario, is that:
“You don’t have to spend everything and go broke. You don’t have to self-pay without help until everything is gone. You don’t have to wait for the nursing home to put you on Medicaid. The rules do not dictate that it has to be that way — and the key is to understand those rules and leverage all of the best tools available.”
Of course, the exact tools we would consider vary from person to person, but in our experience at Iron Point Financial, it can be so much better — and can be so much more affordable — to get a long-term plan in place for Medicare and Medicaid now, when you’re healthy and active, than later, when you’re already undergoing the stress of having to work all this stuff out on the fly. That’s why we prioritize educating our clients and laying out the best options to suit their financial situation.

2. Proactive, Careful Asset Structuring
The next priority area we are likely to address with a client who needs to think about long term care is the importance of working with a financial advisor to structure their assets in a way that maximizes Medicaid eligibility, or protects their wealth through other optimized financial, legal and tax options. In that conversation, Greg always starts with a question:
“What assets are we talking about? What are we trying to protect? There are a lot of different strategies… we could be talking about asset protection trusts, or maybe we’re just retitling assets out of your name. Perhaps we could just cover them with life insurance and eat the costs that way. It all depends.
No matter what situation you or your loved ones find yourselves in, know that with careful planning and measured implementation, we can curate financial plans that help to solve your nursing home problem long before it becomes an immediate need or crisis situation. As financial fiduciaries, we know what that process can entail, and we will do everything possible to look out for your best interests.

3. Considering Worthy Alternatives Like In-Home Care
For many families, in-home care works out as a far more affordable and flexible alternative to full-time nursing home care. For those unfamiliar with the idea, in-home care allows aging individuals to remain in a familiar environment — their homes — while receiving the professional, qualified assistance they need (through nurses who come directly to them).
Part of the reason this could be much easier on your wallet is, in Greg’s experience, that,
“Many long term care insurance providers pay for assisted living — for in-home care — because they would rather keep you in your home than have to pay for a full-blown assisted living facility.”
Staying at home could have further relational and emotional benefits, too, as it might be easier to live full-time with younger family members, or even to have your wider friendship circle come and visit.
Considering the scarcity of nursing home places, you might have to travel considerable distances just to visit your loved one in a facility, making staying at home a much more attractive option. After all, nobody wants to be separated from those they care most about; in-home care can be a great way to ensure that everyone who matters stays as close as possible.

4. Invest in Long-Term Care Insurance
Speaking of long-term care insurance: it can be a highly effective, valuable tool for covering the costs of nursing home care, assisted living, or in-home care. However, timing is absolutely of the essence when it comes to purchasing a policy. As Greg frames it,
“You probably don’t want to be looking at long-term care insurance when you’re 70. The chances of you actually getting it at that age are slim to none, and if by some miracle you do, it’s going to be so expensive that it’s probably not worth it.”
Instead, we would strongly recommend looking into long-term care insurance in your late 50s or mid-60s — to prepare for it well ahead of time. Typically, long term care insurance policies kick in once you are unable to perform two out of the five “Activities of Daily Living” (ADLs) — things like bathing, dressing or feeding yourself — so most people sign up years before those activities get too difficult.
For an insurance company, the logic is simple: if you’re 75, and you’ve just signed up, the chances of you cashing in on the policy when you’re 76 are incredibly high, but when you’re a bit younger, you still have a good number of years to pay your premiums, so that’s a risk they’re willing to take.
Have you considered long-term care insurance? Click here for Iron Point Financial’s free PDF resource on the benefits and costs of including long-term care insurance in your retirement plan.
Final Thoughts
Hopefully, you can now answer the question, “Why are nursing homes so expensive?” in your own words, with the knowledge we have shared in this article. Whether you point to nurse staffing shortages, rising demand from the baby boomer generation, medical inflation, or the increasing number of care facilities closing their doors, we trust you are well equipped not just to talk about the big picture situation, but to do something about it for those you love, starting today.
As we’ve shared, there are some great options for working through the cost of care, and we would be honored if you sought out our help to explore those. If that’s something you would be interested in — if you are feeling overwhelmed by the practicalities, or you’re just not sure where to start — why not reach out to schedule an appointment with us today?
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Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have registered broker licenses for 22 other states across the continental USA.
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