Understanding the Cost of Funeral and End-of-Life Care in America

For most big life events – college, marriage, child rearing, retirement – we know that we have to think about them ahead of time and make sure we’re financially prepared for life’s next big step. Death, life’s last big step, is not pleasant to talk about, much less plan for.

Dying costs money. In many cases, it can cost a considerable – and surprising – amount of money. While planning for the end of your life can feel really morbid and uncomfortable, having a financial plan in place can help make things easier for both you and your family as the inevitable approaches.

How Much Does It Cost To Die?

How much it costs to die depends on how an individual passes and the decisions the family makes after they do. While you might only associate the costs of death with funerals and burials, a large portion of death-related costs can actually come from the days, weeks and months leading up to the death, when dying individuals may need to be hospitalized, entered into hospice or receive other end-of-life care.

We’ll go over some of the basic routes individuals can take through their end-of-life journey and give you estimates of what these options may cost. Beyond these estimates, your end-of-life costs, including health care while you’re still alive and funeral arrangements after you’ve passed, will depend on a variety of factors and may be much higher or much lower.

End-Of-Life Costs

For those who need end-of-life care, costs will typically be higher, though your private health insurance or Medicare/Medicaid may help you cover some or all of these costs.

The type of care an individual requires at the end of their life depends on their relative health and their ability to care for themselves. There are a few different options for end-of-life care, including hospice or palliative care, in-home care, nursing homes or assisted living facilities and hospital care.

Hospice And Palliative Care

Hospice and palliative care are typically reserved for those who have serious or terminal illnesses. Both types of care focus on helping the individual to manage symptoms or side effects of their illnesses and improve quality of life. The difference is that palliative care is offered in conjunction with treatment of the illness, while hospice care is given to those who have a life expectancy of 6 months or less and have opted to end treatment.

Hospice and palliative care can take place in the home, a hospital or in a facility that specifically offers this type of care. Many of the costs related to these types of care are partially or fully covered by Medicare or Medicaid, provided you meet the requirements. If you have private or employer-provided insurance, you’ll have to consult with your individual plan to find out what your coverage is for this type of care.

How much this type of care will cost depends on a variety of factors, including whether you receive in-home or facility-based care and what condition you’re being treated for. A 2016 analysis by Arcadia, a health management technology company, found that for those who died in hospice care, costs were an average of $17,845 in the final month of life.

In-Home Care

With in-home care, an individual remains in their home and is visited by a professional caregiver who assists them with things they need help doing, such as cooking, bathing, cleaning or administering medication. Depending on the types of services you enlist, your health insurance may cover some of these costs, particularly if you’re receiving health-based services; otherwise, you’ll likely have to pay out-of-pocket.

In-home care is typically charged at an hourly rate, and costs can range from $16 – $28 per hour. Medical in-home care may cost slightly more than nonmedical in-home care. How much you’ll pay overall will depend on how much care you need, how often you need a home care aide to visit you and the duration of their visits.

Facility-Based Care

Those who need full-time, around-the-clock care might decide that facility-based care may better suit their needs. This type of care covers a variety of different long-term, live-in facilities that provide care to those who need more robust end-of-life care, including assisted living facilities, group homes, nursing homes or continuing care retirement communities.

In 2016, the average cost per day in a semi-private nursing home room was $225, according to LongTermCare.gov; it was $253 per day for a private room. At an assisted living facility, where residents generally require less medical care than they do at a nursing home, the daily cost for a one-bedroom unit was $119.

Health insurance coverage is typically very limited when it comes to long-term care. If you anticipate needing to live in a long-term care facility as you age, you should plan ahead, as it’s likely you’ll be responsible for the majority of the costs. You may consider purchasing long-term care insurance or speaking with a financial advisor about whether your retirement savings will be sufficient to support you should you need full-time care.

Hospital Care

For many individuals, whether by choice or necessity, end-of-life care will happen at a hospital. Hospitalization is beneficial for those who require more intensive or life-sustaining care.

Your health insurance may cover some or the majority of the costs incurred during your hospital stay. Be prepared, however, for out-of-pocket costs. Your insurance may not cover everything, and having money set aside for medical bills can make a stressful time easier on you and your loved ones.

According to the Arcadia analysis, costs in the final month for those who died in the hospital were an average of $32,379.

Out-Of-Pocket Care Costs

Though insurance or other programs help with many of the costs associated with end-of-life care, individuals and their families still may incur some costs that they’ll have to cover using their own funds.

According to a 2018 paper written for the Federal Reserve Bank of Richmond titled “End-of-Life Medical Expenses,” out-of-pocket expenses in the last year of an individual’s life can be around $9,530.

If your end-of-life care includes treatment for a disease or health condition, costs can vary quite a bit, and out-of-pocket costs can get high if you require long-term care.

The Richmond Federal Reserve paper notes average medical expenditures over the last 5 years of life among dementia, cancer and heart disease patients.

By far, dementia is the costliest disease, with total average medical expenditures of $218,288 per individual over the last 5 years of life. While Medicare and Medicaid covered the majority of these costs, out-of-pocket costs over 5 years were still a hefty $65,826.

Individuals with cancer incurred an average of $30,834 of out-of-pocket costs in the last 5 years of their lives, and individuals with heart disease paid $37,763 out-of-pocket.

It’s important to think about the type of care you’ll want and likely need in the last years of your life, and whether you can afford that care. Be aware of what your insurance covers and talk to family members, including adult children or grandchildren, about what help, if any, they’ll be able to provide to you as you age. Speaking with a financial advisor who specializes in retirement may also be beneficial in helping you figure out how much money you’ll likely need and how to budget in a way that ensures you have money for out-of-pocket end-of-life costs.

Funeral Costs

After death, there will still be costs that need to be attended to. Ideally, you’ve made your wishes clear ahead of time regarding what type of services you’d like to be held in your honor, whether that be a formal funeral service, a more informal viewing or services that adhere to your religious traditions and beliefs. You’ll also need to decide whether you prefer burial or cremation.

The median cost of a funeral with a viewing and burial in 2017 was $7,360, according to the National Funeral Directors Association. Cremation (including the funeral and viewing) was slightly cheaper, at $6,260.

That’s a significant chunk of money. U.S. Bureau of Labor Statistics data tell us that funerals have become a lucrative industry over the past few decades, with the price of funerals rising almost twice as fast as consumer prices for all items from 1986 to 2017.

If you’re trying to limit costs, learn a little bit about the different goods and services that make up typical funeral arrangements and think about what you and your family want.

For example, the casket is an item that can often make up a large portion of an individual’s funeral costs. In fact, while a typical casket costs around $2,000, some can cost as much as $10,000. Even though sellers may insinuate that more-expensive models do a better job of preserving the body, “sealed” or “protected’ caskets won’t prevent inevitable natural processes from taking place any better than cheaper models.

The Funeral Rule protects consumers who are planning their own or a loved one’s funeral. One essential protection you have is that a funeral provider is not allowed to make you think that certain services are required by law as a way to get you to pay for things you don’t want.

You may encounter this when it comes to deciding whether or not to opt for embalming. If a funeral director tries to tell you that embalming is a legal requirement, that simply is not true. However, funeral homes are allowed to have their own policies that require embalming if the body is going to be displayed in a viewing. If you decide that you want a direct burial or cremation, meaning there is no viewing or visitation, you can potentially save hundreds of dollars by not embalming – the median cost of embalming a body in 2017 was $725, according to the NFDA.

The Funeral Rule allows you to choose which arrangements you want and to know the costs of what you’re paying for ahead of time. Knowing your rights can help ensure that you don’t overpay for your funeral, burial or cremation.

Who Pays When You Die?

Dying, as we’ve seen, is expensive. So, the question of who pays is an important one. Here’s how payments are typically handled throughout the end-of-life journey.

Paying For Medical Costs

End-of-life health costs will likely be covered by some combination of health insurance, other forms of insurance, government programs and your own funds.

If you’re concerned about having enough money should you end up needing long-term care, you may want to look into purchasing long-term care insurance, which is a type of insurance that will help you pay for care services you receive that aren’t covered by regular health insurance, whether they’re provided in-home or in a facility such as a nursing home. If you’d like to purchase this type of insurance, it’s important to do so before you need it; if you’re already in need of or receiving long-term care, you likely won’t qualify.

For out-of-pocket costs, you may first use any retirement savings you have available. For large expenses, you may also consider utilizing your home’s equity, such as with a reverse mortgage, to pay – though you should do your research and make sure this option makes sense for you.

After you pass away, your medical debts will generally be collected from your estate. This means that any assets you owned will first be used to pay off your debts before they can be passed to your heirs. However, certain assets, including retirement accounts and life insurance, are typically exempt from this and can be passed onto the beneficiary of the asset.

If you were a recipient of Medicaid, your state will attempt to recoup some of the benefits you were paid from your estate.

In some states, “filial responsibility laws” can compel the adult children of the deceased to pay for medical bills or other debts that weren’t covered by the estate. However, these laws usually aren’t enforced.

Paying For The Funeral

Once you die, it will be up to your next of kin to figure out funeral arrangements and how they’ll be paid for.

Some people opt to plan ahead to make the process easier for their living relatives after they’ve passed. You can do this by allocating money to be used for a funeral or even prepaying for your own funeral arrangements. Beware, though, that things can go wrong when you prepay (such as the funeral home going out of business) and it may be safer to simply set the money aside for your next of kin to use as they make arrangements.

Families often assume that they can use a life insurance payout to pay for the funeral. However, these payouts can take time to process, and families may have to pay out-of-pocket up front to cover the immediate costs associated with the funeral and burial or cremation.

Planning For Your Passing

It’s a macabre topic to be sure, but planning for the end of your life and eventual passing is a vital part of ensuring your and your family’s financial security as you get older.

If you need help in planning for your future, or simply want to learn more, there are plenty of resources specifically aimed at aging adults. Your local Area Agency on Aging is a great place to start – they can help you with planning for the future and getting connected with the services you need.

There’s also plenty of helpful information online. LongTermCare.gov has information that can help you plan for the what, where and how should you need long-term care in the future. The National Institute on Aging, a branch of the National Institutes of Health, has information for aging individuals and their caregivers on what to expect as an individual approaches the end of their life.