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 Housing Options for Middle Market Consumers Demand Attention, Report Says

​A new report by NORC at the University of Chicago says 54 percent of middle-income Americans over the age of 75 will be unable to cover the projected average annual costs of $60,000 for assisted living rent and other out-of-pocket medical costs by 2029, even if they generated equity by selling their home and committing all of their annual financial resources.
 
That figure rises to 81 percent if middle-income seniors in 2029 were to keep the assets they built up in their home but commit the rest of their annual financial resources to cover costs associated with seniors housing and care, the report said.

Funded by the National Investment Center for Seniors Housing & Care (NIC) and appearing in Health Affairs, the research said “this large, neglected middle market” of consumers demands attention now from government and industry. 

According to the report, even as options for seniors housing have expanded in recent decades with the growth in assisted living and independent living communities, the ability of middle-income earners to pay for their housing and care has not kept pace.

“These settings provide housing in a community environment that often includes personal care assistance services. Unfortunately, these settings are often out of the financial reach of many of this country’s 8 million middle-income seniors (75 and older),” the report said.

The private seniors housing industry has generally focused on higher-income people, researchers said. “We project that by 2029 there will be 14.4 million middle-income seniors, 60 percent of whom will have mobility limitations and 20 percent of whom will have high health care and functional needs,” the report said. “While many of these seniors will likely need the level of care provided in seniors housing, we project that 54 percent of seniors will not have sufficient financial resources to pay for it.”

The gap, they added, suggests a role for public policy and the private sector in meeting future long term care and housing needs for middle-income seniors who can no longer remain at home.

“We still have a lot to learn about what the emerging ‘middle market’ wants from housing and personal care, but we know they don’t want to be forced to spend down into poverty, and we know that America cannot currently meet their needs,” says Bob Kramer, NIC’s founder and strategic advisor. 

Among the alternatives is to find less costly ways to provide housing and care. From the private-sector perspective, options may be to lower investment return expectations by charging less rent and reducing profit margins, subsidizing lower-income residents with higher-paying residents, as in mixed-income communities, or offering more basic and less expensive housing service products, the report said.

Technology may be a help, too, if new tools can be tapped to reduce operating costs, increase staff efficiency, or make residents more self-sufficient. “Seniors housing could also work to more formally involve family caregivers, outside volunteers, and healthier residents in a structured way to offset staffing costs, as occurs in some other countries,” the report said.

Another possibility, researchers said, is to offer à la carte pricing models that break out service and care expenses from housing to create more flexibility for some residents.
 
Even though some seniors housing operators are experimenting with some of these options, they are not widespread, which leads to the possibility of using tax incentives to promote innovation in these areas among developers and operators of seniors housing to serve middle-income seniors. “As the opportunity to serve this growing cohort becomes more recognized, we expect creative entrepreneurs to pursue other yet-to-be-imagined solutions,” the report said.
 
From a public program perspective, housing and health care policies could be put in play, like through changes to federal housing policy, such as those related to low-income tax credits and other programs. The report also said eligibility limits could be raised to include more middle-income seniors. On the consumer side, subsidies or voucher programs could be expanded to allow more seniors to access seniors housing or new incentives created to encourage long term care financial planning. 
 
A factor in helping to ease the situation could come from Medicaid since more than roughly one-fifth of assisted living residents have some of their care covered by Medicaid, though many programs have waiting lists and other coverage limits, the report said.
 
“By statute, Medicaid can pay only for care services and is not allowed to cover the costs of housing, except for institutions such as nursing homes and hospitals,” the report said. Changes to allow residents to retain greater income to pay for room and board while still qualifying for Medicaid or allowing supplementation by families or trusts could be considered.
 
Key to the general discussion on affordability of seniors housing is the need to weigh the full range of services that seniors require. The report notes that having people remain in their own homes might not produce the best outcomes for all people. “Social isolation and loneliness have been documented to create real and costly declines in health status,” the report said.
 
Additional support for the study came from AARP, the AARP Foundation, the John A. Hartford Foundation, and The SCAN Foundation.​​​
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