New Approach to Housing Is Urgently Needed for Middle-Income Seniors

Given the frequency of policymakers warning about health care’s future, they’ve paid surprisingly little attention to an issue that will jeopardize the well-being of millions of Americans in the next decade, while putting enormous new cost pressure on Medicaid.

A new peer-reviewed study funded by the National Investment Center for Seniors Housing & Care and conducted by researchers from NORC at the University of Chicago shows that middle-income seniors face a huge financial cliff in the next decade, in terms of paying for the housing and care they’re likely to need.

Researchers found that more than half of middle-income seniors (54 percent) will not have enough assets to cover projected average annual costs of $60,000 for assisted living rent and other out-of-pocket medical costs a decade from now, even if they generated equity by selling their home and committing all their annual financial resources. That figure rises sharply, to 81 percent, if middle-income seniors in 2029 were to keep the assets they built up in their home, but committed all of the rest of their annual financial resources to cover costs associated with seniors housing and care.

Where does that leave middle-income seniors who are expected to need the care and services that seniors housing provides, but currently isn’t affordable to them? These individuals — many of them the teachers, firefighters, government workers and nurses of their generation — with incomes between $25,001 and $74,298 annually, aren’t eligible for Medicaid, but they don’t have enough assets for assisted living and related care.

The data are daunting. By 2029, the number of middle-income seniors will nearly double from 7.9 million to 14.4 million. Sixty percent of middle-income seniors will have mobility limitations, and 20 percent will have high needs, which means three or more chronic conditions and one or more functional limitation, yet less than half (46 percent) will have the financial assets to afford seniors housing and care.

Reflecting our country’s broader demographic shifts, these seniors will be more racially diverse, have higher educational attainment and smaller, more disparate families from which to draw unpaid caregivers. Overall, there will be nearly 9 million middle-income seniors with mobility limitations, almost 3 million with high needs and more than 1 million with cognitive impairments.

Currently, seniors housing in the United States is paid out of pocket by seniors with sufficient assets. A relatively small percentage of Americans have long-term care insurance to defray the costs. For seniors with the lowest incomes, Medicaid covers housing only in the skilled nursing setting, but increasingly also covers long-term services and supports in home and community-based settings.

We need to develop an entirely new market of housing and care for this emerging cohort of middle-income seniors. No one, regardless of background, should have to spend down assets into poverty to pay for a retirement that he or she worked a lifetime to achieve.

Making that aspiration a reality requires the government, private sector and those working in health, housing, technology, and finance to innovate and find new solutions. The private sector could consider offering more basic housing products, better leveraging technology, subsidizing middle-market residents with higher-paying residents, more robustly engaging unpaid caregivers and developing innovative real estate financing models.

Simultaneously, the government could create incentives to build the new market for middle-income seniors by offering tax incentives targeted to the middle market, expanding subsidy and voucher programs, expanding Medicare coverage of non-medical services and supports, creating a new “Medicare Part E” benefit to cover long-term care, and broadening Medicaid’s coverage of home- and community-based services.

It is imperative that we act now. If we don’t, millions of aging middle-income seniors will exhaust their savings seeking appropriate housing and care. More broadly, we risk the sustainability of public safety net programs that millions of Americans rely on every day.

The NORC data show that, as profound as the changes highlighted in this research on the middle market will be, they are only the tip of a much larger demographic shift. The research captures just the beginning of the baby boomers’ transition into their elder years. By 2029, the oldest boomer will only be 83, and millions more will follow.

Working together, we can create a new middle market for seniors housing and care that honors their goals and preferences, better preserves their lifetime savings and helps us prepare for larger demographic shifts.


Bob Kramer is founder and strategic adviser at the National Investment Center for Seniors Housing & Care, a nonprofit organization that supports access and choice in seniors housing and care through research and analytics.

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