Why aging middle-class people can’t afford assisted living

Senior housing has a problem with middle-class affordability.

There are many alluring options for the wealthy, and there’s considerable financial help available for the poor. But middle-class people who need assisted living — help with daily activities and simple medical tasks such as medication and meal management — often find themselves priced out of the market.

In an attempt to spur the developers of senior housing to come up with cheaper alternatives before the wave of baby boomers hits old age, a group of researchers analyzed the likely needs and financial resources of the “forgotten middle” in 10 years.

In 2029, 7.8 million Americans aged 75 and up won’t be able to afford assisted living, according to the team led by Caroline Pearson, a senior vice president at NORC, an independent research institution at the University of Chicago. These 2029 seniors will have annual financial resources of $60,000 or less, but will make too much to qualify for Medicaid, the state and federal health insurance program for the poor.

Meanwhile, in the report published Wednesday in the health policy journal Health Affairs, the researchers estimated that the average annual cost of assisted living and medical needs would be $62,000. That does not include clothing or other supplies.

More than 11 million people would find assisted living out of reach if they held on to their houses. The researchers said that resistance to selling the family home keeps some seniors from considering other options. Selling the house can also be a problem when one member of a couple needs assisted living and the other doesn’t.

Although many people say they prefer to “age in place,” that can lead to loneliness and other health problems as seniors become more physically or cognitively disabled. Marc Cohen, co-director of the LeadingAge LTSS Center @UMass Boston, said many boomers are open to moving once aging causes disability. Greater availability of affordable housing would give them the option of “aging in community.”

Housing and health care are strongly linked, Pearson said. Changes in health usually drive the need to move to assisted living. “When you’re looking at the problem of aging, it is a problem that is housing and health care combined,” she said, “and yet the system doesn’t think about it that way and certainly doesn’t pay for it that way.”

Medicaid pays for nursing home care after people have used their other resources. It also often pays for supportive services that can help poor people stay in their homes longer. In most states — Pennsylvania is not one of them — it also helps pay for assisted living services, though not housing itself. Pearson said that a big increase in the number of people who spend all their money and need Medicaid’s help in old age would stress the program.

The National Investment Center for Seniors Housing and Care, a nonprofit whose mission is to improve access and choice in senior housing options, partly funded the project to draw more attention to the affordability problems, encourage conversation, and stimulate creative responses. “This study is meant to be a wake-up call,” said Beth Burnham Mace, NIC’s chief economist and a study author. She added that operators of senior housing wanted data on the size of the middle market.

Many boomers may need professional care because they’ve had fewer children than earlier generations. The report estimated that 60 percent of middle-income seniors in 2029 would have mobility issues and 20 percent would have three or more chronic medical conditions and difficulty with at least one activity of daily living, such as eating or bathing.

On the plus side, boomers are better educated than their parents and many have earned more income. The percentage of the population that can afford assisted living will also increase for some time. However, the portion that can’t will swell after 2029, Mace said. Future seniors, the study said, have lower overall savings and are less likely to have pensions than the previous generation.

The study defined the middle market based on which individuals in 2014 would have trouble paying for assisted living if they kept their house. That was people who made more money than the bottom 41 percent of seniors and less than the top 20 percent. In 2029, the study’s middle-market of 75- to 84-year-olds would have annual financial resources of $25,001 to $74,298 in 2014 dollars.

Mace thinks more people would move into senior housing if they could afford it. She sees the middle market as the aging equivalent of “workforce housing,” a planning term used to describe housing that firefighters, police officers, government workers, and teachers could afford.

But Jennifer Kappen, chief financial officer for Presby’s Inspired Life, said it’s not that easy to lower the price tag on assisted living because of building costs and salaries for skilled staff. “There’s not a lot that we can do to continue to drive those prices down,” she said. Her organization runs four higher-end senior living facilities in the Philadelphia suburbs and multiple independent-living apartments for lower-income elders. Without an entrance fee, the least expensive personal care (the most common type of assisted care in Pennsylvania) apartment costs $5,350 a month. Kappen wouldn’t want to cut costs there. “We feel good about how we provide services at that community,” she said.

The company has programs that offer "actuarial pricing" based on a resident's expected lifespan. People who live longer than expected can stay, even if they run out of money.

Kappen estimated that most people need assisted living for two to four years.

So far, Pearson said, "we've seen not a lot of progress from policy makers" in addressing the affordability problem. She hopes experts will now take on the challenge. "It feels like there should be some creative solutions out there."

The researchers suggested that the private sector could accept lower profit margins, offer less luxurious housing, take advantage of technology, and subsidize middle-income residents with higher paying ones. The government could create tax incentives, expand subsidies, expand Medicare coverage of non-medical services, and create a long-term care benefit.