A decade from now, most middle-income seniors will not be
able to pay the rising costs of independent or assisted living.
By Paula Span
May 10, 2019
Gretchen Harris likes
the small brick house she bought in Norman, Okla., 36 years ago. She’s fond of
her neighbors and the magnolia tree she planted in the front yard. And having a
single-story residence proved helpful after knee replacement surgery last
summer.
“It’s always been a
good size for me,” she said.
But Ms. Harris, 72, a
retired attorney, has grappled with assorted health problems — heart disease,
non-Hodgkin’s lymphoma, osteoporosis, rheumatoid arthritis — and takes a long
list of prescription drugs.
Though she feels well
enough to hear cases a few days a month as a state administrative law judge and
to stay involved in educational and church activities, she worries about the
future.
“It weighs on my mind
some,” she said. Divorced, childless and without family nearby, “I am going to
need some long-term support, independent or assisted living, rather than just
living by myself.”
But will she be able
to afford it on her income, $4,600 a month from a state pension and Social
Security? Ms. Harris has no retirement savings and still pays a mortgage on her
house, refinanced several times.
She might be able to
swing $3,425 for a one-bedroom apartment in assisted living, which an annual survey by Genworth,
a financial company, says is the current Oklahoma state median. But that’s
projected to hit $4,600 in 10 years; one assisted living facility in Norman is
already charging $4,260 and up.
Even if she sold her
house, Ms. Harris calculates, she would fall short. “It’s the middle-class
bind,” she said. Too much money to qualify for Medicaid or subsidized housing,
but not enough to pay for long-term care, an industry that has primarily pursued
the well-off.
A recent analysis in
Health Affairs, pointedly titled “The Forgotten Middle,” investigated how many
middle-income seniors will be caught in that bind.
The numbers were grim.
Using data from the
national Health and Retirement Study, including personal income and assets and
health status, the researchers defined the middle-income cohort as Americans
from the 41st to the 80th percentile in terms of financial resources.
In 2029, for people
75 to 84 (ages when they’re likely to need long-term care), that would mean
access to about $25,000 to $74,000 a year in current dollars. Over age 85, the
middle-income category extends to $95,000.
About 14.4 million
people will fall into the middle-income category, almost double the
current number. Sixty percent will need canes, walkers or wheelchairs to remain
mobile, the analysis estimated, and 20 percent will need extensive help with
the so-called activities of daily living, such as bathing and dressing.
They’re a better
educated and more diverse group of older adults than in the past, less likely
to experience poverty. Still, most will be unable to afford assisted living,
the authors found.
A decade hence, 80
percent of middle-income seniors will have less than $60,000 a year in income
and assets, not including equity in their homes. Yet the estimated cost of
assisted living plus out-of-pocket medical expenses will hit $62,000, by the
team’s conservative estimate.
“This group gets ignored
and underserved in today’s long-term care market, and it’s a problem that’s
going to explode over the next 20 years,” said Caroline Pearson, a health
researcher at Norc (formerly the National Opinion Research Center) at the
University of Chicago and lead author of the study. “When you see the numbers,
it’s sobering.”
Depending on how one
defines the need, half to
two-thirds of older Americans will eventually require
long-term care.
Like Ms. Harris, many
consider selling their homes to finance it. (The analysis includes assisted and
independent living but omits nursing homes, where Medicaid becomes a major
payer.)
Even among
middle-income seniors with housing equity, though, more than half will be
unable to pay assisted living fees and medical costs in 2029, the study found.
(Independent living, while cheaper, provides some services but no hands-on
care.)
“Though a very large
percentage of older adults own homes, the amount of equity they have isn’t as
much as they think,” said Howard Gleckman, a senior fellow at the Urban
Institute. “They’ve used home equity for other things, including health care.”
Mr. Gleckman looked
into housing equity as a member of the Long-Term Care Financing
Collaborative, a group of policy experts. “In places like New York
or D.C., you might think of a middle income house as worth close to a million
bucks,” he said. “In a lot of the country, the value of the house is $150,000.”
The collaborative
found that among 65- to 74-year-olds, the median household had about $100,000
in home equity and an equal amount in other assets. “It doesn’t go very far,”
Mr. Gleckman said.
While the Genworth
survey puts the current national average for a one-bedroom apartment in
assisted living at $4,120 monthly, geographic variations can be extreme, from
about $3,700 in New Orleans to over $6,000 in Boston.
Moreover, today’s
middle-income older adults have more debt and less savings than earlier
cohorts. They’re less likely to receive pensions and have smaller families to
turn to for unpaid care.
“A lot of us are
going to get stuck in this middle, and it’s pretty scary,” said David
Grabowski, a health policy researcher at the Harvard Medical School and the new
study’s senior author.
As it happens, the
same week the research was published, the federal government issued its annual
report on Medicare and Social Security solvency. Next year, Social Security’s
costs will start exceeding its income; the program is projected to deplete its
reserves in 16 years. Medicare will deplete its hospital fund in just seven years.
That doesn’t mean
either program will evaporate, but benefits will decline if Congress doesn’t
take action — as it always has — to shore up financing.
“It’s hard to imagine
that Congress wouldn’t step up to make sure they remain viable for future
generations,” said Tricia Neuman, director of the Kaiser Family Foundation’s
Medicare policy program.
“At the same time,
there are tough choices to make, some of which could make long-term care harder
to afford.” An example: shifting additional costs to Medicare beneficiaries.
The United States,
unlike many Western democracies, has never created a broad public program
covering long-term care. Medicare pays for doctors, hospitals, drugs and
short-term rehab after hospitalization — not for independent or assisted
living.
That could change one
day — imagine a new Medicare Part LTC — but “that will be incredibly difficult
to achieve politically,” Ms. Pearson said.
Policy types instead
suggest more incremental changes by both government and industry. Perhaps
Medicaid could cover seniors with slightly higher incomes, or modify its
regulations to include housing costs along with health care.
The federal government
could expand the tax credits it gives developers of low-income senior housing
to encourage housing for middle-class seniors. Assisted-living operators might
aim for the middle market, with less luxe décor.
Already, Dr.
Grabowski pointed out, some chains are offering their own Medicare Advantage plans, which
can now cover certain support services for residents.
“There’s some
innovation happening here,” he said.
Gretchen Harris may
need senior housing before such innovations take hold, however. She would find
it distressing to leave Norman, where she’s lived nearly all her adult life.
But if finances
dictate, she’s contemplating a move to Little Rock, Ark. She has cousins there.
A version of this article appears in print on May 13, 2019,
on Page D5 of the New York edition with the headline: Long
on Care Needed. Short on Cash Necessary.
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