More than half of middle-income seniors will lack resources for housing and care, study says
For more than half of middle-income Americans over 75 years old, senior housing with health care services will be out of reach in the coming decade, a new study warns.
The report, published Wednesday in the journal Health Affairs, is the first comprehensive look at a vast and growing demographic group researchers call the “forgotten middle” — people who can’t afford private assisted-living facilities but don’t qualify for subsidized nursing home care unless they spend down the assets they accumulate during their working years.
As the ranks of retired baby boomers swell and many live longer than their parents, the study projects that by 2029 about 14.4 million middle-income seniors — nearly double today’s number — will lack the financial resources for housing that offers personal care assistance.
“We’re talking about retired teachers, trade union members, first responders, government workers,” said Beth Burnham Mace, the Lexington-based chief economist at the National Investment Center for Seniors Housing & Care, who coauthored the report. “This is a cohort that hasn’t been paid much attention to. These are people who provided amazing services to society, and it’s important that there’s housing and care they can afford.”
The study is seen as a springboard for a national push to create new assisted-living models and accelerate construction of assisted-living units for middle-income residents.
On Wednesday, researchers met with policy makers and senior advocates in Washington, D.C., to discuss the challenge for the coming generation of seniors. They’ve scheduled a second meeting in New York next month with senior housing developers and operators.
“It’s going to take greater private-sector attention, and a greater government response,” said David Grabowski, another coauthor who teaches health care policy at Harvard Medical School.
Currently, he said, “There’s a private-sector market for high-income seniors. On the low-income side, there’s housing and Medicaid supplements. For those in the middle, it’s a balance of family caregivers and spending down their assets until they’re eligible for low-income assistance.”
In the study, Mace, Grabowski, and four other researchers from the University of Chicago and the University of Maryland broke middle-income seniors into two groups. The “young old,” between 75 and 84, were able to draw on $25,000 to $74,000 a year per person from savings and investments. The “old old,” those 85 and older, were able to draw on $24,000 to $95,000. The income range was wider in the older group partly because more are widowed.
Only about 54 percent of the people in this middle-income group will be able to meet the estimated annual costs of $60,000 for assisted-living rent and other expenses, researchers found. Middle-income individuals under 75 weren’t included in the study because many are working and most live independently.
As they age, about six in 10 seniors eventually will have mobility limitations, while more than 8 percent of those over 75 will have cognitive impairment. Many others will need personal care assistance because they have three or more chronic health conditions.
“Unfortunately,” the report said, “most middle-income seniors will not have the financial resources required to pay for private seniors housing options, as they exist today.”
Some in the field are already grappling with ways to extend housing and care to more people.
In 2017, Benchmark, a Waltham company that manages 28 senior living properties in Massachusetts, opened an assisted-living and memory-care complex called the Branches in North Attleboro, where residents live in smaller studios but have larger common areas.
“By shrinking the size of the units, we were able to lower the price by 20 to 25 percent,” said Benchmark founder Tom Grape, who will attend the meeting in New York.
Even at reduced prices, many in the middle class won’t be able to afford assisted living without some kind of government support. One idea that has long being discussed by senior care advocates is expanding Medicare, the federal health insurance program for older Americans, to cover long-term care services, such as help with bathing, dressing, and other daily tasks. But that could cost billions of dollars, requiring an infusion of federal money into the Medicare system.
Elissa Sherman, president of Leading Age Massachusetts, which represents nonprofits providing housing and aging services for older adults, said the study is “a huge wakeup call” for seniors, few of whom have long-term care insurance.
“We just don’t have a system in place [to pay] for long-term services and support,” she said.
Others, including Nancy Eldridge, who spoke at Wednesday’s meeting in Washington, are working to provide more support to seniors who continue to live in their homes.
“We’re trying to create an alternative system to support the whole baby boomer generation,” said Eldridge, chief executive of the National Well Home Network, a Burlington, Vt., nonprofit that runs a program connecting people who live independently with health care support and services.
State Senator Pat Jehlen of Somerville, who has fought the closing of health care facilities serving older residents in her district, said the lack of affordable assisted living for the middle class is part of a larger issue of economic insecurity.
“There’s no real model for middle-income people to retire and live securely,” said Jehlen, who said lawmakers should look at ways to spur the construction of more middle-class senior housing and help people boost their retirement savings. “Even without the cost of assisted living, older people in Massachusetts face economic insecurity due to inadequate pensions and savings combined with the high cost of housing and health care. We need to address these problems now.”
Developers began building the first assisted-living communities about 40 years ago. But in recent decades, new construction has generally focused on high-end properties for seniors who have large nest eggs or can sell expensive homes to pay hefty admission fees.
The economics of the industry, where private investors finance construction and labor accounts for a high percentage of operating costs, makes it tough to build middle-income housing, said Larry Gerber, chief executive of Epoch Senior Living, a Waltham company that runs assisted-living and memory-care housing in Massachusetts and Connecticut. While some housing units in Epoch’s properties are affordable for middle income seniors, most command higher, market rates.
In high-cost housing markets in the Northeast, “it’s very hard to save enough on building costs to move the needle on the price you’re going to charge,” Gerber said.
Among the goals of the study’s sponsors, including the National Investment Center for Seniors Housing & Care in Annapolis, Md., is to find incentives for investors to fund more middle-income assisted living, perhaps through tax credits for mixed-income developments, Grabowski said.
Other areas to explore, he said, include new pricing models that replace all-inclusive fees with a la carte purchases of health care services, and designing more supplemental Medicare plans that pay for assisted living as well as health care.