About 11.5 million older Americans age 75 and older will be unable to afford assisted living in the coming decade as the middle-market gap continues to widen.
That’s according to a newly updated report by NORC at the University of Chicago. The refreshed report, released Wednesday, builds on the groundbreaking “Forgotten Middle” study in 2019, which at the time showed that millions of older adults wouldn’t be able to afford senior living at today’s rates in less than a decade.
NORC, wth funding from The SCAN Foundation NORC, analyzed data from the 2018 Health and Retirement Study to reassess the cohort’s income thresholds, health needs and care solutions.
According to the new report, the outlook for middle-income older adults has only gotten more dire over the last three years. The updated report shows that by 2033, 15.9 million seniors will be considered middle market consumers, compared to the previous projection of 14.4 million in 2029. Between 2018 and 2033, the report projects that the number of middle-income seniors will grow by 89%.
Excluding home equity — which the report noted constitutes 20% to 40% of seniors’ financial resources on average — nearly three-quarters of those older adults in 2033 will have insufficient financial resources to pay for assisted living while also not qualifying for Medicaid, according to the report. Even when counting home equity, 39% will not be able to afford assisted living services as it costs today.
“This is a large and growing problem in the industry and we have no comprehensive industry or policy solution to it,” Caroline Pearson, vice president of NORC at University of Chicago and the study’s lead author, told Senior Housing News. “The number one thing I think is the magnitude of this unmet need among middle market seniors.”
Peason said the update to the study was meant to include more recent demographic information related to the baby boomers than in the 2019 study. And like the first, NORC’s newly updated study is meant to make policymakers more aware of the large and growing issue.
In 2033, 72% of middle income seniors, or 11.5 million people, will have less than $65,000 in income and annuitized assets, which NORC noted was the average amount needed to pay for both private assisted living monthly rates and medical care.
“The trends that we saw in the first study are only going to get worse,” Peason said.
Like in 2019, the report detailed the financial differences between the incoming baby boomer generation and the outgoing Silent Generation. Compared to their predecessors, boomers have fewer savings and fewer adult children or spouses.
The report’s authors also noted that among middle income seniors, more than half will likely have three or more chronic health conditions in 2033, while nearly 60% could face mobility limitations. On top of that, about a third of middle-income seniors will face cognitive impairments, with that percentage ticking higher for those 85 and older at 40%.
The middle-income senior cohort also will be more diverse in 2033, the report projects, with almost a quarter of middle-income boomers being people of color.
Senior living providers have started to address the middle market and affordable living sectors of the industry more closely, and many are embarking on unique ideas to meet the cohort.
Still,Peason said the industry was not moving fast enough for her liking to address the problem — though she highlighted operators including Lloyd Jones, Merrill Gardens and Priority Life Care, who are meeting the middle-market challenge head-on.
“I’ve been heartned with the amount of innovation and leadership, but the amount of capacity the supply of middle market units right now is still woefully short of what we will need as the baby boomers age,” Peason said.
Even as operators herald the incoming wave of baby boomers to the market, those residents will not have the pensions and savings of their predecessors, and that will make any move into senior housing tougher, Pearson said. And the projections in the report are likely conservative, she said, as Covid-19 has caused new financial hardship for many that were not taken into account of the study’s methodology because the full effects aren’t yet known.
Elevated construction and development costs present another new hurdle to middle-market growth, andPearson said operators need to find more ways to make their budgets more efficient to accommodate lower rates, such as by rethinking food service with catering to reduce costs to pared-down programming and project design that emphasizes socialization instead of luxurious bells and whistles.
“It’s really about finding some sort of existing real estate and rethinking how to renovate and use it at a lower cost,” Pearson said.
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