A lot of middle-class seniors are not going to be able to pay the costs who are on the rise for assisted or independent living a decade from now.
Gretchen Harris and her dog Alfie are in this picture in their home in Norman, Okla. ‘’My mind is troubled by paying for long-term care” She said.
Gretchen Harris is very fond of the small brick house she bought 36 years ago in Norman, Okla. She likes the magnolia tree that she planted in the front yard and is content with her neighbors. Her one store house proved to be helpful after she underwent a knee replacement surgery last summer.
“I am comfortable with the size of the house,” she said.
But Ms. Harris who is 72 years old and is a retired attorney is struggling with various health related problems such as: Osteoporosis, heart disease, rheumatoid arthritis, non-Hodgkin’s lymphoma and he takes a lot of prescribed medications.
For the time-being she is able to hear cases a few days a month as a state administrative law judge and she is involved in church and educational activities, but she is worried if she will be able to do these things in the future.
How much does assisted-living cost
“It worries my mind,” she said. She does not have a family, children and is divorced. “I am going to need independent or assisted living and some long-term support and stop living on my own like now.”
But, is income of $4.600 a month from Social Security and her state pension going to suffice? Ms. Harris has no savings for her retirement and is still paying a mortgage on her house which was refinanced on several occasions.
A one-bedroom apartment in Oklahoma state in assisted living costs $3,425 according to an annual survey by Genworth, a financial company, and she may be able to afford it for now. But it is expected that in 10 years from now the costs will get somewhere around $4,600. Meanwhile in Norman, one assisted living facility costs around $4,260 and even more.
Ms. Harris believes that she will not have enough money even if she sells her house. “I face middle-class problems” she said. She does not qualify for Medicaid or subsidized housing because she has too much money, but she doesn’t have enough money for long-term care, something which only rich people can afford.
Will middle-class seniors have enough finances to afford assisted-living
Health Affairs analysis so called “The Forgotten Middle,” investigated how many middle-class seniors will have insufficient financial resources. The numbers were high.
Information gathered from the national Health and Retirement Study, including health status, personal income and assets, researchers defined middle-class cohort as Americans from the 41st ot the 80th percentile regarding the financial situation.
In 2029, people who need long term care aged 75 to 84, would have to pay around $25,000 to $74,000 yearly. People who exceed age 85 and are middle-class would have to pay $95,000.
Around 14.4 million people will be categorized as middle-class, which doubles the current number. Over 60 percent of them are going to need walkers, canes or wheelchairs in order to be moving, and 20 percent are estimated to need daily help throughout activities such as bathing and dressing.
Their education is better and their groups are more diverse comparing to older adults in the past, and they are less like to experience poverty. But the authors found that anyway most of them will not be able to afford assisted living.
How much will assisted-living cost in the future
A decade from now, 80 percent of middle-class senior’s income and assets will be less than $60,000 a year, not including equity in their homes. The costs of assisted living along with medical expenses which are not covered are estimated to be around $62,000.
“Middle-class seniors are often ignored and undeserved in the current long-term care market but 20 years from now it will be a huge problem,’’ said Caroline Pearson, who is a health researcher at Norc (formerly the National Opinion Research Center) at the University of Chicago and an lead author of the study. “You will get sober once you see the numbers”
A lot of people are considering to sell their house in order to be financially prepared for it just like Ms. Harris. (The analysis includes independent and assisted living but doesn’t include nursing homes, where the major payer is Medicaid.)
What does the Long-Term Care Financing Collaborative say
The study found that more than half of middle-class seniors with housing equity will be unable to pay assisted living fees and medical costs.
(Independent living is cheaper and even though it provides some services it doesn’t support hands-on care.)
“Even though most of the seniors own their own homes, the amount of equity isn’t as much as they believe.” said Howard Gleckman, a senior fellow at the Urban Institute. “Seniors have used a part of their home equity to provide other things such as health care.”
Mr. Gleckman did a profound research about housing equity as a member of the Long-Term Care Financing Collaborative, which is a group of experts in policy. “In places like D.C or New York middle income houses are believed to cost around million dollars,” he said. “But in a lot of the country, the house’s value will be around $150,000.”
The median household among 65-74 year-olds had around $100,000 in home equity and the same amount in other assets. “It is not enough,” said Mr. Gleckman.
One-bedroom apartment in assisted living costs $4,120 monthly averagely according to the Genworth survey, however there are geographical variations such as $3,700 in New Orleans to over $6,000 in Boston.
Will the Congress be viable for future generations
Today’s middle-class seniors have less savings and more debts than earlier cohorts. Their chances of receiving pensions are slimmer and they have smaller families to turn to for unpaid care.
“A lot of us will be put in a difficult situation, and it’s frightening,” said David Grabowski, a health policy researcher at the Harvard Medical School and a senior author of the new study.
The federal government issued its annual report on Medicare and Social Security solvency when the research was published. And by next year, the costs of Social Security will exceed its income; and in 16 years the program is projected to deplete its reserves. In just seven years Medicare will deplete its hospital fund.
That doesn’t mean that the programs will cease to exist, but if the Congress doesn’t shore up financing as always, benefits will decline.
“I can’t imagine the Congress not stepping up and making sure that they are viable for future generations,” said Tricia Neuman, director of the Kaiser Family Foundation’s Medicare policy program.
“Some of the choices are very tough to be made because they may make long-term care harder to afford” One example is: Shifting additional costs to Medicare beneficiaries.
Is the government making incremental changes
Unlike other Western democracies, the USA has never covered long-term care by creating a broad public program. Medicare is paying for drugs, hospitals, doctors, and short-term rehabilitation after hospitalization, but never for independent or assisted living.
One day things may change. Just imagine a new Medicare Part LTC, but “It will be almost unachievable politically,” said Ms. Pearson.
Policy types are suggesting that the government and industry make more incremental changes. Maybe Medicaid is able to cover older adults with slightly higher incomes, or change the regulations and include housing costs along with health care.
The federal government could encourage housing for middle-class seniors by expanding the tax credits it gives to low-income senior housing developers. Then the middle marked will be a possibility for the assisted-living operators to aim.
Dr. Grabowski said that some chains offer their own Medicare Advantage plans which can cover certain support services for the residents. “Innovation is happening,” he said.
Before the innovations take hold, Gretchen Harris needs senior housing. It would be horrific for her to leave Norman, because she has spent all her adult life there. But if her finances allow it she is going to move to Little Rock, Ark, because her cousins are living there.
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