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Older adult finances and future senior housing options are out of sync    

Rant on. A sad tale - reading the lament about the numbers of seniors who will not be able to afford assisted living in 10 years. The report is from NIC – the National Investment Center that provides research to the senior living industry. The upshot – 54% will be unable to pay the $60,000 average annual cost of assisted living (make that $93,000 in Washington DC), even if they sell their home. If one member of a couple is still living in the home, the number rises to 81%.  According to the study, 60% of the population aged 75+ will have mobility, cognitive impairment or chronic conditions that would characterize them as good candidates for assisted living services and settings – but will not have the savings to enable them to move in.

There are some problems with this study’s message to the industry.  First the affordability gap of assisted living and the population that could benefit. This has been a statistical fixture forever (move in age of 85 noted in 2012 and again in 2015). What has changed, if anything, is life expectancy. For those aged 65+, living into the late 80s or even the 90s is increasingly likely.  Looking at life expectancy lasting to mid-to-late 80s combined with average savings for those aged 75+ of $16,025 for a couple with no children, it is no wonder that the steady-state penetration of assisted living remains stuck at 10% of the likely population, at least according to the industry. According to NCAL, seniors stay 22 months on average, before moving to skilled nursing or elsewhere. With assisted living occupancy at 85% being attributed to over-building, one might also posit that price-plus-life expectancy algorithm keeps even the willing and interested at home.

Consider the operating margin of 34% and the real cost – can tech help?  This industry has been a real estate investment play from the very beginning. One executive interviewed for the NIC study observed, reluctantly, that margins could be compressed to create more affordable options, perhaps by building on less expensive land. Hopefully not from robbing the pay of CNAs who do the real hands-on labor – their average pay of $11-12/hour nationwide can’t be pushed down much further. Maybe high-end food choices could be trimmed, the lobby furniture more modest, or the long-shot on operational costs, noted in the Health Affairs study: “Technology is already driving innovation. The implementation of an ever-expanding panoply of high-tech solutions such as artificial intelligence, voice technology, smart phone apps, smart sensors, and telehealth can help improve quality of life, and care, while reducing costs.” Right.

The margin question is about people -- how to need fewer or boost pay to recruit. The staff-to-resident ratios may, in some states, already be too thin to handle assisted living memory care residents. For families of a resident, that means supplementing the $60K annual cost with the hidden cost of needed private duty home care aides (same hourly rate). For many, that additional cost may drive families elsewhere, to nursing homes on Medicaid or back home. But the real problem that will limit expansion of assisted living is a shortage of available workers -- for assisted living, skilled nursing, home care and home health care. Where to recruit this low-paid workforce in a high employment time, competing with wage levels of Walmart and McDonald’s? Finally, will we read the same lament in 10 years about the large population of now-aged boomers who cannot afford assisted living? Count on it.  Rant off.

[NOTE:  Will we see you at the Silicon Valley Boomer Venture Summit on June 5, 6 at the Claremont in Berkeley? Let's meet up!]


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What a wasted funding to do a study like this. It assumes that in 10 years’ time we still have assisted living at the same level as today. It further assumes that the only way to provide a protective environment for the later years of life is assisted living. It assumes that the cost of assisted living stays the same. That the way we take care of older adults is not evolving or improving for the better in 10-years. It assumes that the senior will not be better informed and prepared for their later year’s 10-years from now. It further assumes that no other housing/care model will come along to replace assisted living as care model. That technology-at-home cannot keep people longer at home and in control. 

"The 54 percent data point represents a total of 14 million people over age 75, and accounts for seniors who would sell their homes to afford seniors housing. If those middle-market seniors were to not sell their homes, the percentage rises to 81 percent that could not afford assisted living" (NIC Report).  

This means that 19% or 2.66 Million of those people who do not sell their home can afford to the move to assisted living if and when needed, and 6.44 Million who do sell their home can afford it. So what does this say, if nothing changes price wise there are plenty of people for the hungry and overpriced assisted living industry. It’s time to change that model and make it human centered instead of real estate centered. 

That is what the study should have focused on, not to find excuses to get regulation or government programs to support their hunger.   


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