A recent NORC study done in 2019 and updated in 2022 shows that nearly three-quarters of middle-income seniors in the US will be unable to afford assisted living and long-term care by 2033 without selling their homes. It is the first study of its kind focused on this growing health care crisis.
Assisted Living and Nursing Homes come at a high cost – it’s not unusual to spend over $10,000 per month to live in these skilled facilities. And there are generally only a few ways to pay for it: out-of-pocket, with long-term care insurance (itself costly to purchase and almost impossible to obtain later in life), or by qualifying for Medicaid – a needs-based program in which individuals must spend all their assets before becoming eligible.
But most middle-income seniors have income and assets that make them less likely to qualify for Medicaid. At the same time, they’re not wealthy enough to pay for the rising costs of housing and care options they need.
Data Used in the Study
The researchers evaluated middle-class seniors’ financial resources, starting from actual income and assets. Then grew them based on the historical changes in each category, annuitized across each senior participant’s life expectancy and their spouses. Data for financial resources included fixed income streams, such as Social Security, and annuitized assets like retirement savings or mutual funds.
Most seniors own a home. The equity they have in their home often makes them ineligible for Medicaid. And the reality is that many seniors may be reluctant to sell their homes to use those funds to pay for a nursing home. Also, many seniors may want to keep their homes as a resource to protect against outliving their assets or having a catastrophic medical event.
With 16 million middle-income seniors in 2033 and 11 million over the age of 75, the size of this demographic will double to include the following statistics:
- Roughly 9.5 million will be unmarried, widowed, or divorced;
- 4 in 10 will not have family members living nearby to offer care or support;
- Over age 75, 54% will have three or more chronic health conditions, 56% will have mobility limitations, and 31% will have cognitive impairments;
- Average financial resources of less than $65,000 in income and annuitized assets will not cover health, personal care, and housing services.
Even after selling their homes, seniors in 2033 will struggle to pay for assisted living or require additional help from family members. Health limitations will make it hard to live independently. Without government assistance like Medicaid, this creates a significant problem.
What it Means for the Future
Clearly, efforts must be made to improve the affordability of long-term care for seniors, particularly for those of lower middle incomes. Without a long-term care system able to accommodate a more diverse set of older adults and families, only the individuals with the lowest or highest incomes will be provided with care. Others will be reliant on their families, or will be forced to deplete their assets.
An Immediate Solution
Estate planning and elder law services are essential to prepare for long-term care costs in the future. By starting early, a thorough evaluation of income and assets can provide resources and options over time. Long-term care and Medicaid planning, including using trusts to protect assets from being spent down for care, can prevent you from having a financial and medical crisis.
To learn more, and to get started on your plan, contact Beaupre Law today.