The Forgotten Middle: Bridging the Gap in Senior Living

Jun 13, 2024 |
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This article highlights the challenges faced by middle-income seniors, who earn too much for Medicaid but not enough for high-end senior living.


Recent research by the National Opinion Research Center (NORC) at the University of Chicago has spotlighted a critical yet often overlooked demographic in senior living: the "Forgotten Middle." This term refers to seniors who earn too much to qualify for Medicaid but not enough to afford high-end senior living options. The research, published originally in 2019 and updated in 2022, provides valuable insights into the challenges and potential solutions for this growing population.


Understanding the Middle Market

NORC's findings reveal a stark reality. By 2033, the number of middle-income seniors will nearly double to 15.9 million, up from the previously projected 14.4 million by 2029. These individuals typically have annual incomes between $25,000 and $74,000. Despite owning homes and having some retirement savings, they often cannot cover the high costs of traditional senior living communities, ranging from $3,000 to $7,000 per month.

A key issue the research highlights is the insufficiency of financial resources among middle-market seniors. By 2033, nearly three-quarters of these seniors will have less than $65,000 in income and annuitized assets, insufficient to cover both private assisted living costs and medical care. Even considering home equity, which constitutes a significant part of their financial resources, 39% of middle-income seniors will still be unable to afford assisted living.


Key Findings from the Research

  • Financial Strain: By 2033, 72% of middle-income seniors, or about 11.5 million people, will have insufficient financial resources to afford private assisted living without selling their homes.
  • Healthcare Needs: More than half of these seniors will have three or more chronic conditions, and nearly 60% will face mobility limitations. Cognitive impairments will affect about a third of middle-income seniors, rising to 40% among those aged 85 and older.
  • Demographic Shifts: The middle-market senior cohort will become more diverse, with people of color comprising 22% of the group by 2033


Options for Serving the Middle Market

Senior living operators and others in the senior care space must think creatively to identify strategies that balance affordability with housing, social, care, and wellness options for middle-market seniors. Here are several approaches that may be considered:

  • Mixed-Income Communities: Developing mixed-income communities can help bridge the gap for middle-market seniors. These communities can offer a range of pricing options and cross-subsidize more affordable units with higher-end ones, creating a diverse and inclusive environment.
  • Flexible Pricing Models: Sliding scale fees or income-based pricing can make senior living more accessible. This approach ensures that residents pay according to their financial capabilities, reducing the financial burden on middle-market seniors.
  • Unique Housing Options: Utilizing modular and prefabricated housing can significantly reduce construction costs and time, making it possible to offer more affordable senior living options. These housing solutions can be designed to meet the specific needs of older adults, including accessibility features and communal spaces.
  • Partnership with Healthcare Providers: Forming partnerships with healthcare providers can enhance program options to serve middle-market seniors, especially programs that focus on promoting wellness and preventative health in addition to serving health needs as they arise.
  • Home- and Community-Based Programs: Developing home- and community-based programs that promote social engagement and well-being can help mitigate the effects of social isolation and assist participants in maintaining independence. These programs can include recreational activities, educational workshops, and support groups that foster a sense of community and belonging among participants.


Financing and Scaling Solutions for Serving the Middle Market

Innovative strategies can help senior living operators provide affordable housing and care models for middle-market seniors. The Milken Institute’s Financial Innovations Lab® and Center for the Future of Aging Research shared potential financing and scaling solutions that operators and investors should consider.

  1. Repurpose Distressed Properties
    One strategy is to repurpose distressed senior living properties, apartment buildings, and even hotel properties. Creating a pilot refinancing and restructuring program can transform these properties into affordable living options for middle-market seniors. This approach not only uses existing resources but also helps quickly scale the availability of affordable housing.
  2. Revolving Loan Fund
    Creating a revolving loan fund can provide a sustainable source of capital for developing and maintaining middle-market senior living options. This fund would be designed to offer low-interest loans to developers and operators who commit to serving the middle market, ensuring long-term affordability.
  3. Pay-for-Performance Model
    Implementing a pay-for-performance model can incentivize senior living communities to deliver high-quality, cost-effective care. Under this model, payments to providers are tied to the achievement of specific health and wellness outcomes, encouraging efficiency and improved care for residents.
  4. Value-Based Regional Partnerships
    Launching value-based regional partnerships between senior housing operators and payers can enhance the affordability and quality of care. These partnerships would focus on integrating healthcare services within senior living communities, reducing overall costs through coordinated care and preventive health measures.

In summary, the "Forgotten Middle" study represents a significant and growing challenge in the senior living sector. The NORC's updated research highlights the urgent need for affordable, high-quality housing and care options for this underserved demographic. Doing so is not only a mission imperative but also a strategic business decision that can lead to market growth, enhanced reputation, regulatory incentives, and long-term sustainability. As the senior population continues to grow, addressing the needs of the middle market will be crucial in ensuring that all older adults can age with dignity and grace.

Sources:

1. NORC at the University of Chicago. (2022). The Forgotten Middle in 2033: An Analysis of Middle-Income Seniors and the Ability to Afford Housing and Health Care. Retrieved from https://www.norc.org/content/dam/norc-org/documents/standard-projects-pdf/NORC%20Forgotten%20Middle%202022%20-%20Analysis%20and%20Findings.pdf

2. Montgomery, A. (2022, August 31). Newly Updated ‘Forgotten Middle’ Study Shows Middle-Market Senior Living Gap Getting Wider. Senior Housing News. Retrieved from https://seniorhousingnews.com/2022/08/31/newly-updated-forgotten-middle-study-shows-middle-market-senior-living-gap-getting-wider/.

3. ElderLawAnswers. (2024). The Forgotten Middle: Seniors Facing Housing, Care Crisis. Retrieved from https://www.elderlawanswers.com/the-forgotten-middle-seniors-facing-housing-care-crisis-18613.

4. National Investment Center for Seniors Housing & Care (NIC). (n.d.). Supporting Middle Market Senior Housing: Four Financing Solutions. Retrieved from https://content.nic.org/supporting_middle_market.

Other resources on Middle Market research and strategies:

NIC: https://www.nic.org/middlemarket

NIC-Sponsored Milken Institute Research: https://content.nic.org/supporting_middle_market

Episode 105 of Senior Living Visionaries: Middle Market Housing Strategies with Jon Fletcher

Episode 119 of Senior Living Visionaries: Current Trends in Senior Living with Lisa McCracken

Learn more about Middle Market opportunities and other ways to increase profitability in our white paper “13 Secrets to Increase Profitability in Senior Living in 2024.” Download it here:



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Listen to episode 124 of Senior Living Visionaries on your favorite podcast platform or listen/watch here. Be sure to subscribe to be notified when a new episode drops!


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Listen to episode 123 of Senior Living Visionaries on your favorite podcast platform or listen/watch here. Be sure to subscribe to be notified when a new episode drops!

Categories: : Growth, Strategy, Vision