There is a vast, untapped middle market of seniors in the U.S. who will be faced with a large threat in accessing senior living services in their retirement. Here are 3 creative ideas that senior living organizations have come up with to benefit both seniors and providers.
The middle market is comprised of Americans who are too financially wealthy to qualify for government support programs, but can’t fully afford private senior living and other care options.
Studies, such as The Forgotten Middle conducted by the NORC at the University of Chicago, shocked industry professionals when it reported that many middle-income seniors were at risk of falling through the cracks of senior care.
Within the next decade, there will be 14.4 million seniors that fall into the middle market in the U.S., and 54% of them won’t be able to afford senior living at today’s average market rates. Experts also predict that about 60% of middle-income seniors will have mobility limitations and 20% will require a higher level of healthcare and functional needs, meaning that many seniors will require a more intense level of care.
This information presents both a tremendous business opportunity and a budding crisis facing the private senior living sector, public health, and U.S. government insurance programs.
While these reports may cast a dire picture, they may also force those in the industry to find creative, new solutions to the problem. Now that we’ve determined who the middle market refers to and what challenges they’re facing, let’s look at some of the solutions that have been presented as viable options moving forward.
One idea presented at an event hosted by the National Investment Center for Seniors Housing & Care (NIC) in the Fall of 2019 was to separate senior living operation costs from the costs associated with real estate. To decrease building and land expenses, organizations could find third-party investors who would receive tax credits in return for their investing.
For this proposal to be effective, a new tax credit for senior living organizations, similar to the existing Low-Income Housing Tax Credit (LIHTC), would need to be implemented. Providers could also focus on providing more adult day services (ADS) to drive down costs according to Pilar Carvajal, founder and CEO of Innovation Senior Management (ISM).
Unbundling services is the practice of separating a package offer into a base price with multiple add-ons. This concept could be applied to senior living, which would decrease price points and make it a more viable option for the middle market while still benefiting providers with new revenue streams.
Senior living organizations could also partner with nearby amenities to keep their services accessible by situating themselves in a mixed-use development where commercial tenants could offer discounts or complementary services. This concept could be translated into an a la carte pricing model for higher-income senior living communities.
Another idea to further drive down costs is to separate healthcare and hospitality from senior living and let a third-party concierge service provide this care. This would require some coordination within local communities to ensure that the needs of residents remain covered.
It’s important to acknowledge that the private sector of senior living can’t meet the needs of the middle market alone. The support of surrounding communities, insurance companies, and even policymakers are necessary to craft a successful solution that will help this generation thrive in their golden years.
Thinking about what the future holds for our communities presents a distinct opportunity for senior living developers, investors, and brokers. Give our team a call at (800) 425-9914 today or visit us online to see how you can improve the lives of seniors in your area.