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A recent report from the U.S. Government Accountability Office (GAO) found that the federal government reimbursed $12 billion in Medicaid and Medicare dollars for assisted living services last year.
While the report itself isn’t controversial, its findings have sparked another round of discussions regarding the possibility of oversight for assisted living communities. Not long after the U.S. agency published the report earlier this month, Sen. Elizabeth Warren penned a letter citing the dollar amount of the Medicare and Medicaid services that take place in assisted living communities as proof of a “huge federal oversight gap.”
But I would argue that the report shows a different gap: the gap between what assisted living is and what people – including lawmakers and older adults – think it is.
That gap has long existed and has proven incredibly difficult to close. But until that gap is addressed, the potential for productive public-private collaboration in the senior living sector is impossible. And that is poised to become a severe problem, because such collaboration is needed in order to meet the housing and care needs of the boomers and subsequent generations.
The gap in understanding is revealed through one of the report’s central assertions, related to the amount of Medicare dollars flowing to assisted living.
Maggie Elehwany, who is senior vice president of public affairs at Argentum, pointed out that Warren and other senators are likely conflating the billions of dollars spent on Medicare for residents, often for services not provided by the senior living provider, as money flowing directly to assisted living operators.
“They are saying that our communities are receiving over $8.5 billion dollars in Medicare reimbursements,” Elehwany told me. “Obviously we who are in the industry know that that’s not true.”
Elehwany and Argentum’s stance is that “the federal government can’t do it alone” with regard to expanding senior living services for the boomers, and she believes that there is a big role for public-private partnerships between the industry and the federal government.
But for all the back-and-forth between senators and industry associations in the last decade, I haven’t really seen much progress toward the goal of supporting older adults in a way that substantially expands services and housing.
I believe there is much more the federal government could do to help older adults by supporting them in assisted living. I also think that the industry must be willing to at least entertain the idea of some kind of federal oversight if it wants this kind of support. But the first step toward any productive relationship has to be greater clarity about what assisted living is, from the services provided in these communities to the way they are paid for, and what differentiates AL from other congregate care settings.
In this members-only SHN+ Update, I analyze the state of the current back-and-forth between Congress and the senior living industry to offer the following takeaways:
- Why lawmakers say they want to regulate assisted living
- Why the prospect of regulation is a non-starter for senior living industry associations
- How the government and the senior living industry could work more closely together
Oversight vs. support
At the root of the calls for more oversight is the fact that there are billions of federal dollars worth of services occurring in assisted living communities. While Medicare doesn’t cover assisted living room or board directly, it does cover certain medical services performed within assisted living facilities.
The GAO report noted that $8.5 billion worth of Medicare-reimbursed services, mostly hospice and some home health care, took place within assisted living settings in 2024. That figure is a likely undercount of all Medicare spending for services provided in assisted living facilities, the GAO report noted.
“For example, it does not include services paid through Medicare Advantage,” the report read.
The government agency also tracked $3.5 billion in federal Medicaid spending for assisted living services such as ADL support and physical therapy.
The report showed there is a growing number of older adults relying on Medicaid and Medicare to fund services typically offered in assisted living. Today, 44 states cover assisted living services and 29 states use Home and Community-Based Services Waiver Programs that give them flexibility to place a cap on enrollment, target certain demographics and restrict services by location.
Federal and state Medicaid spending combined averaged approximately $23,000 per beneficiary receiving services in assisted living in 2024, according to the report.
While billions of dollars worth of services changed hands in assisted living settings, Sen. Warren pointed to thousands of “critical incidents” as proof that more federal oversight of assisted living is necessary.
“Assisted living facilities receive billions in federal dollars, but there is no federal role in ensuring that they are providing high quality care,” Warren wrote in her letter earlier this month. “Residents of these facilities deserve better, and that starts by making sure that assisted living facilities are making good use of taxpayer dollars and are not leaving our seniors out to dry.”
Assisted living communities don’t actually receive billions of dollars from the federal government. But their partners do, and in recent years, an entire industry has cropped up to provide assisted living companies with services related to value-based care models that drive access to more reimbursable services.
Regardless of who gets the dollars at the end of the day, Warren is not wrong that billions in federal dollars are flowing through a sector that is relatively hard for Congress to peer into. And I believe her motivation to support America’s seniors living in assisted living is altruistic, especially with the backdrop of big looming affordability issues and recent reporting showing potential issues caring for people living in assisted living.
The senior living industry and lawmakers need a productive conversation about the oversight and funding role the federal government could play. But so far, that conversation has seemingly centered on trying to clarify and define fundamental aspects of the assisted living model. It’s obvious that even after decades of assisted living growth, the general public, lawmakers included, often don’t understand assisted living or who it’s for. Elehwany said that much of her job at Argentum is educating lawmakers about senior living.
“We were created to keep people out of SNFs, and when we can bring policymakers to our communities, they get it,” she told me. “What we’re worried about is that … the regulation will be identical to that of SNFs, and that we believe will destroy the model of assisted living.”
And indeed, assisted living operators often can care for high-acuity residents without needing to move them “downstream” to skilled nursing. That can save money not only for residents, but for taxpayers.
According to the most recent Genworth Cost of Care Survey, assisted living carries an average annual cost of $70,800 in the United States. That’s compared to $127,750 annual costs for residents in skilled nursing or $77,792 for limited support from a home health aide.
I believe both Warren and Argentum would agree that there’s at least a theoretical opportunity to spend dollars on the federal level to improve access and care – and there is inarguably a pressing need to expand access to senior living.
I don’t think that money can actually flow to assisted living without the acceptance that there will have to be some kind of oversight. I agree with Elehwany that the SNF regulation model doesn’t apply to senior living, but I think that something must change, and soon, to aid the millions of baby boomers who will want and need assisted living without a way to pay for it.
A vision for a better future
My vision for the future is relatively simple. I could imagine the federal government supporting operators – those that opt to participate in federal insurance programs and are certified to do so – through subsidies and reimbursed services in exchange for more visibility.
I agree with Juniper Founder and CEO Lynne Katzmann, who said in 2024 the industry should embrace a “fair market” system built on transparency for consumer prices and services.
I recently spoke with Bill Lowe, who is CEO of Chicago Methodist Senior Services (CMSS). CMSS is no stranger to the world of reimbursement, having for years operated a skilled nursing facility on Chicago’s north side, Wesley Place, until it changed hands to operator Aperion Care.
The Chicago-based operator was losing money managing the facility even while reimbursement for services in Illinois was at an all-time high. Staffing woes and legal costs simply made operating the community too expensive, Lowe said.
Assisted living communities also face extraordinary high costs to do business, and thus pass those costs on to residents. The issue is particularly hard for non-profit organizations like CMSS.
“The government just has to spend more to make this manageable for both people and providers,” Lowe told me. “There just needs to be funding. I mean, it’s as simple as that.”
At the end of the day, I agree that the federal government has a necessary role to play in boosting affordability of senior housing. But I don’t see that changing until the larger conversation about assisted living, who it’s for and how it works, changes.