By Audrie Martin
Senior living operators have for years sought to provide their services at a rate that middle-income older adults can afford. For memory care operators, that is a tough task.
Faced with a resident population that needs much more care than is typical in other product types like independent living, memory care operators often incur higher staffing costs that are translated into resident rates that are higher than other product types.
At the same time, the need for more middle-market senior living services is great. According to the latest “Forgotten Middle” report by NORC at the University of Chicago, about 11.5 million older Americans 75 and older will be unable to afford assisted living services by 2033.
The delta between the cost of memory care and the need for affordability has left operators in the space wondering whether middle-market memory care is even possible without major societal or payment changes. But there are some in the industry who see a path forward for it through use of certain payment models and more creativity in how senior living communities come together.
High cost of memory care
As the population ages, the prevalence of Alzheimer’s and other forms of dementia and the costs of taking care of those struggling with these illnesses is a growing concern. The total cost of treating Alzheimer’s and associated dementia was $321 billion in 2022, according to the American Journal of Managed Care. That number is expected to reach $1 trillion by 2050.
While Medicare and Medicaid cover some of those costs, the remaining are out-of-pocket expenses that patients and their families pay. The median price for memory care in the United States is $6,935 per month, according to the Genworth Cost of Care survey. However, this can fluctuate due to the level of care required and the facility’s location.
When it comes to senior living, more than half of those people cannot afford traditional market-rate senior housing, and nearly 60% are going unserved. Moreover, nearly 6.9 million Americans age 65 and older are living with Alzheimer’s Disease.
Many memory care units charge a monthly fee that covers a shared or private room, snacks, three meals per day, planned social activities, and emergency assistance. Personal care services, including medication management and help with activities of daily living, such as bathing and dressing, may incur additional fees.
“Long-term care and services are expensive because they are labor intensive. Memory care can require even more hours of care. Each person’s memory care issues are unique, so greater training and continuity of care are needed to provide excellent memory care. Often, memory care also requires a secure space, which further increases the costs,” explained Shawn Bloom, president and CEO of the National Program of All-Inclusive Care for the Elderly (PACE) Association in Alexandria, Virginia.
But Bloom and other senior care operators are leading the charge on making more affordable services attainable for older adults in the U.S.
PACE, funded through Medicare, Medicaid, insurance, and premiums, enables older adults still living at home to access many of the things they might otherwise find in senior living, such as exercise, activities and meals, but at a cost far lower than a private-pay community, Bloom said.
”PACE programs can also invest in caregiver support and incentives to keep seniors healthy for longer,” Bloom told Memory Care News.“This allows them to remain in their own homes and communities, where care is the least expensive and quality of life is greatest.”
Changing the model
Among the biggest reasons for the high cost of memory care is staffing. Residents in memory care often require a higher staffing ratio, and that can bump up the costs, said Innovation Senior Living Founder and CEO Pilar Carvajal.
“Payroll is costly; if you cannot spread the costs over larger beds, each person has to pay a lot to get the care they need.”
Innovation Senior Living is a Florida-based middle-market operator with few secured memory care units.
“We accept Medicaid in all our buildings, and currently, in Florida, Medicaid pays the same whether [the facility] is an assisted living or memory care unit,” said Carvajal. “If someone in our community needs memory care and they are on Medicaid, we will receive the same revenue, and this gets difficult to [balance].
She added: “Not all people with dementia and Alzheimer’s need to be in secured units. Secured units are more suitable for those at risk of elopement. Unfortunately, I believe people end up in them because their caregivers assume that is where you go when you have dementia or Alzheimer’s. For the middle market, it is important to keep people in the right community level.”
Carvajal said that middle-market memory care is feasible, but with a higher Medicaid reimbursement and a larger memory care unit that can take in more residents to offset the lower revenue from middle-market residents.
“It’s all about lowering your payroll costs,” she said. “Having nurses on your payroll makes these operations very costly. Partnerships are the key to keeping those costs down. With reimbursing for these services, Medicare eventually has to come into the equation.”
Bloom said he would like to see wholesale changes to finance long-term care. PACE is also burdened by Medicare part D, which results in older adults often paying around $1,000 per month to take part in the program – a lower rate for sure, but still too high for many.
“In the U.S., we need to have a system that encourages people to save for their long-term care costs while at the same time offering incentives for private and social insurance.”
Adam Marles, president and CEO of Lutheran Senior Services in St. Louis, said that investing in technology, training, and compensation to keep great team members engaged and collaborating with the broader community are all ways to lower the costs of memory care services.
“Additionally, there is an opportunity to have significant involvement from family members in care delivery,” Marles added. “The caveat to that, however, is that it only works if the family members are willing to be trained in being a dementia caregiver. It is not a skill set that people can effectively deliver upon with solely good intentions and love for the person suffering. It requires abundant patience, awareness, understanding of what is happening medically and psychosocially, and a robust skill set to make it a healthy situation for all involved. It can be done and trim back the cost for in-home support significantly.”
Erin Shvetzoff Hennessey, CEO and principal of Minneapolis-based Health Dimensions Group surmised that another answer may be to repurpose existing real estate.
“The opportunity to develop new options, expand into untapped or underserved markets, or convert old buildings to senior housing will continue for many years,” she explained. But even this route is not an easy lift.”
“One challenge of developing for this market is matching expectations for returns on investment with the actual price per square foot or unit. Rent must be competitive or lower to attract the middle market,” she added. “Coupled with the high cost of labor and construction, this might mean that expectations on returns should be adjusted.”
Bloom hopes that future advancements may alleviate some care issues.
“We all hope the future will bring effective treatments for dementia and that the incidence of memory care will be lower,” he said. “We might also be able to develop AI that interacts effectively with memory care patients. These developments could reduce costs and create a better quality of life.”
Marles agreed, “Middle-income memory support can be available, but it will require earlier diagnosis and better training and investment from our healthcare system. It will also require ongoing technological advancements to allow team members to focus on service delivery and not task completion.”