This is a follow-up to Part 2 of a multi-part series exploring the question, “Will the Nation Go Broke Paying for Senior Housing & Long-Term Care?” Check out parts one and three.
While some states are making use of Medicaid waivers to create “affordable” assisted living models, there’s industry consensus that the concept of affordability probably isn’t viable in assisted living facilities.
“It’s a very difficult thing to accomplish, to make a meaningful difference in the cost of assisted living without compromising the service,” says Tom Grape, chairman and CEO of New England-based Benchmark Senior Living.
The only real way to provide truly affordable assisted living is with a reimbursement or grant of some form from the government, he says.
“There’s no way to offer it without some payment from an outside source, and I don’t think that’s going to happen in the near term,” Grape told SHN.
He broke down the economics of an assisted living community: Roughly 70 cents of every dollar goes toward operating costs, another 20 cents goes to mortgage or debt services, and the remaining 10 cents is left for cashflow.
“Someone could give you the building for free, and it would reduce costs by 20%. But once you start chipping away at 70% of operating expenses… you can chip away at the margin, but you still have to provide three meals a day, and all the other basic services,” he said.
And until there’s some sort of government waiver program set in place, residents often end up relying on their families to “chip in,” Grape said.
“The long-term solution that is best for the country is an expanded long-term care insurance product, whether publicly or privately sponsored, but I don’t think a new large-scale reimbursement program from the government’s likely, so I think the situation will likely remain as is for most of [the next 10 years].
Andrew Carle, a former senior living administrator and the founder and executive in residence of George Mason University’s seniors housing administration program, agrees wholeheartedly with Grape. He’s done extensive research on the topic of technology and its role in senior care, including how it can help senior living facilities reduce costs and become more efficient.
Despite the possibility of using technology to cut costs, it’s not enough to constitute affordability.
“There are fixed costs that you can’t do anything about,” he says. “There’s an opportunity to make things more affordable, but not actually affordable with technology.”
He says that some of those currently using various technological developments in their senior housing communities are actually the county-run, low-income senior housing organizations.
This is because they don’t have a business interest in ancillary revenue, says Carle.
In general, while it’s possible to make facilities “more” affordable and efficient, he says, there will probably never be a truly affordable model because at a certain point, it’s just not possible to trim costs any further.
Written by Alyssa Gerace
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