Thoughts on "affordable" assisted living.

Based on an interview with Dean Painter, Jr., President and CEO, Eaton Terrace Group, Lakewood, CO

Assisted living, as it has developed over the past few years, has the image of being an upscale service, available only to those who can afford to pay monthly leases of $1,500 to $3,000 or more, depending on the range of services provided. For the majority of elderly over age 75, this has meant that the term "affordable assisted living" is self-contradictory. Relatively few of the "old" elderly have income sufficient to pay these kinds of rates.

We have been fortunate at Eaton Terrace to be able to push down those parameters to make assisted living affordable for elderly in the $1,000-1,700 a month income range. We have done this through tiering lease rates, with average private pay at $1,600 per month for rent, meals and services, and by resident "spend down" of assets to make up the difference between income and fees, along with the back-up support of a Medicaid waiver for those who qualify as nursing home-eligible. We are far, though, from having solved the problem of making assisted living truly affordable to the majority of elderly in need.

There are four basic techniques for moving in this direction: tax credit financing for low-income residents, which in this area has pushed lease rates down to about $1,300 a month (see also "Developing Affordable Assisted Living" by David C. Nolan, Nursing Homes 1997 (July/August), pp. 2930); tax-exempt bonds available to non-profits, which we have used to restructure our debt under the current low rates, enjoying a very healthy market these days; private long-term care insurance, which has had a very minimal impact thus far for people in immediate need and faces a major educational effort to attract the middle-aged purchasers who can afford it; and Medicaid waivers.

Some assisted living facilities have dealt with the "aging in place" issue by setting very strict discharge criteria resulting, typically, in reduced lengths of stay. However, in working with the Assisted Living Quality Coalition involving all the major players in long-term care services and housing, what I have heard from consumer groups, such as the American Association of Retired Persons, is a desire for some assurance that residents will be able to stay in their dwellings for as long as possible. This mandates that conscientious assisted living providers offer a reasonable array of health care services (either by third-party contract or by the provider) to help make this possible.

Our approach has been to keep costs low enough to attract lower-income elderly, many of whom have some assets (e.g., sale of home, savings in varying amounts) that they choose to use for assisted living, which represents in their mind a better quality of life as their care needs increase. Availability of such assets is not something that we researched, by the way; there are no data available on this, other than what is voluntarily offered by applicants or required when they apply for Medicaid assistance. To this extent, our market has defined itself. When residents have spent down, their assisted living costs are normally supplemented by Medicaid under the waiver.

Fortunately, the Medicaid waiver "personal care" reimbursement, after remaining flat for several years, has lately kept pace with our costs. To add to these health care services, we also contract with a hospital-based home health agency to provide services reimbursed by both Medicare and Medicaid.

We have also not gone in the direction of some assisted living facilities in attempting to provide special care for Alzheimer's disease and charging extra for it. Our building could not be readily modified to provide special care, and our external property would not allow for a sufficiently developed wandering path. In any event, Medicaid in our state does not pay extra for special Alzheimer's care, except in skilled care facilities.

While all of this has added up to our being able to offer a complete assisted living service for relatively low-to-moderate-income elderly, it has not solved the overall problem of affordability. Even though our units are attached to a 162-unit 221(d)3 HUD housing project, virtually none of the residents of that project would be able to afford our rates, as their average income is approximately $11,500 per annum, or below our basic private pay rates. Even though HUD has shown some willingness to consider subsidizing at least a portion of assisted living housing costs through conversion of units, as the situation exists now, residents still need to become nursing home-eligible in order for Medicaid to cover their personal care expense. This has the rather unfortunate effect of rewarding illness rather than wellness - we wait until medical costs start to rise before responding, rather than subsidize attempts to forestall them. As a result, HUD housing residents fall through a large and expensive crack.

Furthermore, none of this addresses the needs of middle-income elderly, who of course comprise the vast majority of those who could benefit from assisted living. This is, indeed, the major market of the future. And yet making the numbers work for them today is excruciatingly difficult.

In sum, we believe that we have made real progress in expanding the affordability of assisted living. But we have a long way to go. In the case of subsidized housing, we may actually be regressing as Federal subsidies decline. Clearly, a great deal more organized attention is required to address the growing numbers of elderly persons with moderate income who make up the fastest-growing cohort of our population. Without some form of third-party payment (savings, family contributions, long-term care insurance, Medicaid and perhaps managed care), the cost of meeting the chronic care needs of this larger segment of those who are "aging in place" cannot be met through their income alone. If we are to achieve savings over the long term, we need to focus on the delivery of preventive health care and supportive services, which will delay the onset of more expensive acute care.