Aging population + Increasing Average Lifespan = HUGE opportunity in the senior living industry. But are we prepared?

In part one of the series, we will explore the multifaceted aspects of infrastructure and supply/demand challenges.

The issues covered in this first series include…

·?????? Demographic Shifts

·?????? Existing Infrastructure Capacity

·?????? International Influences

·?????? Trends In Senior Living Uptake

·?????? Governmental Support

Demographic Trends and Lifespan Increases

The average lifespan in America has seen a notable increase over the past decades, thanks to advancements in healthcare, nutrition, and disease prevention. According to the Centers for Disease Control and Prevention (CDC), the average life expectancy in the U.S. was 78.7 years in 2018, a significant rise from 69.7 years in 1960. This upward trend in lifespan has contributed to a growing population of older adults.

Aging Population and Senior Living Facility Demand

Individuals aged 65 and older are the primary demographic for senior living facilities, which include independent living, assisted living, and memory care communities. The U.S. Census Bureau projects that by 2030, individuals 65 years and older will number over 73 million, making up more than 20% of the total U.S. population. This demographic shift indicates a substantial increase in the potential demand for senior living facilities.

Capacity and Infrastructure Challenges

The current capacity of senior living facilities may not suffice to meet the burgeoning demand. As of recent estimates, the United States has just under 30,000 assisted living facilities and 16,000 nursing homes. However, the capacity of these facilities is not keeping pace with the expected increase in demand. Many existing facilities are already near or at full capacity, as targets for profitability in these facilities is when they are running over 85% (which they mostly are doing today).? Also, the construction of new facilities is often hindered by high costs and lengthy development processes.

International Influence on Demand

Immigration also plays a role in shaping the demand for senior living facilities in the U.S. Immigrants who have settled in the United States over the past decades are aging, adding to the native aging population. According to the Migration Policy Institute, the number of immigrants aged 65 and older in the U.S. grew by 70% from 2000 to 2019. This increase in the elderly immigrant population will further strain the already limited senior living infrastructure.

Trends in Senior Living Uptake

There is a growing trend of older adults moving into senior living communities at earlier stages of aging. Factors driving this trend include the desire for social interaction, the appeal of a maintenance-free lifestyle, and access to healthcare and wellness programs. Additionally, the increase in chronic conditions like dementia and Alzheimer's disease has led to a higher demand for specialized memory care services.

Over the past few decades, there has been a noticeable increase in the number of people moving into senior living facilities in the United States. Let's look at some statistics that illustrate this trend:

·?????? Historical Trends: Data from the National Center for Health Statistics (NCHS) and various industry reports indicate that the number of residents in assisted living and similar residential care communities increased from approximately 730,000 in 1998 to over 800,000 by 2010. By 2016, this number had grown to an estimated 1 million residents.? That’s a 25% increase in 6 years and the forecast is only higher in the coming decade.

·?????? Growth in Facilities: The number of assisted living and other residential care facilities also grew significantly during this period, from about 11,500 in 1998 to over 30,000 by 2016, reflecting the increasing demand for such services.? But, the forecasted continued growth does not meet the forecast of demand.

·?????? Percentage of Older Adults in Senior Living: According to the American Seniors Housing Association (ASHA), the percentage of older adults aged 75 and older living in senior housing (including independent living, assisted living, and continuing care retirement communities) has increased from around 6.9% in 2001 to approximately 9.5% by 2021.? We expect to see this only go further as our society continues to feel the pressure to outsource the day-to-day care of the elderly.

·?????? Memory Care Demand: Specifically, in the memory care sector, there has been a substantial increase in demand due to the rising prevalence of Alzheimer's disease and other forms of dementia. The Alzheimer's Association reported that the number of memory care units in the United States nearly doubled from 20,200 units in 1998 to 40,600 units in 2018.? Insights into the demand side are less complete, but we know the demands on these facilities in both execution of care and regulations are onerous.

Governmental Support and Regulations

State and federal governments play a crucial role in the senior living industry, primarily through regulatory oversight and funding. Programs like Medicaid and Medicare can significantly impact the financial accessibility of senior living options for older adults. However, these programs often face financial pressures and may not fully address the growing demand. The government also provides funding for the construction and operation of senior living facilities, but this is typically not sufficient to bridge the gap between demand and supply.? Here are some key statistics and facts regarding government involvement:

·?????? Medicaid and Long-Term Care: Medicaid is the primary public payer for long-term care services in the U.S., including those provided in senior living facilities. According to the Kaiser Family Foundation, Medicaid spending on long-term care services and supports was over $150 billion in fiscal year 2018, accounting for more than half of all long-term care spending in the nation.

·?????? Medicare's Role: While Medicare does not generally cover long-term stays in senior living facilities, it does cover certain skilled nursing facility stays, hospice care, and home health care under specific conditions. In 2019, Medicare spent approximately $28.5 billion on skilled nursing facilities.

·?????? Regulatory Oversight: The senior living industry is subject to state and federal regulations. The U.S. Department of Health and Human Services (HHS) and its agencies, like the Centers for Medicare & Medicaid Services (CMS), oversee these regulations to ensure the quality and safety of care in these facilities. States also have their own licensing and regulatory requirements for senior living facilities.

·?????? Affordable Housing Programs: The U.S. Department of Housing and Urban Development (HUD) operates programs like the Section 202 Supportive Housing for the Elderly Program, which provides capital advances and rent subsidies to develop and operate affordable housing for low-income seniors. As of 2020, HUD had allocated over $700 million to senior housing through this program.

·?????? Community-Based Services Funding: Through the Older Americans Act, the federal government provides funding for community-based services that help older adults live independently, including meal programs, caregiver support, and transportation services. In 2020, Congress appropriated approximately $3.5 billion for Older Americans Act programs.

These statistics and facts highlight the significant financial and regulatory role the government plays in the senior living industry, aiming to ensure that elderly residents receive appropriate care and support.

This is Ahead of All of Us, We Need to Prepare

The United States is facing a significant challenge in accommodating the needs of its aging population.? This includes each of us and our parents.? We need to be ready, as a society, to provide a positive experience in our next stage of life.? With the increase in average lifespan, coupled with demographic shifts and immigration, is leading to a substantial rise in demand for senior living facilities. However, the existing infrastructure and capacity is not adequate to meet this demand. The senior living industry, along with governmental agencies and the public, as a society, must address these issues promptly to ensure that the growing population of older Americans has access to the necessary care and living arrangements. Strategic investments, policy reforms, and innovative solutions are essential to prepare for the impending demographic changes and to sustain the quality and accessibility of senior living options in the United States.