Study Points to Flaws in Seniors Housing Projection Models

By Anuradha Kher, Online News EditorAnnapolis, Md.–The current models that predict demand, supply, cost etc. in the seniors housing industry have failed to account for several factors, making the projections about the industry less reliable, according to the “NIC Compendium Project: A Guide to Long-Term Care Projection and Simulation Models.” This review and analysis of research on long-term care financing for senior citizens was conducted by the National Investment Center for the Seniors Housing Care Industry (NIC).The study points out that the models do not address the substitutability of services such as home care and assisted living facilities for nursing home care. There is also a lack of data on which to determine the impact of price changes on the use of services or “price elasticity.” In addition, younger people with disabilities are not included as part of the projections, even though 22 percent of Medicaid nursing home expenditures in 2003 were for people under age 65.“Policymakers use the projected numbers to make policy decisions and, therefore, it is in our best interest that the projections are as accurate as possible. Currently, we believe they are not,” Robert G. Kramer, president of NIC tells MHN.“The study is a body of knowledge that will help policymakers and others determine the best combination of public- and private-sector funding that will be needed to pay for the nation’s growing care needs, especially when Baby Boomers reach their 70s and 80s,” says Kramer.“In a short 20 years from now, our nation’s economy will face an enormous challenge. How are we going to pay for the massive numbers of Baby Boomers who will move through the long-term care system?” Kramer asks.This report focuses attention on the need for long-term care research and hopes to stimulate a policy debate at the national level.The study was conducted by RTI International for NIC and Joshua M. Wiener, Ph.D., senior fellow and program director for aging, disability and long-term care at RTI International, is the lead author and head of the research team for the project. Some other findings include:•    The number of people with disabilities is likely to increase substantially, even if disability rates fall. A 2007 study from Johnson, Toomey and Wiener projected that the number of older people with disabilities will grow from 10 million in 2000 to between 15.1 million and 24.6 million in 2040. As such, policymakers can’t assume that declines in disability rates will solve the problem of long-term care, the report warns.•    The demand for long-term care services is likely to at least double by 2040. The same Johnson, Toomey and Wiener study projected that the use of paid home care will increase from 2.2 million people in 2000 to 3.9 million — 6.2 million in 2040, depending mostly on assumptions about disability rates. During the same period, the number of older people using nursing care will increase from 1.2 million to 2 million — 3.1 million. •    The price of long-term care services will have a big impact on the level of expenditures. A 1994 study from Wiener, Illston and Hanley found that total expenditures (in 1993 dollars) for older people were projected to be $134 billion in 2018 if prices increased 4.5 percent annually; $215 billion, if prices increased 6.5 percent annually.“This issue on how we will fund future long-term care has huge implications for the seniors housing and care industry, and its leaders need to work closely with government and research communities to craft on-going, relevant research, especially in those areas that have been lacking in previous studies,” says Kramer. “We recommend working with a simpler model in conjunction with the Lewin model that is used to make these projections.”