The latest casualty of the Great Recession may soon be the nation's elderly. Cuts in government payments for patient care and less construction of new nursing homes are already taking a toll. Add to this the aging baby boom generation, and you have a worst-case scenario in which older people who need full-time care won't be able to get it.
"We believe we're at a tipping point," says Mark Parkinson, the head of the American Health Care Association, which represents nursing homes.
If so, the timing couldn't be worse. The first baby boomers hit age 65 last year. By 2030, 20% of the U.S. population will be at least 65, up from 13% today. In that same period, the number of 85-year-olds will increase more than 50%, and the number of 100-year-olds will nearly triple. But the number of nursing homes dropped almost 9% from 2000 to 2009.
Nursing homes and hospitals are places that everyone wants to avoid -- until they can't. Most people say they want to age at home, but as retiring boomers get older, more will need the type of 24-hour care that only a nursing home or hospital can provide. That's because the prevalence of chronic illnesses like Alzheimer's disease, cancer and diabetes increases with age. Fifty-five percent of all cancers are diagnosed in individuals 65 and older, and by 2030, 7.7 million of those 65 and older will suffer from Alzheimer's, 50% more than today, according to the Alzheimer's Association. By 2025, the number of those 65 and older with diabetes is projected to almost double to 10.6 million.
Several trends are cutting into the number of nursing homes. Many homes were constructed during the 1960s under President Lyndon Johnson's Great Society programs. Often those homes are closed because they are old or, with their long hallways and large, multi-resident rooms, don't fit what current residents want, says Robert Kramer of the National Investment Center for the Seniors Housing and Care Industry.
But the recession has made getting private financing for new nursing home construction tougher. From 2007 to 2011, the number of under-construction nursing home units (the sections of a facility that provide only nursing care) declined by a third. "I cannot tell you of anyone who has actually developed a new skilled nursing facility in at least the last five years in California," says Edward Steinfeldt, a consultant to developers of retirement housing and health care.
And existing nursing homes are struggling. They have long lost money on patients whose stays are covered by state-run Medicaid programs, which pay for long-term care for chronically or terminally ill patients who have run out of money. According to a recent report by the AHCA, in 2011 nursing homes lost at least $20 per Medicaid resident per day nationwide. Total losses came to $6.3 billion nationally, the highest yearly total ever, with higher deficits to come next year, according to the report.
Making matters worse, last year the federal government also cut its reimbursement rates by 11% to nursing homes for Medicare patients -- people released from hospitals to nursing homes who need short-term care to recover from injuries or acute illnesses. That's a huge hit, because Medicare payments are responsible for more than 20% of nursing home revenues. (Medicaid provides about 50% of revenues, and most of the rest comes from private long-term care insurance and people who pay out of pocket.)
For the 187-bed nonprofit Lutheran Home in Milwaukee, which has gross receipts of about $20 million, the Medicare slash will take $700,000 to $750,000 off the organization's bottom line this year, says CEO Scott McFadden.
The real-estate crash has added to nursing homes' budget crunch. Many clients sell their homes and use the money to pay out of pocket for long-term-care services from a nursing home. By obliterating more than $8 trillion in home equity, the collapse cut the number of patients who can pay their own way.
More from The Fiscal Times:
