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Many Americans will need long-term care. Most won't be able to afford it

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Retired attorney Gretchen Harris has assorted health problems and will need assisted living. Her pension and Social Security provide her with US$4,600 a month. A one-bedroom assisted living unit already charges US$3,425, a figure projected to rise.

New York

GRETCHEN Harris likes the small brick house she bought in Norman, Oklahoma, 36 years ago. She's fond of her neighbours and the magnolia tree she planted in the front yard. And having a single-story residence proved helpful after knee replacement surgery last summer.

"It's always been a good size for me," she said.

But the 72-year-old retired attorney has grappled with assorted health problems - heart disease, non-Hodgkin's lymphoma, osteoporosis, rheumatoid arthritis - and takes a long list of prescription drugs.

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Though she feels well enough to hear cases a few days a month as a state administrative law judge and to stay involved in educational and church activities, she worries about the future.

"It weighs on my mind some," she said. Divorced, childless and without family nearby, she anticipates needing some long-term support, independent or assisted living, rather than to live by herself.

But will she be able to afford it on her income, US$4,600 a month from a state pension and Social Security? Ms Harris has no retirement savings and still pays a mortgage on her house, refinanced several times.

She might be able to swing US$3,425 for a one-bedroom apartment in assisted living, which an annual survey by Genworth, a financial company, says is the current Oklahoma state median. But that's projected to hit US$4,600 in 10 years; one assisted living facility in Norman is already charging US$4,260 and up.

Even if she sells her house, she calculates, she would fall short. "It's the middle-class bind," she said. Too much money to qualify for Medicaid or subsidised housing, but not enough to pay for long-term care, an industry that has primarily pursued the well-off.

A recent analysis in Health Affairs, pointedly titled "The Forgotten Middle", hazarded an estimate of the number of middle-income seniors who will be caught in that bind. The numbers were grim.

Using data from the national Health and Retirement Study, including personal income and assets and health status, the researchers defined the middle-income cohort as Americans from the 41st to the 80th percentile in terms of financial resources.

In 2029, people aged 75 to 84 (ages when they're likely to need long-term care) would need access to between US$25,000 and US$74,000 a year in current dollars. Over age 85, the middle-income category extends to US$95,000.

About 14.4 million people will fall into the middle-income category, almost double the current number. Sixty per cent will need canes, walkers or wheelchairs to remain mobile, the analysis estimated, and 20 per cent will need extensive help with the so-called activities of daily living, such as bathing and dressing.

They're a better educated and more diverse group of older adults than in the past, less likely to experience poverty. Still, most will be unable to afford assisted living, the authors found.

A decade hence, 80 per cent of middle-income seniors will have less than US$60,000 a year in income and assets, not including equity in their homes. Yet the estimated cost of assisted living plus out-of-pocket medical expenses will hit US$62,000, by the team's conservative estimate.

Caroline Pearson, a health researcher at NORC (formerly the National Opinion Research Center) at the University of Chicago and lead author of the study, said: "This group gets ignored and underserved in today's long-term care market, and it's a problem that's going to explode over the next 20 years. When you see the numbers, it's sobering."

Depending on how one defines the need, half to two-thirds of older Americans will eventually require long-term care.

Like Ms Harris, many consider selling their homes to finance it. (The analysis includes assisted and independent living but omits nursing homes, where Medicaid becomes a major payer.) Even among middle-income seniors with housing equity, though, more than half will be unable to pay assisted living fees and medical costs in 2029, the study found. (Independent living, while cheaper, provides some services but no hands-on care.)

Howard Gleckman, a senior fellow at the Urban Institute, said: "Though a very large percentage of older adults own homes, the amount of equity they have isn't as much as they think. They've used home equity for other things, including health care."

Mr Gleckman looked into housing equity as a member of the Long-Term Care Financing Collaborative, a group of policy experts. "In places like New York or D.C., you might think of a middle-income house as worth close to a million bucks. In a lot of the country, the value of the house is US$150,000."

The collaborative found that among 65- to 74-year-olds, the median household had about US$100,000 in home equity and an equal amount in other assets. "It doesn't go very far," he said.

While the Genworth survey puts the current national average for a one-bedroom apartment in assisted living at US$4,120 monthly, geographic variations can be extreme, from about US$3,700 in New Orleans to over US$6,000 in Boston.

Moreover, today's middle-income older adults have more debt and less savings than earlier cohorts. They're less likely to receive pensions and have smaller families to turn to for unpaid care.

"A lot of us are going to get stuck in this middle, and it's pretty scary," said David Grabowski, a health policy researcher at the Harvard Medical School and the new study's senior author.

As it happens, the same week the research was published, the federal government issued its annual report on Medicare and Social Security solvency. Next year, Social Security's costs will start exceeding its income; the programme is projected to deplete its reserves in 16 years. Medicare will deplete its hospital fund in just seven years.

That doesn't mean either programme will evaporate, but benefits will decline if Congress doesn't take action - as it always has - to shore up financing.

Tricia Neuman, director of the Kaiser Family Foundation's Medicare policy programme, said: "It's hard to imagine that Congress wouldn't step up to make sure they remain viable for future generations.

"At the same time, there are tough choices to make, some of which could make long-term care harder to afford." An example: shifting additional costs to Medicare beneficiaries.

The United States, unlike many Western democracies, has never created a broad public programme covering long-term care. Medicare pays for doctors, hospitals, drugs and short-term rehab after hospitalisation - not for independent or assisted living.

That could change one day - imagine a new Medicare Part LTC - but "that will be incredibly difficult to achieve politically", Ms Pearson said.

Policy types instead suggest more incremental changes by both government and industry. Perhaps Medicaid could cover seniors with slightly higher incomes, or modify its regulations to include housing costs along with health care.

The federal government could expand the tax credits it gives developers of low-income senior housing to encourage housing for middle-class seniors. Assisted-living operators might aim for the middle market, with less luxe d├ęcor.

Already, Mr Grabowski pointed out, some chains are offering their own Medicare Advantage plans, which can now cover certain support services for residents.

"There's some innovation happening here," he said.

Gretchen Harris may need senior housing before such innovations take hold, however. She would find it distressing to leave Norman, where she's lived nearly all her adult life. But if finances dictate, she's contemplating a move to Little Rock, Arkansas. She has cousins there. NYTIMES