Winners and Losers as Oregon's Population Ages
As investors flock to the red-hot elder-care market, long-term care bills loom for consumers and Medicaid.
July 9, 2018
Author, Lynne Terry
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REAL ESTATE
Long-term care bills loom for consumers and Medicaid
They called her the Norwegian songbird.
A beauty with short brown hair and bright green eyes, she sang at weddings and funerals and had one of the sweetest voices in the choir at the Lutheran Church in Beaverton, a few miles from her home where she raised two children with her husband, the Aloha postmaster.
When he died in 1990, Jenny Tollefsen was only 65. But she was helpless on her own. Though she skied and swam, she spoke broken English and didn’t know how to write a check. Her daughter took over the finances.
As the years passed, Tollefsen sunk into the feebleness of old age. She developed dementia and, as often happens, fell and broke her hip. Thus she entered long-term care. Her daughter got her into a rehabilitation center, Chehalem Health & Rehab in Newberg. She went from there to Brookdale Beaverton, a facility for dementia residents. She ended up at an adult care home, where she died this past March at 93. Tollefsen was financially fortunate. She had an income of about $4,000 a month from Social Security and her husband’s U.S. Department of Veterans Affairs benefits. Though she was only in long-term care about a year, she burned through her savings and income and then some. Her daughter Ellen Tollefsen had to refinance her own home to pay for her mom’s care. When her mother died, her room and board and care cost about $8,000 a month.

“Money isn’t everything, but it’s certainly a component when you’re trying to keep things going,” says Tollefsen.
Many Oregonians are not prepared for the costs of old age, which can include expensive in-home care and residence in a long-term care facility. For elderly people with chronic conditions who live a long time, the lifetime bill can reach nearly $1 million, according to an analysis by the financial firm, PricewaterhouseCoopers. On average, the study found, Americans who need care later in life pay $172,000 in a lifetime; in Oregon the average is nearly $150,000. The study was based on claims for long-term care insurance, which covers expenses related to the cost of care. But only a small fraction of consumers even has those policies. “Very few companies are still offering them,” says Larry Rubin, a partner at PricewaterhouseCoopers.  Medicare, the insurance program for seniors, does not pay for long-term care. Medicaid, the insurance program for the poor, does — at soaring costs. In 2013 the state shelled out about $575 million for long-term care for Oregon Medicaid clients in facilities or adult care homes. In 2017, just four years later, the bill jumped 26% to nearly $730 million due to an increase in the older population, the number of facilities and federal and state rate hikes.

A version of this article appears in the July/August issue of Oregon Business.
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"Investor groups say Oregon’s high occupancy and penetration rates mean operators will find more success here than in some other states. According to NIC, Oregon’s assisted-living occupancy rate is 92%.“I personally like Oregon — it’s fiscally pretty sound,” says Elwell of 1031 Crowdfunding. “It’s got a great Medicaid reimbursement rate, and I don’t think it’s overbuilt. The occupancy is pretty high in the whole metropolitan area.” 
A red-hot market The outlook for the state — and the consumer — contrasts with the picture for business. The companies investing in elder-care projects reap big profit margins. A percentage in the low 30s is considered decent on a building, says Peter Elwell, a senior-housing specialist at 1031 Crowdfunding LLC, a California-based investment company that just paid $14 million for a Hillsboro memory-care facility, Rosewood Specialty Care. “There’s a ton of money flowing into the space right now,” Elwell says. “With the silver tsunami — the Baby Boomer generation — coming along that there will be a great need for this product type.” In 2016 Oregon was home to about 670,000 people 65 and older. About 85,000 of them were at least 85, when people typically need the most care. Flip forward 10 years to 2026 and the number of those 85 and older are likely to increase to more than 100,000 people, according to forecasters at the Oregon Office of Economic Analysis.  With big profits, many private-equity firms and institutional investors are moving into senior housing. The sector is also attracting interest from abroad. “There’s a lot of foreign money that’s flowed into it, mostly from China,” Elwell says. “When people see a high-performing asset class, they flood it with money and drive up prices. That’s what’s happening.”

Oregon is one of the most popular markets for senior housing, according to the National Investment Center for Seniors Housing and Care, an Annapolis-based nonprofit research group. (Senior housing includes independent-living facilities as well as long-term care communities.) The Portland metro area ranks sixth out of 99 metro areas for its 93% senior-housing occupancy rate, says Beth Burnham Mace, NIC chief economist. Portland’s 22.7% penetration rate (the percentage of potential customers the industry serves) is more than double the national rate of 11.2%. In other words, 22% of Portland-area seniors live in senior-housing facilities and not at home.  In the past six years, residential care and assisted-living facilities have increased by more than 10% in Oregon. As of the first quarter 2018, there were nine assisted-living projects representing 1,061 units under construction here, according to NIC.  Unlike New York, where most people stay in apartments as they age, “it’s more the lifestyle in Portland,” says Mace. “It’s on the radar for Oregon seniors as they age; it’s on the radar of their adult children.” Continue reading full article here.
Touchmark Portland is one of around nine assisted-living facilities slated to open in the metro area in 2018.
Medford-Jackson County Chamber of Commerce
101 E. 8th St.  |  Medford, OR 97501
Phone: (541) 779-4847