Housing & Health Care Policy Solutions for Middle-Market Older Adults
September 2024
This policy brief provides critical information for stakeholders to facilitate a more affordable, equitable, and accessible aging environment for middle-income older adults.
Introduction
NORC has spent over five years researching the demographics, financial resources, and care needs of the Forgotten Middle, defined as middle-income older adults who do not qualify for Medicaid but are unlikely to have the resources to pay for housing and care over the course of their lives. NORC’s latest research focuses on the Near Duals, the financially insecure older adult cohort that is at risk of imminent Medicaid spend-down within one to two years.
Cumulative research into these populations—which together comprise what we call “the middle market”—has identified a policy crisis with no clear solution: a majority will be unlikely to afford critical long-term care and housing options should they need or want them, challenging their ability to age with dignity, choice, and independence.
As they age, these middle market populations generally have insufficient financial resources to cover the median costs of common long-term care options.
- Near Duals: $11,000 to $28,000 in annual income and less than $26,000 in total assets
- Forgotten Middle: $26,000 to $103,000 in income and assets annuitized over life expectancy
(Note: These figures are in 2020 dollars.)
Figure 1
Annual median costs of many common long-term care options exceeds the financial resources of middle market populations.
Solutions Development & Discussion
To address this middle market crisis, NORC and The SCAN Foundation collaborated with an interdisciplinary Expert Panel comprised of more than 20 leaders from the housing, health care, and aging sectors to establish a holistic view of the challenges and identify corresponding policy or programmatic solutions. These include:
- Develop a Pathway for a New HCBS Benefit under Medicare
- Expand and Harmonize Medicaid Eligibility Requirements
- Expand the Scope and Eligibility of Home Modification Programs
- Increase Flexible National Funding for Community-Based Services
Proposed options vary in their potential impact and approach. The first option stands apart as one that creates a new benefit for all eligible Medicare beneficiaries, while the other three aim to effectuate change by bolstering and expanding existing systems to support the middle market. While each option varies in the size of its potential reach, most will require statutory changes to appropriate sufficient funding and operational support for implementation. Additionally, implementation and sequencing of these options should account for the anticipated timeframe and scope to maximize impact and optimize resources.
NORC’s research on the middle market is just the first step to effectuating change. The challenges facing the Forgotten Middle and Near Duals are growing and will require decisive and timely policy changes to safeguard these populations.
Medicare
Develop a Pathway for a New Benefit under Medicare for Home & Community-Based Care Services
In general, Medicare does not cover long-term services and supports (LTSS), which encompass care received in institutional settings as well as a range of home- and community-based services (HCBS) that include health and supportive services. Many people who need paid LTSS rely on Medicaid, which has complex financial eligibility criteria for different benefits. Most beneficiaries prefer to receive care in the home and community rather than an institutional setting, but the current patchwork approach to benefit design funded by state waivers produces inconsistencies in access to benefits across geography. In the absence of Medicare coverage of HCBS, Medicare Advantage plans have used new authorities to offer some expanded supplemental benefits that can fill gaps, but these services are still relatively limited in scope and only available to beneficiaries enrolled in specific plans.
Develop a pathway to provide needs-based coverage in the Medicare program for HCBS either as a permanent new benefit or as a demonstration program. Policymakers should look to NORC’s data on the middle market to inform specific eligibility requirements, which may rely on ADL/IADL limitations or chronic conditions.
What about Medicare’s Home Health Benefit?
The Medicare Home Health (HH) Benefit is not commonly utilized to meet older adults' longitudinal LTSS needs. As it is implemented and experienced by beneficiaries today, Medicare HH is much more episodic than HCBS, with a major focus on short-term rehabilitation as opposed to long-term support and maintenance. Beneficiaries must be confined to their homes to be eligible for Medicare HH services and are ineligible if their only or primary need is for aide or personal care services that are often at the core of HCBS. While there are policy reform ideas intended to increase access to aide services under the Medicare HH benefit, they should not be thought of as representing a sufficient or sustainable solution to meeting broad HCBS needs.
Understanding Unmet Needs
NORC’s latest research on the Near Duals population highlights that nearly 30 percent and 10 percent of this population requires assistance with instrumental activities of daily living (IADLs) and activities of daily living (ADLs), respectively, yet these beneficiaries lack access to the Medicaid LTSS services to help meet their needs. NORC research also underscored the equity impact of the unmet need for home and community-based services, since rates of 3+ ADL limitations are higher among Black and Hispanic middle-income older adults than white older adults.
Figure 2
Prevalence of IADL and ADL limitations for middle-moderate, Near Duals, and Full Duals
Program Design
A new program should include the following characteristics:
- A universal approach to coverage
- A self-directed benefit that could be used on an individually defined menu of services following a needs assessment
Public policies should ensure people with different levels of functional capabilities have access to the services and supports to meet their needs and allow them to live as independently as possible. A baseline functional limitation would be required to qualify for services (e.g., 2+ ADLs) under this new benefit, followed by regular assessments to determine specific benefit eligibility for a range of diverse HCBS services.
Menu of Services
This benefit would include a range of services, based on the functional limitations of the individual beneficiary. This menu could include services such as:
- Home modifications (e.g. installation of handrails and ramps or bathroom modifications) to allow aging in place
- In-home support services (e.g. to assist in dressing, eating, and housework)
- Home health outside of what is covered under the current Medicare benefit
- Respite care
- Adult day care
- Subsidies for assisted living
Implementation & Impacts
Two pathways to provide needs-based coverage in the Medicare program for HCBS:
- Enact a New Limited Medicare Benefit
A new Medicare benefit could be enacted to cover limited, and needs-based, HCBS services. Specific eligibility criteria should be determined using NORC’s data on the middle market and may rely on ADL/IADL limitations or chronic conditions.
This solution has the potential for the largest impact on the middle market. However, policymakers will need to devote substantial thought to financing.
Further modeling work is needed to understand the costs of this new program. The definition of functional limitations required for eligibility will inform the size of the population. The provision of HCBS for beneficiaries otherwise at high risk of hospitalization or nursing home stays could result in savings to Medicare to partially offset new costs.
- Develop & Implement a Demonstration
Alternatively, the Centers for Medicare and Medicaid Innovation Center could develop and implement a demonstration to test the impact of a new, limited Medicare benefit to cover needs-based HCBS services for Medicare-only individuals with ADL/IADL limitations or chronic conditions.
This allows CMS to address operational challenges, potentially on a smaller scale (such as in a specific state or region, or for a more limited population), and generate data to understand potential costs and/or savings.
Medicaid
Expand Medicaid Eligibility & Facilitate MSP Enrollment
NORC’s research finds that over half of Near Duals have mobility limitations, four or more chronic conditions, and low financial resources, suggesting that this population would benefit from full Medicaid coverage and/or financial assistance through Medicaid Savings Programs (MSP). However, Near Duals face challenges accessing these resources:
- Full-benefit Medicaid. Many Near Duals do not meet the financial eligibility criteria for Aged, Blind, and Disabled (ABD) Medicaid, which is generally under 100 percent of FPL. (Note: Those with a nursing home level of care may qualify for HCBS or other Medicaid pathways with higher income levels, but these services vary by state and are not an entitlement.)
- Medicare Savings Programs. Research shows that a substantial portion of those eligible for MSP are not enrolled, potentially due to application complexity and other administrative barriers.
Incentivize states to increase their income eligibility limits to at least 138 percent of FPL for Aged, Blind, Disabled Medicaid. For MSP, release additional guidance and technical assistance to improve MSP enrollment for eligible beneficiaries.
Implementation & Impacts
- Expand & Harmonize Medicaid Eligibility Requirements
Near Duals have similar health and functional needs as full duals but lack access to the Medicaid LTSS available to their full dual counterparts.
States can help address this issue by increasing their ABD Medicaid income eligibility limits to meet that of the expansion population (138 percent of FPL). Both California and New York have implemented this change.
At the federal level, ABD thresholds could be reset, or states could be incentivized to standardize eligibility by approving an increase to the Federal Medical Assistance Percentage (FMAP) for newly covered populations up to 138 percent of FPL, akin to the enhanced FMAP applied to Medicaid expansion populations. While both options would require statutory changes, expanded eligibility would extend full-benefit Medicaid coverage to approximately 3.5M individuals. This would offer access to a long-term care entitlement to help a meaningful portion of Near Duals meet their health and functional needs.
Figure 3
Near Duals have similar health and functional needs as full duals.
- Release Guidance & Technical Assistance to Support MSP Enrollment
Beyond expanding Medicaid access, it is also critical to address the population of older adults who are eligible for partial or full Medicaid benefits but not enrolled.
A 2017 report found that only half of eligible individuals were enrolled in the Qualified Medicare Beneficiary (QMB) or Specified Low-Income Medicare Beneficiary (SLMB) programs—two Medicare Savings Programs that help pay for certain Medicare costs—most of whom were over age 65.
To address this, CMS finalized a rule in 2023 aiming to streamline the MSP enrollment process. However certain provisions—such as automatic enrollment—are not mandatory in all states, and Near Duals ineligible for SSI would not be impacted. CMS can bolster MSP by providing technical assistance and guidance to states on increasing their MSP thresholds (for example, through Section 1902(r)(2)-based disregard authority) or requiring that Medicare Advantage plans provide better MSP education and enrollment support.
Home Modification Programs
Expand the Scope & Eligibility of Home Modification Programs
A range of home repair and modification services exist at the federal, state, and local levels to help low-income older adults remain in their homes. Examples of current national programs include:
- U.S. Department of Agriculture Section 504 Home Repair: Provides direct loan or grant funds to very low-income applicants with homes in rural areas
- Department of Housing & Urban Development (HUD) Older Adults Home Modification Grant: Low-cost, high-impact interventions to meet functional needs of low-income older adults
However, these federal home assistance programs have experienced chronic underfunding when compared to the demand for services. Additionally, many older adults who could benefit from these types of programs do not qualify for services due to income, geographic, or disability requirements. Other programs may not cover certain types of modifications—such as weatherization, broadband access, and general home repairs—that would allow older adults to live safely in their homes.
Increase funding for existing home repair and modification programs—such as those under HUD and the USDA—specifically designated for vulnerable low-income older adults. With additional funding, explore expanding the scope and eligibility of programs to include low-to middle-income older adults with home modification needs that go beyond accessibility.
Implementation & Impacts
To bolster program impact, additional funds could be allocated to expand existing home modification programs that can address the needs of low- to middle-income older adults. Increasing program reach to slightly higher income brackets would provide much needed support to the Forgotten Middle in particular, over 70 percent of whom are homeowners. To not displace funds for the most socioeconomically vulnerable, a sliding scale could be considered for subsidizing certain modifications or adjusting loan interest percentages contingent upon income bracket.
With additional funding, government departments could update the guidelines around existing programs to expand eligible populations and services. Examples include:
USDA Section 504 Home Repair. To meet the needs of the Near Duals and Forgotten Middle, eligibility for this program could be expanded in the following ways:
- Extended financial eligibility to include low-to-moderate incomes, potentially with varied interest rates and grant amounts based on income
- In addition to those residing in rural areas, include those in areas identified as being at high risk of climate change impacts
HUD Older Adults Home Modification Grant. The scope of services could be broadened within this grant program to include modifications that go beyond accessibility and focus on a wider range of health and safety challenges facing older adults, including:
- Increased broadband internet access
- Weatherization
- General home repairs
Expanding the eligibility and scope of services within these programs will offer additional supports to middle market, especially those living in areas disproportionately affected by climate change and those with home modification needs that go beyond functional limitations. Additional funding could also be considered for regional, evidence-based programs, such as Community Aging in Place - Advancing Better Living for Elders (CAPABLE), that are backed by evaluations demonstrating quality and cost-effectiveness.
Flexible National Funding
Increase Flexible National Funding for Community-Based Services
A range of flexible, community-based programs already exist to meet the unique needs of various communities, including their older adults, but funding for these critical programs is often lacking. An increase in funding for these programs can support community-based solutions to meet the needs of middle-income older adults.
- The Older Americans Act (OAA), administered by the Administration for Community Living (ACL) and implemented by State Units on Aging and Disability and Area Agencies on Aging (AAA), authorizes a range of programs and services focused on helping older adults age in their homes and communities.
- Community Development Block Grants (CDBG), administered through the Department of Housing and Urban Development, offer flexible grants for community development projects provided to states, cities, and counties which can be used to address the needs of middle-income older adults.
Increase funding for programs and services provided through the Older Americans Act and the Community Development Block Grant program.
Implementation & Impacts
Federal COVID-19 emergency relief funds for the OAA allowed the Aging Network to support more individuals than ever.
- OAA FY2024 Funding: $2.372 billion received; lower than the $2.76 billion that was authorized for FY2024.
- CDBG FY2024 Funding: $3.3 billion, a substantial decrease from previous years—funding was $3.99 billion in 2010.
These needs are expected to increase as the population ages.
Older Americans Act
The OAA provides critical home and community-based services essential for the Forgotten Middle & Near Duals:
- Personal care
- Meals
- Transportation
- Caregiver support
- Fall prevention and chronic disease self-management programs
- Home repair and modifications
Community Development Block Grants
CDGB grants can be used to address needs of the Forgotten Middle & Near Duals including housing rehabilitation, building senior centers, and other economic development projects.
- Single-family housing rehabilitation is largest use of CDBG grants, helping older adults remain in their homes.
- Grants also provide public services including meals and transportation for older adults.
Funds from the OAA and CDBG can be deployed quickly through existing infrastructure and partnerships. These programs provide flexibility for states, cities, and communities to tailor programs and services to meet the unique needs of their populations, which is important for providing culturally appropriate offerings:
- NORC’s analysis identified that Black and Hispanic older adults face distinct aging challenges. HUD’s CDGB 2024 proposed rule includes changes to incentivize investment in historically marginalized and minoritized communities.
- OAA services reach many rural older adults, another population that faces unique needs and access challenges. Nearly half of AAA’s serve predominantly rural areas.
Increasing funding for these flexible national programs can be a cost-effective way to support community-based programs and services for older adults. Federal funding has been found to lead to other sources of funding.
- Every $1 in federal funding for the OAA leverages nearly an additional $3 in state, local and private funding.
- Every $1 of CDBG investment leads to $3.64 from other public and private sources.
Acknowledgements
NORC and The SCAN Foundation thank the members of the Expert Panel for their time and important contributions to this research and the field more broadly. The opinions and policy solutions included in this document are grounded in extensive analyses of the Forgotten Middle and the Near Duals, and do not reflect endorsement by the Expert Panel.
Expert Panel
- Manuel Acevedo, USC School of Gerontology and Helpful Village
- Angela Beck, ChenMed
- Mike Cheek, SNP Alliance
- Amber Christ, Justice in Aging
- Marc Cohen, LeadingAge LTSS Center at UMass Boston
- Yanira Cruz, National Hispanic Council on Aging
- Hagar Dickman, Justice in Aging
- Tim Engelhardt, Federal Coordinated Health Care Office
- Jose Francisco Figueroa, Harvard T.H. Chan School of Public Health
- Molly French, USAging
- Blair Harrison, United Healthcare
- Mary Hsieh, Transpectus
- Ruth Katz, Association of Jewish Aging Services
- Bob Kramer, Nexus Insights
- Britta Larson, Center on Halsted
- Christine Aguiar Lynch, Association for Community Affiliated Plans
- Lisa McCracken, NIC
- Jennifer Molinsky, Joint Center for Housing Studies of Harvard University
- Lauren Pongan, Diverse Elders Coalition
- Eric Roberts, Perelman School of Medicine, University of Pennsylvania
- Sarah Steenhausen, California Department of Aging
- Ashley Washington, Lutheran Services in America
- Dhakshike Wickrema, Business, Consumer Services and Housing Agency, State of CA
About NORC
NORC at the University of Chicago conducts research and analysis that decision-makers trust. As a nonpartisan research organization and a pioneer in measuring and understanding the world, we have studied almost every aspect of the human experience and every major news event for more than eight decades. Today, we partner with government, corporate, and nonprofit clients around the world to provide the objectivity and expertise necessary to inform the critical decisions facing society.
The SCAN Foundation
The SCAN Foundation is an independent public charity devoted to transforming care so that every older adult has the choices and opportunity to age well with purpose. For more information, visit www.TheSCANFoundation.org.
