When private retirement housing developers step on a nail, the U.S. Department of Housing and Urban Development (HUD) hollers.
Chances are that most, or all, of your long-term care (LTC) planning clients live in privately financed housing, and they may be thinking of using reverse mortgages to pay for any LTC services they need. But one way to understand the forces shaping private housing for older Americans may be to look at what HUD is doing. HUD officials often say in public what private developers are saying behind closed doors.
HUD officials gave a look inside the sausage factory recently when they drafted an update to the Section 202 elderly housing finance program regulations.
The Section 202 program provided loans, and later grants, that helped developers create about 117,000 subsidized rental units for elderly Americans. Many of the early developers received 40-year loans. Little new government money is available, and the original loans are starting to mature. HUD wants to help the owners get their loans refinanced and use the cash to renovate their properties and turn some apartments into assisted living units. HUD also wants to encourage managers to offer more units to frail elderly people.
Both managers of the HUD Section 202 elderly housing financing program and private developers face the effects of the aging of the baby boomers, the damage the Great Recession did to the boomers' finances, and conflicting ideas about how and where people with disabilities should live.
For a look at why the Section 202 regulation update might interest LTC planners, read on.
1. If any of your LTCI clients do end up in HUD-subsidized elderly housing, they could get a good deal.
Most HUD-subsidized apartments for the elderly look for applicants with income under 80 percent of the "area median income" (AMI), and many prefer applicants with income under 50 percent of the AMI. The average U.S. cut-off for having a very-low-income one-person household is $22,350.
But, especially in wealthier communities, 50 percent of AMI may be relatively high. In Connecticut, for example, the very-low-income threshold for a one-person household is $30,250.
When managers of HUD programs calculate whether applicants meet income eligibility criteria, they include wages, periodic payments from annuities and retirement plans, and regular benefits payments from disability insurance or life insurance.
HUD program managers exclude $180 per day in private LTCI benefits payments.
HUD programs also exclude any cash applicants and families spend on guaranteed-renewable LTCI premiums. "Payment of long-term care insurance premiums is an eligible medical expense," according to a HUD guidebook.
2. The Section 202 update could shape how policymakers think about who needs long-term care.
Today, LTCI issuers often pay benefits when insureds either suffer from severe dementia or are unable to handle two or more "activities of daily living" (ADLs) — bathing, dressing, dining, grooming, toileting and walking.
Government agencies assessing people's abilities also ask about "instrumental activities of daily living" (IADLs), such as the ability to cook, clean, shop, take medicine and use the telephone.
Doctors use the term "frail" to refer to people who are slow or weak.
When HUD officials developed their proposed Section 202 regulations, they included incentives for project managers to serve the "frail elderly." They defined "frail elderly" to mean people who have trouble with at least three ADLs.
Colleen Bloom, a housing operations specialist at LeadingAge, a long-term care (LTC) provider group, wrote in a comment that HUD officials are using "frail" differently from how doctors use the term. She suggested that HUD ought to expand its definition of "frail elderly" to include older people who have trouble with at least one ADL, or at least one IADL, and who also need help with chronic health conditions.
Including people with chronic health problems in the definition could help housing programs work better with chronic care management programs, Bloom said.
