With more Americans gaining health insurance under the Affordable Care Act, and with the nation’s population continuing to get older, many analysts project increases in healthcare spending in the coming years, particularly in the long-term care sector. The Centers for Medicare and Medicaid Services’ (CMS) Office of the Actuary believes spending on nursing care and continuing care retirement communities will increase by nearly 70 percent from now until 2023.
This spending increase presents a significant opportunity for long-term care providers and senior housing communities to generate additional revenue and increase their net operating income through increased occupancy rates and new fee structures. These gains will strengthen their financial positions and make it easier to obtain capital from firms like Chicago-based Cambridge Realty Capital. Cambridge Realty Capital has over 20 years of experience in real estate financing, and currently focuses on the senior housing market. Senior housing participants and investors seeking capital for debt refinancing, acquisitions, or sale/leasebacks should contact Cambridge Realty Capital to learn more about the many different financing options it offers for these and other purposes.
Details from the CMS Report
According to CMS projections, healthcare spending is likely to grow by 5.7 percent through 2023. These projections account for an increase in the number of baby boomers becoming eligible for Medicare, as well as a dramatic drop in the number of uninsured persons due to increases in Medicare enrollment and various provisions in the Affordable Care Act. CMS projects that, after reaching 45 million in 2012, the number of uninsured in the country should fall to 23 million by 2023. The annual 5.7 percent increase in healthcare spending will also lead to an increase in the share of GDP devoted to healthcare, from 17.2 percent in 2012 to 19.3 percent by 2023.
Medicare and Medicaid each cover some long-term care services. Spending on Medicare is projected to increase at an annual rate of 7.3 percent from 2016 through 2023. Spending on Medicaid is projected to increase by 12.8 percent in 2014. These numbers are partly due to increased enrollment as a result of the Affordable Care Act, which is expected to see a 6.7 percent increase in 2015, and an average increase of 6.8 percent from 2016 through 2023.
These spending figures apply to all aspects of the healthcare system, including long-term care, hospitals, physician and clinical services, prescription drugs, and hospice and home care. Because of the aging of the population and the extra care needs that seniors often have, healthcare spending on that segment of the population should increase by a sizeable amount. Many senior housing providers are already taking notice, and are moving to build new facilities to meet the increased demand. Going forward, industry participants should keep an eye on reports such as the one released by CMS. Reports such as these can help with strategic planning, and allow investors to take advantage of future opportunities in the senior housing and long-term care sectors.