By ALAN TURNERContinuing our look at the explosive growth of the health care sector in America, it’s important to consider the whole issue of senior care as it relates to the retirement and aging of the baby boom generation.
In the prior segment on the future of health care, we looked at the growth of health care in the United States from 1960 until today. In 1960, we spent less than 5% of our gross domestic product on the total health care needs of America. Today, that number has climbed to approximately 18%, and many sources (including the Government Accounting Office) have forecast that at current trends, health care could consume nearly 25% of the GDP of America in less than 10 years.
We also considered how this stacks up with other developed nations, and we found that on average, the share of GDP spent on health care in those nations is in the 10-11% range, with some lower. To be sure, there are numerous reasons why this is true. For instance, America continues to shoulder the R & D costs for most of the world. For another, there has been a significant increase in life expectancy, along with a strong ethic to extend life as far as possible. From what we learned, health care is “rationed” in many other developed nations on a “quality vs. quantity” basis. Does that suggest that people in, say, the UK or France or the Scandinavian countries are less likely to get advanced life-saving procedures when they are at an advanced age? Probably.
Which brings us to the whole perspective of senior care. Some estimates indicate that the unfunded liability for Medicare over the next 40 years is a number approaching $75 TRILLION. That’s a difficult number to grasp.
Recently, I had the opportunity to spend some time with Merit CEO Steve Dobbs, and Think Anew CEO Don Glidewell, to discuss the future of health care in general, and also on a specific basis, to discuss the whole issue of senior care with Glidewell.
Don Glidewell is a man with a passion, and that passion is senior care. As the CEO of a technology company serving the senior care industry, he is in close and constant touch with the owners of nursing homes and other facilities, and probably understands the needs and challenges of these providers as well as anyone. He sees a growing crisis in the making insofar as it relates to the needs of seniors.
To begin with, it’s important to recognize the sheer size of the baby boom generation. Most demographic estimates place the number of boomers at 77 million. Today, boomers are reaching the age of 65 at a rate of 10,000 per day, every day, and this trend will continue for many years to come.
Glidewell said that there are a total of 16,000 nursing homes in the U.S., and over 33,000 assisted living facilities.
“With life expectancies increasing, we’re going to have to have a lot more beds and facilities to take care of the needs of our seniors in the next 20 or 30 years,” he said. “What we’re seeing, though, is a regulatory environment that continues to get more and more burdensome for senior care providers.”
He pointed out that, unlike hospitals, nursing homes are generally much smaller businesses, and the costs associated with regulatory compliance are really pressuring those businesses.
“In fact, we’re seeing that many nursing homes have seen their profit margins decline from the 4-5 percent range, which wasn’t great, all the way down to less than 1 percent,” he said. “Hard to imagine that an owner can or will want to continue to operate a business that doesn’t even generate a 1 percent profit.”
He did point out that he understands that regulatory practices in many cases are essential to preserve the quality of care for seniors, but also said that the increasing size and frequency of fines to operators for Health Insurance Portability and Accountability Act and health care record violations is truly burdensome.
“In some cases, we’re aware of fines being levied that topped a million dollars”, he said. “How can any small business handle that kind of threat?”
A great deal of the challenges to senior care come from the need to adopt new technologies.
“It’s really hard to maintain a technologically savvy staff when you need their main job to be taking care of people,” he said. “Senior care providers are just never going to have the resources and assets of large hospitals.
“We keep asking them to do more and more, to take care of more residents, and yet, their reimbursement rates have been cut, their compliance costs have increased dramatically, and they simply don’t have the resources to deliver the increased care our seniors will require in the next 10 or 20 years.”
From that perspective, it certainly does sound like a problem of crisis proportions.
“Just think of it this way,” he said. “The more time staffers and caregivers have to spend dealing with tech and compliance, the less time they have to deliver care.”
Does that mean that the level and quality of care are going to suffer?
“Right now, it’s hard not to reach that conclusion,” he said. “We’re giving out mandates without resources.”
Given these considerations and the exploding needs, what does he see as the solution?
“I think we need to let certified technology companies provide the oversight on compliance and HIPAA issues,” he said. “Let the companies who specialize in technology deal with the technology issues, and those who specialize in care, provide the care.”
Overall, he says taking some of the burdensome weight of regulatory practice from the care providers would allow them to operate their businesses much more efficiently, which would translate to better care.
Another issue covered under this approach would be security.
“Health care records are one of the prime targets for hackers,” he said. “You can sell a health record for a whole lot more money than you can a Social Security number or a credit card number, because it contains so much more sensitive information.”
That’s where the HIPAA regulations come into play, making the provider directly responsible for any breaches that occur within its system. Two breaches in any calendar year results in a very large fine to the provider.
“We simply can’t afford to let things continue as they are,” he suggested. “It should be important to every American that we get our ducks in a row, focus on the really meaningful priorities, such as taking care of the needs of our seniors, and reallocate our assets and resources to do just that.
If the choices are to deliver less and lower quality care for parents or grandparents, or else figure out how to reallocate resources in ways that foster quality care, it’s hard to imagine that anyone would choose the first alternative. After all, we’re all going to be old one day, if we live long enough, and the future is just around the corner.