AI and the Increasing Cost of Elder Care

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Harris’ plan to fund aging at home … the graying of America is fast approaching … the enormous costs associated with aging … robotics to the rescue … how to invest

$40 billion… per year… conservatively.

That’s the cost estimate from the Brookings Institute for Vice President Kamala Harris’ new proposal, “Medicare at Home,” which aims to cover in-home aides for seniors.

Harris claims the program will be funded by regulating pharmacy benefit managers and negotiating lower prices with prescription drug manufacturers in Medicare. However, if this plan moves forward, it’s a safe bet that the cost will eventually fall on you and me in some form. It all comes down to numbers.

Here’s Forbes explaining:

The Congressional Budget Office estimated that regulating pharmacy benefit managers would yield only $226 million in savings over the 2024-2034 period.

In fact, total Medicare spending on prescription drugs is less than $120 billion a year, raising serious questions about the fiscal feasibility of her proposal.

If Harris truly believes $40 billion can be squeezed out of pharmacy benefit managers and Medicare, she should do it – yesterday. And if there is that much waste in these programs, it calls for deeper scrutiny.

But ignoring that, with what appears to be a massive funding shortfall, who will eventually foot the tab? The answer seems obvious.

Even if Harris somehow manages to extract this money from Big Pharma, consumers will still pay more. Pharmaceutical companies would almost certainly raise prices on other products, passing the cost on to consumers through higher prescription costs. Or consumers would see increased insurance premiums.

Alternatively, Big Pharma could reduce investment in new drug research, which would have long-term consequences for healthcare innovation.

There are always consequences. Nothing provided by the government is truly “free.” Rather, they just shift wealth from one group to another, and if you’re reading this, the odds are high that you won’t be the beneficiary of this transfer.

That said, Harris has correctly identified a significant challenge facing Americans.

The nation is aging. Healthcare costs are going to surge in the coming years, driving trillions of dollars through the economy and financial markets.

Let’s position ourselves to benefit from these inevitable shifts.

Today, we will explore one avenue to do just that.

In March, I attended InvestorPlace’s Big Ideas Conference

It was a fantastic week with presentations from Louis Navellier, Eric Fry, Luke Lango, and a handful of key team members.

The conference provided a forum for our experts to showcase the most influential investment opportunities they’re excited about. These are the game-changers – the investment set-ups offering the greatest portfolio-transforming firepower.

Among the handful of big ideas presented, there was one idea that Louis, Eric, and Luke not only agreed upon, but was at the top of their respective lists…

The union of AI and healthcare.

It’s hard to overstate AI’s coming impact on healthcare – both in terms of its influence on your personal wellness and longevity, as well as for the bottom lines of companies in the sector.

In the months since, here in the Digest, we’ve profiled opportunities in precision medicine, drug discovery, medical devices, and predictive analytics.

Today, let’s look at a new opportunity inspired by Vice President Harris…

The convergence of senior living and robotics.

The challenge and the opportunity

America is aging rapidly. By 2035, for the first time in U.S. history, there will be more seniors than children.

As of 2024, the U.S. has approximately 56 million people aged 65 and older, representing around 17% of the population. By 2050, that number will reach 90 million, and by 2060, 35% of the population will be seniors.

The 85+ age group is projected to be the fastest-growing demographic, nearly tripling in size over the next few decades.

As you’d expect, older adults require more healthcare services, but the scale is striking. Healthcare spending for individuals over 65 is roughly five times that of children and nearly three times that of working-age adults.

The combination of a growing senior population and higher healthcare costs per person translates into staggering spending figures.

According to the Centers for Medicare & Medicaid Services (CMS), total U.S. healthcare spending is projected to reach $6.8 trillion by 2030, nearly double the $3.8 trillion spent in 2019. And beyond 2030, the numbers will continue to climb.

Now that we have a broad understanding of the issue, let’s narrow the focus.

How does “Medicare at Home” stack up?

Here are some statistics from Genworth’s 2023 Cost of Care Survey Results:

The cost of a home health aide, which includes “hands-on” personal assistance with activities such as bathing, dressing, and eating, has increased 10.0% to an annual median cost of $75,500.

One of the primary drivers behind this expense is the growing shortage of skilled healthcare workers, which will only worsen.

The American Geriatrics Society reports that there are currently only about 7,500 geriatricians in the U.S., but at least 30,000 will be needed by 2030. Additionally, the American Health Care Association and National Center for Assisted Living (AHCA/NCAL) projects that, despite existing shortages, we will need an additional 1.3 million nurses over the next decade.

At-home health care costs are already high, and labor shortages will drive these costs even higher.

What’s the answer?

You know where this is going.

AI, robotics, and elder care

AI and robotics are poised to play a major role in addressing the challenges of elder care. Let’s start with the subtler version of robotics in the home before we get to the full-blown “robots.”

Health Monitoring and Diagnostics: AI-driven devices are already helping seniors monitor their vital signs, manage medications, and predict potential health issues. Wearable technology like Fitbit and Apple Watch tracks heart rates, sleep patterns, and even detects falls. AI can analyze this data to forecast potential health problems, enabling timely intervention.

Medication Management: AI-powered pill dispensers, such as Pillo, help seniors keep track of their medications, reducing the risk of missed doses or overdoses. These devices can also alert caregivers if something is wrong.

Companionship: Social robots like ElliQ provide companionship for elderly individuals living alone. They can engage in simple conversations, offer reminders, suggest activities, and track health metrics.

Home Automation: Tech giants like Google and Amazon are integrating AI into smart home devices, allowing seniors to control lighting, appliances, and more with voice commands. The future will likely see robots that can interface with these systems, enabling seniors to live independently without needing daily professional assistance.

Then we have the stuff of the sci-fi movies – the advanced healthcare robots…

For example, Toyota’s Human Support Robot (HSR) and SoftBank’s Pepper assist seniors with daily tasks like retrieving objects, cleaning, and helping with mobility. I won’t post a photo due to copyright infringement, but you can see what Toyota’s robot looks like, and watch a video of its capabilities, here.

So, how do we invest?

First and easiest, there’s Big Tech.

Three examples…

Amazon has adapted its Alexa voice assistant for seniors, enabling them to control smart home devices, set medication reminders, and contact caregivers using voice commands.

Apple is focused on its Apple Watch, which offers electrocardiogram (ECG) functionality, heart rate monitoring, fall detection, and alerts for irregular heart rhythms—critical features for seniors.

And for Nvidia, its Jetson platform is used in healthcare robotics to assist with tasks such as monitoring vital signs and helping seniors with mobility. The Toyota Human Support Robot we looked at a moment ago uses Jetson.

Next, we have more focused plays. Three more examples…

Medtronic is incorporating AI into remote health monitoring systems for chronic disease management.

iRobot, which is known for its Roomba vacuum, is expanding into robotics designed to assist seniors with home tasks.

Then, there’s Philips, which offers AI-driven products like the Lifeline medical alert system. It also offers remote monitoring solutions to help seniors manage chronic health conditions.

To be clear, this is not going to pay off tomorrow

But for that portion of your portfolio that you want allocated to safe growth, this is a no-brainer. Big Tech would not be sinking billions into this area if there wasn’t going to be a massive payday.

On that note, here’s CNBC:

[There is a Big Tech] red-hot AI arms race, where tech companies are competing to dominate a market that analysts believe could someday be worth trillions.

The financial opportunity is so enormous that even Nvidia, which is now the second largest company in the world, anticipates needle-changing growth.

Here’s a CNBC headline on this point from earlier this year:

Nvidia makes it clear its best days are still ahead – and health care is one reason why.

The mass adoption of these technologies is expected to accelerate over the next five to ten years. This will come from advancements in AI, robotics, and cloud infrastructure.

The benefits will be enormous – not only will seniors have greater independence and improved quality of life, but healthcare providers and families will also be able to manage care more efficiently and cost-effectively.

And for investors like us, we’ll get to ride this enormous swell of growth as America ages at home.

Bottom line: You want to know the future of elder care? Look to the intersection of AI, robotics, and home automation.

If you want a long-term set-it-and-forget-it investment growth story, this is for you.

Have a good evening,

Jeff Remsburg

The post AI and the Increasing Cost of Elder Care appeared first on InvestorPlace.