Key Takeaways From the $648B Care Economy Report and What They Could Mean for Age Tech
A new report estimates the U.S. care economy to be worth $648 billion. The report, released by Pivotal Ventures and The Holding Co, states that the care economy is bigger than the U.S. pharmaceutical market ($510B). That’s quite a number, but what does it include? This report is about the U.S., in which many age tech startups operate, and to which many international age tech startups look to when they want to expand to their next big market. I dove into the 266 page report to understand what parts of this economy are actually about caring for older relatives, and what this could mean for age tech.
What does the care economy include?
The creators of this report used the following inclusion criteria to determine what goes into the care economy:
“Products, services, and technology that center on the unpaid or paid caregiver – helping alleviate the labor of caring for another individual in terms of money, time, and/ or mental load (e.g., coordination, planning, stress)”
The report breaks the care economy down into four major service categories, two of which, which have a combined market size of $390B (more than half the overall size of the care economy), are aging in place related services and non-home based long-term care provided to older adults and people with disabilities.
Aging in place and home-based care market breakdown
Aging in place and home-based care for older adults and people with disabilities which was estimated at $151B in 2019, is broken down into aging in place services and home care provision:
These two categories are then further broken down into subsegments.
Aging-in-place services ($60B in 2019) include the following service categories:
- Daily essential activities
- Care coordination
- Caregiver quality of life
- Health & safety awareness
- Transition support
- Social well-being
While home care provision for older adults and people with disabilities ($91B in 2019) includes the following service categories:
- Traditional home healthcare and nursing care
- Home hospice
- Home therapy services
- Other services
Key insights – Payors
#1 – Public payor dominance
According to the report, about three quarters of the home-based care for older adults people with disabilities care market is paid for by Medicare (Federal health care coverage for people over the age of 65 or people with disabilities) and Medicaid (state health care coverage for low-income individuals).
#2 – A shift towards the home
Payors are “beginning to prioritize care at home — Shifting care to the home has become a priority for payors and service vendors in managing overall cost trends and improving outcomes”
#3 – More Medicare beneficiaries, more coverage for care & SDOH-related benefits
Medicare advantage is a program where those eligible for Medicare can receive health care coverage from private-sector health insurers. These private insurers have a strong incentive to keep people healthier thus keeping health care costs down. Startups offering tech-enabled solutions that focus on the social determinants of health (SDOH) like Papa and Uniper are able to partner with Medicare Advantage plans for coverage and distribution. On top of this, “many states are beginning to cover some forms of Social Determinants of Health (SDOH) through Medicaid” – this could include coverage for tech-enabled products and services.
According to the report, the percentage of Medicare beneficiaries enrolled in Medicare
Advantage has been steadily increasing since 2005. In 2019, the rules for the benefits that Medicare Advantage plans could offer changed, opening up the possibility to offer a range of new care benefits.
#4 – Most new care-related benefits are growing significantly faster than Medical Advantage overall
Key insights – Employers as payors
We can’t unsee what we’ve seen: buyer appetite likely to remain above pre-pandemic levels
With an ever-increasing competition for talented employees, many employers look for new ways to make themselves a more attractive place of work. During the pandemic, 29% of employers reported that their employees experienced caregiving issues with aging parents
With more and more employers understanding that caregiving has a major impact on employees’ well-being, employers are “actively exploring how to best support caregivers across their full population, leading to variety in offerings”
Key insights – how do older adults prioritize what’s important and decide what to purchase?
The makers of this report surveyed 1238 older adults and family caregivers.
- 503 Family caregivers of aging parents or other older relatives. In order to qualify, family caregivers had to help take care of an older adult in their life who does not live in a nursing home, and also help make purchasing decisions for this older adult related to aging-at-home on a regular basis.
- 735 Older adults who are aging-in-place. In order to qualify, older adults had to be 60 years old and older, and not live in an assisted living or nursing home. The report specifically states that those are “older adults who are independent and do not receive care or purchasing support from a family caregiver.”
Family caregivers involvement in purchasing products and services for older adults
For these survey respondents, it is not surprising that they found that “older adults were much more likely than family caregivers to state that they make 96-100% of purchases related to aging-at-home themselves”
When older adults gather information to help them with the decision making process regarding new purchases to support aging-at-home, they most often utilize word of mouth from friends and family and advice from doctors.
When it comes to purchases that are technology complex or critical to the older adult’s health and safety, both family caregivers and older adults agree that “adult children are most likely to help older adults with purchases.” When asked about the most important factor that is considered in past purchases of aging-in-place enablers, both family caregivers and older adults reported the health and safety of the older adult as the most important factor.
It is no surprise then, that past purchases included products like: wearables to detect medical emergencies, virtual fitness programs, home medical devices to monitor things like blood pressure and glucose levels, smart pill boxes, medication management apps and telehealth apps.
When family caregivers are involved in purchases, they report “being significantly involved with each step of the purchase decision journey”, which include:
- Identifying the need
- Researching the purchase
- Choosing the final purchase
- Paying initial cost for the purchase
- Paying ongoing product/ service fees
And utilizing “internet searches and input from older adults” to help with decision making.
The researchers also found that “Both older adults ages 60-69 and 70-79 were largely uninterested in most types of aging-at-home purchases, regardless of how they were framed”, but that is not surprising when you consider the inclusion criteria for the survey – “older adults who are independent and do not receive care or purchasing support from a family caregiver.” The researchers also state that the sample size of those over the age of 80+ was too small, and they are more likely to require care and assistance for aging in place.
Key insights – Covid-19 pandemic effect
#1 – remote access services not growing as expected, except for telehealth
One surprising piece of data from this report is that “the percentage of Medicare Advantage plans offering explicit benefits for remote access, telemonitoring, and medical nutrition therapy is not growing” and that “the one remote service that has grown dramatically in the last year is Telehealth – the ability to have remote visits with a doctor”
#2 – older adults are even more likely to prefer aging in place
“While COVID-19 has not impacted many older adults’ intentions to age-at-home, when intentions were impacted, most family caregivers reported that the older adults they care for are now less interested in transitioning to a retirement home”
What does this mean for age tech?
The steady increase in the percentage of Medicare beneficiaries enrolled in Medicare
Advantage, together with the increase in states’ willingness to cover SDOH-related benefits through Medicaid, and the Biden administration’s plan to allocate an extra $400 billion to support elder-care, are great news for age tech startups in many of the market’s sub-categories. The chances to get many tech-enabled products and services either covered or reimbursed have never seemed brighter.
Same goes for getting employers on board as payors – is definitely worth looking into as a business model. Getting to end users through employee benefits is a model that has been utilized by some age tech companies, like Torchlight, which provides caregivers with the resources they need to handle the daily challenges of caregiving.
The report also backs with data something that has been common knowledge in this industry – the fact that family caregivers play a role in buying decisions. This supports the notion of including not just older adults, but also family caregivers, in the design and development process for new products and services.
In the household management front – a big part of this report covers the gap between what Ameircans are willing to pay for services like cooking, cleaning and laundry services, in order to save time and reduce the cognitive load that’s associated with managing a household. The researchers believe that this $122B market has the potential to almost double to $217B. And while the report doesn’t specifically state that there is a market opportunity for developing custom or at least age-inclusive tech enabled household management services – I believe that this is an opportunity that’s worth looking into.
Any additional thoughts on the opportunities and challenges presented by this report? Feel free to direct-message me using the contact page. You can follow me on LinkedIn, Twitter or subscribe to my YouTube channel!