Disrupting Eldercare

PART II: Eldercare’s Areas of Opportunities

In Part I of this piece, I explored a number of “personas” underserved by the companies and solutions in today’s eldercare market. In Part II below, I’ll dig into the size of the eldercare market, identify solution gaps, explore opportunities where new tech-enabled businesses can drive change, and outline why now is the right time for such companies to emerge.

As part of my work, I spoke with more than 30 founders, operators, advisors and investors active in the eldercare space. I wanted to understand where technology can help bend the cost curve and drive better outcomes — across home health services, care coordination, financial planning and payments, the provision of and payment for medical care, and, ultimately, quality of life.

The large domestic eldercare market — currently $350B annually — is spent on all types of long term care services, and is growing at around a 6% CAGR.

Primary drivers include for this growth include:

• A big aging population (i.e. baby boomers),
• Increasing life expectancies — for example, a 65 year old woman today can expect to live to 86, 11 years longer than in 1900, and
• Rising costs of medical and ADL (Activities of Daily Life) care (driven in part, counterintuitively, by technological advances in medicine).

By 2020 there will be 50 million people older than 65; by 2050, those over 65 years old will represent a whopping 20% of the U.S. population.

Clearly, eldercare is expensive. Currently, $30B — fragmented across some 20,000 agencies nationwide — is spent each year on home health aides. Beyond the actual cost of health and ADL care for seniors and the elderly, it is estimated that over $300B is lost annually in economic activity forgone by family caregivers taking care of an older family member.

Despite the huge amounts of dollars flowing into this industry, the go-to-market path for new companies is challenging:

• There is not a lot of incremental spend available given the high costs of home health aides, facilities, and medical care. The population that best positioned to spend on new technologies and services — and that arguably is most in need of financial products and better content / programming — are today’s baby boomers.
• The cost of online customer acquisition is high: more than $1,000 per customer for lead-gen companies like A Place for Mom.
• Other end markets are rife with their own difficulties: assisted living and independent living facilities are fragmented and burdened by slow sales cycles, outdated technology infrastructures and budget constraints. The payors in this market — Medicare and Medicaid — have limited financial resources to put towards new technologies or solutions — unless they rapidly and demonstrably drive down costs.

Beyond a difficult go-to-market in this industry, I learned that it will be difficult for technology to drive meaningful change the way it has in other industries for two primary reasons:

1. The provision of medical and activities of daily living (ADL) care for the elderly requires in-person, human-to-human care, which is difficult to automate and scale, and
2. Older adults are less comfortable using technology — while this will improve over time as today’s tech-savvy baby boomers age, they, too, will suffer from the inevitable deterioration of vision and hearing that will make using technology challenging.

This lack of incremental spend — and the overall cost sensitivity of consumers in this market — as well as the challenges of leveraging technology for this end-user population have hampered the growth of startups in the space. While none have entirely figured this out, a number of companies have tried to address these challenges across relevant industries:

• Home Health Care: Companies like Honor, HomeTeam, and MavenCare have tried to reinvent the home health caregiver market by creating tech-enabled home health agencies that offer high quality home care at affordable prices with a better work experience for the aide. However, all have struggled in selling direct-to-consumer; low margins of the services business model has made the unit economics challenging. Only Home Care Assistance has managed to gain traction, largely because they sold at a higher price point from the beginning. CareLinx, KindlyCare and others have taken a marketplace approach to matching consumers with potential aides (who are independent from agencies and who these platforms help verify) hoping to capitalize on supply and demand drivers to achieve optimal pricing, but given they are not verticalized they cannot guarantee the quality of the aides being recommended.
• Care Coordination: Companies have emerged to serve the “Overburdened Family Member” persona we explored in Part I. Companies like Wellthy (outsourced care coordinator + tools dashboard), Trusty.care (originally a high-end concierge care and marketplace for care-coordination services, has since pivoted) and Samada (online content for end of life care) have struggled to find the right go-to-market channels given the lack of willingness for this consumer to pay for tools that would be only incremental to her care coordination, and a lack of ability to pay for a high end fully outsourced care concierge. Wellthy shifted to selling to selling to employers as a benefit, with the value proposition of ultimately reducing employees’ time away from work; however, the HR benefits space is crowded. There are a few companies that have emerged which offer direct-to-consumer point solution services and products such as for estate planning (Willing, Tomorrow). If the markets for these point solutions develop, they may be able to build an “end of life” brand in this space that extends to all parts of care coordination and end-of-life planning.

In examining the market, I identified two specific areas within eldercare where I think technology can help drive better outcomes in the near term: financial solutions for long-term care payment and content and programming for both seniors and the elderly.

1. Paying for Long Term Care (LTC): LTC — home health aides and facility-based care alike — is increasingly expensive. There are long-term care insurance products, but those policies are expensive and the supply of LTC policies has dwindled given the challenging economics of the policies and the bankruptcy of carriers like Penn Treaty. As an insurance product, LTC faces two key issues: it is difficult to price (in part given rising health care costs + longer life spans), and incentives are misaligned with the insurance carrier (unlike with life insurance, where neither you nor the insurance company want you to die in your 40s). Additionally, it’s difficult to get younger customers motivated to invest in their future long-term care — it’s challenging enough to get them to think about saving for retirement in general. There are interesting potential alternatives to LTC insurance, like an annuity product dedicated to saving for elderly and end-of-life. Some entrepreneurs are focusing on ways to leverage existing, non-liquid assets, such as home equity, to pay for care.
2. Content and Programming for Seniors and the Elderly: Much of the white space here centers around “things to do” for newly-retired seniors (aged 55–75) as well as the elderly (older than 75). I think a platform that emerges to create or aggregate that content would fill an important need in the space, and could quickly grow to be a big business. Consider a video platform that curates existing educational and entertainment content (i.e. MITx courses, TED talks, Jeopardy games) and delivers it through facilities for in-person group content experiences, or direct-to-consumer via an easy-to-use interface (or via an iPad, for the tech-savvy). For boomers, instructional content for new skills to drive supplemental income could offer a more meaningful and engaging way to spend time. For both groups, programming that fosters social interaction would help prevent isolation and loneliness, which have adverse effects on both mental and physical health. However, any type of programming that occurs offline, and/or that requires local coordination, will be difficult to scale.

NEW OPPORTUNITIES FOR A GROWING, AGING MARKET

Although eldercare remains a challenging market to drive new, technology-driven innovation, the time is right for a new company to leverage technology to solve the pain-points of this huge market.

As people live longer, the increasing burden and cost of healthcare and services is a true societal concern. Beyond care — with post-retirement representing a larger portion of their lives — there is a real need for content, products and services for our aging population.

Additionally, baby boomers are more tech savvy than their parents, having learned how to use computers and iphones during much of their working life, and may be more amenable to embracing (ever evolving) tech in their daily lives. This means that both post-retirement and elderly consumers themselves, as well as their aides both at home and in facilities, will be more open to using new technology solutions. Finally, we are seeing rapid developments in the creation of new technologies, such as voice, robotics and Natural Language Processing AI, that have exciting potential applications in the eldercare world.

I am continuing to explore this space and look for new ideas and solutions that can help improve the quality of care and quality of life for all stakeholders in eldercare. If you are a founder working on an idea in this space, I’d love to hear from you.

For my grandmother Mimi’s sake — and the sake of all grandparents and seniors going through the process of aging — we need more innovation and creative solutions to make aging less painful and to fulfill the promise of the “golden years.”