Morningstar - Q4 2020 - 37

Healthcare Trends Could Lead to More At-Home
Eldercare
The pandemic has been particularly dangerous
to those in assisted living and nursing
home facilities. According to The Foundation for
Research on Equal Opportunity, nursing homes
and assisted living facilities have accounted
for 45% of all COVID-19 deaths as of the end
of summer.

Given the sizable number of COVID-19 cases in
comprehensive nursing home facilities, are
we likely to shift our long-term-care-related dollars
to in-home care solutions instead? The cost for
both is steep: The median cost for a nursing home
facility (private room) exceeds $100,000 annually,
while a 40-hour-per-week home health aide
can run more than $50,000 per year, on average,
according to Genworth Financial.

Ultimately, though we expect elevated demand
for at-home care, numerous factors will
influence how large the increase is and how
quickly any shift occurs. Uncertainties such as
personal preferences, financial means, and
how long COVID-19 remains a pressing concern
make it difficult to forecast how prominent
this shift will be.

EXHIBIT 1

How We Spend Our Healthcare Dollars Though hospitals take in the
most dollars overall, they receive a greater percentage from insurers than
other healthcare categories.
U.S. Total Spend ($ Billions)
Dental: 135.60
Nursing Care: 168.50

Out of Pocket Only ($ Billions)
54.90
44.80

Prescription Drugs: 335.00

Other: 990.70*

Home Health: 102.20
Physicians & Clinics: 725.60

Hospitals: 1,191.80

Total: 3,649.40
* "Other" includes administrative costs, medical equipment and products, and professional services other than physicians and dentists.
Source: Kaiser Family Foundation. Data as of 2018. https://www.healthsystemtracker.org/health-spending-explorer/

"We think there will be increased demand for
in-home care thanks to the pandemic,"
Morningstar senior analyst Debbie Wang says.
"Aside from demand for in-home aide services
and hospice service, we think this issue
could also manifest itself in new zoning ordinances,
for example, that will allow for more 'motherin-law cottages' or carriage houses to be built
on what is currently for single-family homes."

47.10

122.60

10.20
61.20

34.80

Total: 375.60

What We Anticipate for Healthcare Spending
on Prescription Drugs
The pandemic's impact on drugmakers could
be profound, director of healthcare research
Damien Conover says. If drugmakers can
offer COVID-19 vaccines at cost or at very little
profit-and help bring the world back to
something closer to normal-they may be able
to generate some much-needed goodwill
for Big Pharma. And in doing so, the drugmakers
will have a good chance of protecting their
longer-term pricing.

Further, although government policy can have
a large impact on how much we spend on drugs,
new policies are hard to implement.
Take, for example, President Donald Trump's
executive orders targeting drug prices. As of today,
Conover doesn't expect these to pose too much
of a threat to drug pricing.
"The order allowing the importation of drugs
from Canada would significantly reduce U.S. drug
prices, which are close to double international
prices," he says. "But safely implementing
this is challenging, given the different labels
across countries, and drug firms are likely to limit
Canada sales. Importation of drugs [from
Canada] has been passed by Congress twice,
only to fail in implementation, largely due to
safety concerns."

morningstar.com/lp/magazine

https://www.healthsystemtracker.org/health-spending-explorer/ http://www.morningstar.com/lp/magazine

Morningstar - Q4 2020

Table of Contents for the Digital Edition of Morningstar - Q4 2020