Wednesday, February 22, 2006

Could Technology R&D for Seniors Help the State Budget?

Following the Governor's budget address on February 8, there has been a lot of rhetoric about how fast the state budget is growing, the need to cut costs, and where money should be spent.

However, most people don't realize that over half of the state budget is spent on just two programs -- K-12 Education and Medical Assistance. And the biggest of the state's budget problems has been Medical Assistance. Total state spending this year (2005-06) is $1.5 billion higher than the previous year, and 1/3 of that increase ($500 million) went to fund rapidly rising Medical Assistance costs.

Why are Medical Assistance costs rising? The primary cause is the high cost and growing number of elderly in nursing homes. There has been a 70% increase in the number of elderly Medical Assistance (MA) recipients in Pennsylvania in the past four years. And while the elderly only represent 13% of the total number of MA recipients, they represent 35% of total expenditures on Medical Assistance.

This is not a short-term crisis, but a long-term problem - Medical Assistance costs are projected to increase by more than $2 billion over the next five years.

The Governor's proposed budget includes a number of initiatives designed to expand in-home and community-based care for seniors in an effort to slow this growth. But in-home services are also expensive, particularly for seniors with serious disabilities, and it will be increasingly difficult to find enough qualified workers to provide quality services in the traditional way.

Could technology provide a cheaper and better solution? Wireless monitoring, voice recognition, and communication devices could help seniors live at home and get services when they need them, rather than requiring aides to be present constantly. Robotic devices could enable seniors to get assistance with certain tasks without the need for a human assistant. These technologies could also reduce the costs of care in nursing homes, for those who cannot live at home.

A number of organizations and companies in southwestern Pennsylvania are conducting research and developing ways to use new technology to help provide in-home care to seniors. For example, UPMC's Center for Assistive Technology works to find existing devices and develop new devices to help people with disabilities live independently. A company called medSage Technologies has developed voice-recognition systems to enable efficient communication with seniors receiving in-home care. In McKeesport, Blueroof Technologies has developed a "smart cottage" designed to enable seniors to live at home safely for a longer period of time.

What's needed to accelerate this? The federal and state governments could provide R&D funding and investment capital to encourage and assist more of these efforts, with a specific focus on developing technologies that would help to reduce nursing home costs. If successful, the state would get a double return on its investment, by reducing the growth in a major state budget item, and by creating new companies and jobs in this high-technology industry. If the state could slow the projected growth in Medical Assistance spending by only a half percentage point per year (reducing the average annual growth from 8.5% to 8.0%), it would save more than $400 million over the next five years, and even more into the future.

Southwestern Pennsylvania is a natural center for this industry, because of the R&D stengths in life sciences, information technology, and robotics at UPMC, Pitt, and Carnegie Mellon, because of existing entrepreneurial energy in this area, and because of the many innovative and world-class senior services agencies (nursing homes, assisted living facilities, and home care agencies) located in the region. Funding in the 2006-07 budget to support R&D and venture capital in this area could be a wise investment.


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