VITAL STATISTICS

Demographic dangers lurk in health care costs

SV: What opportunities do you see for small businesses in your demographic research?

FRANCESE:  I see three opportunities.

1. Develop service businesses that help older people take care of their homes. Home care is going to become a bigger and bigger business in the Seacoast region.
2. I see growing business opportunities selling and maintaining second homes for out-ofstate residents. There is a boom in second home ownership and this is going to continue. As more people come to own second homes I see a pretty substantial growth in businesses that serve their needs as well.
3. Health care. The opportunities mostly revolve around specialized health services. For example, sleep disorders, diabetes and arthritis. They are examples of a number of chronic conditions that afflict older people. But there is also real opportunity in health maintenance as opposed to health care: keeping people of all ages well as opposed to just providing health care for them when they get an illness.

SV:  One of the biggest complaints from small businesses is the steep annual increase in the cost of providing health insurance for workers. Is there any hope for a change in this trend?

FRANCESE:  In the long run I am very pessimistic because of the rapidly aging population in New Hampshire and Maine. (Francese noted that in median age terms Maine has the oldest population in the country while New Hampshire's population is the seventh oldest). The rapid growth in the 65-and-older population is going to put enormous pressure on health care providers due to the low reimbursement rates from federal government for Medicare and Medicaid. Those two populations, particularly Medicaid, are going to balloon in (New Hampshire).

Older people are moving to New Hampshire because the age-restricted housing being built is so affordable. Some towns also give substantial property tax breaks to elderly homeowners with low income. The bottom line is that we have created incentives for low-income senior citizens to remain here or move here from somewhere else. It is well known that when you incentive something you get more of it.

Unfortunately, we are not offering any incentives for young people to stay here, so they are moving away in large numbers. The result is we are in a situation where the 64 to 74 age segment is projected by the state to double in the next decade. Even if the percentage of people on Medicaid remains the same, if we double the population we will probably double that number as well. This may result in a large increase in cost shifting to the private sector by health care providers.

In Congress all they talk about is cutting spending on entitlements and when they talk of cutting they mean lowering reimbursement rates to hospitals and other health-care providers. That's just foolish because as more and more employers suffer from rising health insurance costs they will either move out of the region to lower-cost states where they don't have to pay as much, go overseas or to some other lower-cost venue. Another option for employers would be to stop offering health insurance to workers or offer only health savings accounts. But health savings accounts are really just a way to push cost-shifting onto the employee.

SV:  The Associated Press reports that national health care spending will double to $4 trillion a year over the next decade, outpacing the growth of wages, inflation and the U.S. economy as a whole. By 2015, one in every five dollars spent in the United States will go toward medical costs. How will this impact business on the Seacoast and beyond?

FRANCESE:  Our costs in the Seacoast region are higher than in, say, the seacoast region of Georgia. Our cost of doing business is higher, in part, because of the high cost of housing and, in part, because workers get paid more in New England than in most other parts of the country. This is not just in the Seacoast region; it's a New Englandwide phenomenon. As the cost of health care gets higher and higher it puts us at an even more serious competitive disadvantage.

Also remember, a city like Portsmouth has hundreds of employees and their costs of medical care will be passed on to the property taxpayers. So, the second impact will be to reduce expenditures for public education because cities and towns won't have the money to pay for improving the quality of education. We'll see our schools start to have problems. Voters are just going to say I won't pay any more because I can't. Localities will be forced to start cutting back on money spent on everything else except health care. This would be a shame because our schools have been our most important competitive advantage.

New England and the Seacoast area have had a very high level of educational attainment. That's, in part, what enables workers to earn higher wages. But the percentage of young adults who are college graduates is lower now than for people now in their 50s. By not adequately funding scholarships we are discouraging people from pursuing higher education. I fear that the whole public education system of kindergarten through college will start to ratchet downward as the rising cost of health care for our aging population crowds out any other expenditure of consequence.

SV:  Is there anything the region could or should do to change these demographic trends?

FRANCESE:  The first thing the region can do is to somehow stop allowing age-restricted housing and start allowing builders to construct affordable workforce housing. Why, for God's sake, is it illegal to discriminate against old people but it is perfectly legal to discriminate against young people? Age, race, creed, color or sexual orientation: it is illegal to discriminate in housing for any of these reasons. Why do we make an exception for one specific demographic group? It is, in my view, morally wrong. All housing should be available to all people.