Small Business Owners Prepare for Baby Boomer Effect

If you are a regular reader of The Fischer Report, you are well aware of the dramatic effect the Baby Boomer generation is having on the health care system. As Boomers who work in the health care industry retire, the workforce is struggling to keep up with the increasing demand those same Baby Boomers are putting on the system.

The same thing is happening to small business owners.  As owners reach retirement age they will find it increasingly difficult to sell their business because there is a smaller pool of buyers.  It is a problem illustrated in a recent survey by the University of UConn School of Business.

The survey studied the shrinking number of potential small business buyers compared to the number of retiring business owners. It showed a dramatic decrease in the potential buyers that could put the squeeze on Boomers who are trying to profit from a life’s work.

Looking ahead between 2015 and 2025, we estimate that over 19,000 business owners will want to retire, with fewer than 23,000 new owners to take their places. Put differently, the ratio of willing buyers to willing sellers will fall from 1.6 in recent years to 1.2 in the years to come.

The report goes on to illustrate the effects this could have on retiring Baby Boomer business owners that could put a serious damper on retirement plans.

This will likely have one of two effects: it will encourage the prospective sellers to work longer, or it will force those sellers to accept lower sale prices for their companies. At times, it will have both effects. Prospective sellers may work longer than they want hoping for a better price that never comes and ultimately sell at a discount anyway.

If you think this is a problem for Connecticut think again.  The report compared the Baby Boomer dilemma in the Nutmeg State to the nation and found the effect intensifies.

Nationally, we are on the verge of an even more pronounced change in the ratio of older business owners looking to sell vs. younger adults that might consider buying businesses. As shown in Exhibit 6, this ratio ranged from 1.34 to 2.05 from 1950 through 2000. This means that, in the second half of the 20th century, there were substantially more prospective “buyers” than “sellers.” It is a different story in the 21st century, as this ratio is projected to be just slightly over 1:1 from 2015 onward.

Yet another illustration of how the Baby Boomer generation will challenge our systems as our country prepares to help the largest generation enjoy their golden years.  We must innovate to meet demand and control cost.  Failing to do so could be a greater threat to our national success then any other influence.


Fixing Home Care: Low Wages for Home Health Aides a Complex Issue

Baby Boomers are retiring at a startling rates and their need for long-term care at home is causing the health care industry a host of problems.  The biggest of which is a shrinking workforce especially among home health aides.

The problem of finding people to work as home health aides involves a number of factors. These jobs are often low paying with some working for as low as $8.50 an hour without benefits.  It’s a shockingly low rate of pay considering the amount of responsibility a home health aide has. In fact most those who use long-term care services in their home depend on home health aides for everything from basic household chores to medically necessary treatment needed on a daily basis. In the case of the frail elderly the lack of care could have dire consequences.

Take for example an Elderly Lady in Ithaca, New York who according to the local newspaper had to go to the hospital because she lacked the home care support she needed.

An elderly, wheelchair-bound Tompkins County woman says she was left for almost two months without the home care aide she needs.

Lane Woods, 68, of Trumansburg says this isn’t the first time this has happened. A six-week stint without an aide when she lived in Niagara County ended with her being sent to the ICU due to the strains of caring for herself and maintaining her home without assistance.

The paper goes on to site several local officials who blame the shortage of home health aide workers for the limited access to home care services.

What is playing out in New York is happening all over the country as baby boomers and their children struggle to met the challenges left by increasing health care demands.  The elderly often depend on home health aides to provide care when family or friends are at work.  The shortage leaves many of the frail elderly to fend for themselves at home often with disastrous results.

Adding to the problem of low pay is the breakneck increase in demand for home based services.  According to a 2013 report by the U.S. Bureau of Labor Statistics, Personal Care Aides, Home Health Aides and Nursing Assistants are job categories projected to see an over 48% increase in job openings by 2022.  Those three segments combined, all of which are employed by the home care industry, will make up the nations second largest workforce with 4.8 million laborers by 2022.  Only the retail workforce is larger.

Government Still Part of the Problem

Now before you start beating the drum for government mandated pay increases you should consider that increasing the hourly rate is only part of the problem.  During 2015 various states around the country have begun mandating wage increases for home care workers.  A good first step but only half the problem.

In an effort to keep up with the increased cost of health care delivery, Medicare and Medicaid have been making deep cuts in reimbursement over the last five years. The most recent is scheduled to take place in 2016 and will slash $350 million from the Medicare budget.  The latest cost saving measure by the government adds to the $60 million in cuts that took effect just this year. Medicaid has seen similar cuts in recent years although those vary by state.

That leaves home care companies struggling to find away to deal with pay rate mandates while receiving less in reimbursement.

Lack of Coverage

Medicare only covers short-term home health care based on acute need often of only an hour or two a day for duration of 60 days.  But what happens to the frail elderly who need services for longer than Medicare based insurance coverage can provide. Those patients are often left without access to the care needed to help them age in pace at home. Rather the lack of care often ends like our lady from New York with a trip to the hospital and possibly a nursing home.

For patient to receive long-term home health care they often have to pay out-of-pocket or depend on local aging services agencies to provide subsidized care (often funded by Medicaid). But decreasing reimbursements and program cuts make access to care provided through these agencies difficult at best with most having to spend time on a waiting list before funding is available.

Fixing the Problem

Such a complex problem requires a dynamic solution.  Policymakers and health care industry leaders must come together and develop ways to provide access to quality care for those who need it most our frail elderly. Of course cost will be a factor which means compromises both government agencies and the health care industry will have to make sacrifices. The home health care industry will have to accept some additional regulations in order to combat fraud and waste and the government will have to increase its efficiency in processing and reimbursing claims.

The Fischer Report will not just present a problem without a solution. That is why we are starting a series of articles called Fixing Home Health Care where we will spotlight ways the public and private sectors are working together to solve the health care crisis for our seniors and forward new ideas that could help in the future. Hopefully it generates the discussion about how we can better care for our elderly.