How Would Jeff Bezos Run a Nursing Home? Implications for the Future of Medicaid

Ron Lieber has written an outstanding piece for the NY Times.   He gently nudges healthy middle aged, upper middle class NY Times readers that they are likely to benefit from Medicaid in the future.  He is trying to make a political economy point that Medicaid isn't a "poor person's safety net" but instead is a program that will benefit many comfortable households in the future.  Why?  As we live longer and longer, the same amount of retirement savings offers a smaller annual flow of consumption. Imagine a case where you have $800,000 in lifetime savings and you are retired at age 70. Suppose the interest rate is 0% per year and you expect to live an extra 50 years (so you will die at the age of 120).  In this case, you would realize that you can only consume $16,000 a year.   If you consume more than $16,000 a year, you will violate your budget constraint.

This simple example highlights how the combination of increased life expectancy and low interest rates together mean that even a large $ savings at retirement ($800,000) quickly vanishes.

Then Ron Lieber writes something really interesting.

 One in three people who turn 65 end up in a nursing home at some point. Among the people living in one today, according to the Kaiser Family Foundation, 62 percent cannot pay the bill on their own.

And when that happens, Medicaid pays. The very Medicaid program that stands to have hundreds of billions of dollars less to spend if anything like the health care bills on the table in Washington come to pass.

....

Reality forces our hand, however, when the first nursing home bills arrive. The average annual cost is $82,128 for a semiprivate room, according to Genworth, which sells insurance that can help pay those bills. Most people can’t pay that amount and certainly not for long, especially after 10 or 20 years of retirement spending.

NOW, the point I would like to explore is the $82,128 figure.  He doesn't offer a source for that but that is the average annual cost today.  Where does that come from? If Jeff Bezos and the Silicon Valley "disrupters" took over the nursing home industry, how much would the average cost decline by?   Suppose that Matthew Kahn is 90 years old in the year 2056.   Could I be at a nursing home in rural North Dakota and be washed by a robot and have my vitals studied by a robot and given basic nutrient nutrition from a series of liquid pills.   My vitals could related to a AI system to look for deviations from my past readings.    I wouldn't be lonely because Facebook and other Internet technologies would connect me with my friends and loved ones who live in bigger cities.  I bet that the average cost of this AI enabled approach would be much cheaper (perhaps $15,000 a year?).   

So, this is an example of how the rise of the robots helps an aging population to not face fiscal collapse.   Do existing regulations act as a barrier to entry inhibiting Jeff Bezos from entering this sector? Do incumbent labor unions oppose the substitution of capital for labor?  What laws would need to be re-written?  So, note my optimism.  Do we allow capitalism to solve a pressing problem?