December 19th, 2018 | by Gregg S. Fisher, CFA, "Invest with Reason"
Don’t Ignore Cancer’s Financial Risk
- Great progress is being made in beating cancer, and we’re now offering to interested clients a pool of biotech and pharmaceutical investments focused on cancer research.
- In that context, we felt it was appropriate to introduce a panel discussion with leading cancer experts on cutting-edge treatments.
- There is much heartening news, but challenges remain—including financial hurdles: Close to half of cancer patients are losing their life savings in two years.
- With many Americans living longer and paying more for health care, the frightening prospect of outliving their money looms larger.
- We’re dedicated to helping build portfolios strong enough to generate long-term growth and help shield against risk.
A new portfolio we are now offering interested clients is a pool of investments in biotech and pharmaceutical companies working in cancer research–an exciting field that’s rapidly producing new treatments and methods of detection. As we always do, we have been refining our thinking through open dialogue with key people on the forefront of this theme. This is what provided me with the opportunity to host an event with two leading cancer researchers, Dr. Julio Aguirre from New York’s Mt. Sinai Hospital and Dr. Ross Levine from Memorial Sloan Kettering. Dr. Samuel Waxman, founder and CEO of the Samuel Waxman Cancer Research Foundation, moderated the event.
Few Are Untouched
Cancer has become almost ubiquitous. Most of us know someone–often a loved one–who has fought a bout with the disease. And we care about our investors, many of whom have been touched by cancer in some way: I wanted to hear from experts who fight the laboratory and clinical cancer battle day in and day out.
But as I said at the event, there’s also an obvious connection between cancer and finances—because cancer treatments are very expensive.
Cancer Costs Can Be Daunting
For example, one study just published this October in The American Journal of Medicine, based on cancer patients newly diagnosed between 2000 and 2012, estimated that 42% of those patients lost their entire life savings after two years because of treatment costs.
While some cancer patients have insurance that covers a portion of their expenses, there’s much that often isn’t paid—deductibles, co-payments, supportive care, caregiver costs, travel to and from hospitals, and so forth. Even when prognoses are good, costs often escalate, since those patients may need treatment for extended periods.
Further, many Americans are living longer, and the risk for developing cancer increases with age. According to the National Cancer Institute, the median age of people diagnosed with cancer in the US is 65, and on average, Americans diagnosed with the most prevalent cancer types are over the age of 50. And so they may face a financial burden when they are less equipped to deal with it: later in life. Which brings me to an issue on the minds of many investors—whether they have cancer or not: Will they outlive their money?
“Longevity Risk” is Real
The thought of outliving one’s life savings is scary. And some of the statistics give you pause. For example, according to data from the Census Bureau and a federal inter-agency forum on aging, between 1900 and 2010 the US population over age 65 grew by about 1,200%–but the over-85s increased by 5,400%! Talk about the graying of America…Planning for a long retirement has definitely become de rigueur.
But it’s not easy since health-care costs are so high, whether or not they’re tied to cancer. For example, in 2017, HealthView Services, a company that provides information on health-care costs, reported that the projected lifetime premiums for Medicare Parts B and D, supplemental insurance, and dental insurance for a healthy 65-year-old couple retiring in that year would, on average, reach $322,000 in 2017 dollars, or $485,000 in future dollars. Again, those amounts are for health-insurance premiums alone—not all the costs that insurance doesn’t pay.
Now the Good News
I don’t want to end on a gloomy note, and I don’t need to. As to cancer treatment, the pace of research keeps quickening, and researchers are sharing information about their work across institutions.
For example, acute promyelocytic leukemia, a cancer of the white blood cells, had once been particularly resistant to therapy, with a fatality rate in excess of 95%. Now the cure rate is above 90%, thanks to a global collaboration of medical researchers developing a treatment called differentiation therapy, which directly targets the leukemia cells and is far less toxic.
Other research that the doctors spoke about at the event included new developments in uncovering the biology and genetics of metastasis, or the factors that “tell” cancer cells to spread from the original tumor location to other parts of the body. These findings are significant, since the leading cause of death from cancer is its spread throughout the body. In addition, the Waxman Foundation has launched a partnership with the National Cancer Institute and the National Institute on Aging to spearhead research on how aging affects cancer development and how scientists can use that knowledge to enhance the prevention and treatment of the disease.
As to rising health-care costs, a comprehensive solution has proven to be elusive so far. Maybe one will emerge soon. Regardless, though, the key for investors is to develop a thorough financial plan, broad enough to account for potential future expenses. Central in that plan is owning an investment portfolio likely to grow in value over time and withstand tough markets. At Gerstein Fisher, we’re fiduciaries of our clients’ wealth—which means that we’re committed to crafting solutions that help address these requirements. As we see it, our duty is to help protect our clients by looking risk straight in the eye–including the risk of incurring large health-care expenses—and remaining mindful of risk as we build portfolios.