America is facing a crisis. As baby boomers age into retirement, the demand for senior services and long-term care (LTC) supports continues to grow. So far, boomers are the largest population to retire, yet they face a unique challenge that past generations escaped: Who will be available to provide the care they may need?
Studies show that most people would prefer to receive LTC at home1. However, the number of people available to work for agencies that provide home health care (HHC) is barely growing compared to the number of people who will need these services, which is estimated to be 120 million by 20242. To make matters worse, turnover rates in the home care industry are high, exceeding 70%2. Therefore, the HHC industry is bracing itself for a labor shortage and the challenge to fill these much needed caregiving positions.
This situation could increase the need for informal caregivers to step in and provide care to help prevent an individual from being forced into a facility simply because professional care services at home were not readily available. However, the people charged with these tasks may not be financially able to reduce their working hours or step away from their job.
What is an informal caregiver?
Simply put, an informal caregiver is an unpaid individual — usually a spouse or partner, family member, friend or neighbor — who assists an individual requiring help with activities of daily living (ADLs) or other living needs. Some of these tasks may be what are called instrumental activities of daily living (iADLs). This care usually takes place in a home setting.
Activities of Daily Living4
Instrumental Activities of Daily Living
- Household chores
- Meal preparation
- Managing money/paying bills
It’s important to note that 25% of informal caregivers are millennials who have less income and assets than their parents did at the same stage in life3.
The resulting cost in cash and lost opportunity costs to people providing informal care is more than double the paid cost of home health care and facility care combined:
- $241.7 billion = annual cost of paid care at home or in a facility5
- $522 billion = annual cost resulting from people providing informal care6
To put these numbers in perspective, the cost of informal care is greater than the 2016 sales for Walmart, which totaled $482 billion7.
Who is providing home care?
of older people receiving care at home get all their care exclusively from family — mostly wives and daughters8
receive some combination of paid help and unpaid family care8
receive all their care from paid help8
Economic impact to caregivers
People may perceive informal care as being free, but there is an economic cost to family and friends who make sacrifices to provide the care.
The average caregiver is a 49-year-old female who is married and employed8. Caregiving reduces paid work hours for these women on average by 41% and results in other career sacrifices such as passed-up promotions, taking a leave of absence, quitting their job entirely or retiring early8. Individuals who return to work when caregiving ends often end up in a job that pays less and offers fewer benefits than their previous job.8
To add to the economic sacrifice, caregivers typically have out-of-pocket expenses related to their caregiving responsibilities:
- $7,000 = approximate average annual out-of-pocket expense for family caregivers9
- $12,000 = approximate average annual out-of-pocket expense for long-distance caregivers9
Time Spent Caregiving
Caregivers often invest a significant amount of time into helping their loved one. This results in time away from their own family, friends, personal and work responsibilities.
24 Hours a week
the average amount of time spent in the role of caregiver10
the average amount of total time devoted to caregiving10
30 billion hours
the total number of hours spent each year on informal caregiving (22 billion of these hours come from people with full-time jobs10)
Health impact on caregivers
Economic, time, physical and emotional challenges associated with caregiving can impact the health of the caregiver. In fact, informal caregivers are more susceptible to8:
- Emotional stress
- Anger and anxiety
- Substance abuse
- Higher mortality rates
Caregivers are twice as likely to say their health is poor compared to the general population11
40% of sole caregivers predecease the patient they are caring for12
Meeting the challenge
How can advisors help clients address some of these challenges? That’s where long-term care insurance coverage may help. Any type of LTC coverage can provide additional funds to help cover the cost of qualifying LTC expenses. This provides an individual with more care options beyond depending on family or friends.
However, when discussing LTC coverage with a client, the advisor should ask what type of care is desired. Clients who express an interest in paying family members or unlicensed caregivers, or are looking at alternative care services for their LTC needs may want to consider a cash indemnity policy.
Cash Indemnity – Value vs. Price
When considering the available policies, how do you determine which one is worth more? On one hand, a reimbursement policy has more potential benefit dollars, but it only reimburses actual cost of care covered under the policy provisions up to the benefit amount. A reimbursement policy may not pay for less expensive unlicensed caregivers and certain types of alternative care. And it generally does not reimburse payment for an immediate family member to provide care. But a reimbursement plan may be a better choice when spendthrift concerns exist.
On the other hand, cash indemnity LTC benefits pay the full available monthly benefit and can be used 100% without restriction from the insurance company. That includes using LTC benefits to pay a family member or friend to provide the care. This could replace some, or all, of the income the caregiver may have to sacrifice when taking on the caregiving responsibilities13. There is also a future value to cash indemnity benefits in that they can be used to pay for the unknown. As other creative solutions to LTC services and supports — such as robots — come
into being, cash indemnity benefits will be available to pay for whatever is needed. Therefore, some clients may find more value in a policy with a benefit pool that is open to any care option — without the need for approval from the insurance company. As this shift in the LTC workforce takes place, it’s likely that LTC services and supports will continue to evolve to meet the ever- hanging needs people will face. Owning cash indemnity LTC coverage is one way to prepare for those changes as it provides flexible funding to pay for family care.
*The content in this article was authored by Shawn Britt, CLU, CLTC and provided by Nationwide.
1Health Care and Long-Term Care Study, presented by The Harris Poll for Nationwide, March 2018
2www.1800homecare.com; “Massive Caregiver Shortage Expected as Demand for Home Care Services Rises”, Christopher Adrien, March 20, 2017
3The Hill; ”Family care needs upgrade; Millennials are the new ‘sandwich generation’, Nancy LeaMond and Jen Mishory, April 12, 2017
4The Internal Revenue Code Section 7702B(c)(1)
5U.S. Dept. of Health and Human Services; July 6, 2016
6NBC News, Jean Chatzky, “How to Care for your Aged Parents — Without Going Broke”, April 24, 2017
8Family Caregiver Alliance, National Center on Caregiving, November 2016
9AARP Study, “Family Caregiving and Out-of-Pocket Costs: 2016 Report”
10The Caregiving Landscape: Challenges and Opportunities for Employers, Nobel, Weiss, Sasser, Sherman, Pickering, March 2017
112015 AARP Research Report — Caregiving in the U.S.
12Caring.com, Ron Kauffman — “I’m Losing Myself Being a Caregiver”, October 16, 2016
13Please consult your tax advisor when paying an informal caregiver as there may be tax implications to such an arrangement.