Home Care Is Least Affordable for Seniors Who Need It Most

Seniors who need nonmedical home care the most — the oldest, sickest and often most vulnerable — are the least likely to be able to afford it. Unfortunately, labor shortages are expected make home care services even less affordable in the years to come.

That’s according to a new study published in the June issue of Health Affairs.

Only 57% of seniors over 65 with significant disabilities could afford to pay for at least two years of moderate home care if they liquidated all their assets, while only 40% would be able to fund two years of extensive care, according to the study.

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Additionally, people with higher needs typically come from lower-income backgrounds, further stressing the need to address social determinants of health.

“The bottom line is that paid home care and other types of long-term services and supports are generally not affordable for the people who need those services the most,” lead researcher Richard Johnson, who is a senior fellow at the Urban Institute’s Income and Benefits Policy Center, told Home Health Care News. “It’s just another indication that the prospect … of becoming frail at older ages poses an enormous financial risk for most older Americans.”

Researchers used 2014 data from the University of Michigan’s national health and retirement study to reach their conclusions. Specifically, they looked at 9,966 seniors 65 and older who were not living in institutional settings or on Medicaid.

They broke home care use into three scenarios: limited care, or about 25 hours per month; moderate care, or about 90 hours per month; and extensive care, or about 250 hours per month.

Meanwhile, researchers used old Genworth cost-of-care data to determine pricing.

“The results highlight the need for a comprehensive reform of the way we finance long-term services and supports,” Johnson said.

And it’s not just home care: By 2029, nearly 8 million middle-income older Americans — in other words, 54% of mid-income seniors — won’t be able to afford senior housing at today’s average market rates, according to separate research.

If nothing changes, a growing number of seniors could be left without the care they need, while also burdening family caregivers and on taxpayer-funded Medicaid programs.

“That creates financial pressures on this social safety net for both the federal government and, more importantly, on states, who don’t have the same kind of funding flexibility that the federal government has,” Johnson said.

Unlike the federal government, state governments don’t have the option to fall back on deficit spending to finance higher Medicaid costs. States must balance their budgets annually — which could mean sacrificing other programs to fund Medicaid.

“That’s going to mean higher tax burdens on state residents, or it’s going to mean that other services like education get crowded out,” Johnson said.

On top of that, it can be hard to get Medicaid to fund home care services. Instead, seniors are often pushed into less favorable, more expensive care settings.

“Medicaid does provide [home care],” Johnson said. “But there are generally long waiting lists in most states, so what that means is that people increasingly get pushed into nursing homes.”

A private room in a nursing home costs $8,365 per month, while home care comes in at around $4,004 per month, according to 2018 data from the Genworth Cost of Care survey.

Additionally, about 76% of Americans over 50 say they want to grow old in their own homes, according to AARP.

The good news: Some states have taken steps to protect themselves and their residents from the rising cost of care for older residents.

Last month, Washington state became the first state to pass a long-term care law designed to help residents afford to age in place — a move many hope will be the harbinger of a national trend.

“I would anticipate more of these bills in the coming years, as states become desperate to reduce Medicaid spending on [long-term services and supports], which will prove to be a great opportunity for home care providers,” Kerin Zuger — corporate vice president of business development and strategic partnerships at RiseMark, Right at Home’s parent company — previously told HHCN.

While states like Hawaii, Maine and Minnesota have considered similar legislation, no other states have been successful — yet.

“Certainly the activity in Washington state was encouraging,” Johnson said.

Pricing problems

To make matters worse, home care prices are only expected to rise in the years to come.

As the demand for long-term care increases, with 10,000 baby boomers turning 65 every day, the workforce to deliver those services is shrinking.

In 2018, the median caregiver turnover rate skyrocketed to 82% and some predict there could be 7.8 million unfilled caregiver jobs by 2026.

Already, costs have already started to rise as a result.

From 2013 to 2018, the average rate charged for one hour of home care increased 16%, from $19 to $22. While the $3 difference may not seem like much, the increase is nearly twice the rate of inflation during the same period, according to the study.

“That trend could become even worse if home care agencies have to pay higher wages because they simply can’t attract the workers they need at the current wages,” Johnson said. “The only way they can do that is by raising wages [or] by offering more training — [but] that’s expensive. And immigration plays a big role, too.”

Currently, more than 23% of home health, psychiatric and nursing aides were born outside the U.S., while almost 9% — and maybe more — were not citizens as of 2016, according to research published in the Journal of the American Medical Association late last year.

One popularly suggested solution to solve the home care pricing problem is adult day services.

Adult day services are programs that use one caregiver to provide care and companionship for a group of older adults for several hours at a time. Such programs usually cost about half as much as home care.

“We think that personal care — one-to-one care — is vital, but we believe that one-to-one care is becoming increasingly expensive, and we think the solution over the long term is group care,” former Addus HomeCare Corporation (Nasdaq: ADUS) CEO Mark Heaney previously told HHCN. “Group care will often be adult day services.”

In January, Heaney teamed up with New York-based private equity firm Post Capital Partners to create a multisite, multidisciplinary system of community care services.

Heaney, who is leading the team’s search for its first acquisition target, said adult day centers are on his radar.

Baltimore-based Senior Helpers is also betting on adult day. Last year, the home care franchise introduced an adult day care franchising model called Town Square, opening its first facility in San Diego.

“We now have a location that’s being completed in Baltimore,” CEO Peter Ross previously told HHCN. “We have a new franchisee that will be opening later this year in Louisville, [Kentucky]. We have a franchise candidate that’s buying 10 [Town Squares] in Chicago [to open] over the next 5 to 10 years. We also have two other candidates, one in New Jersey and one in California, that are ready to sign and move forward.”

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