Researchers find that hundreds of thousands may pay for home care costs out-of-pocket — and people below the federal poverty level spend 87 percent of their monthly income.
Most older adults would prefer to age in place, but many rely on paid caregivers to make it work, according to a recent study in Health Affairs Scholar. Although home care is less expensive than moving into a nursing home or an assisted living facility, paying for it can still be a major financial burden.
Home care agencies can provide people with support on personal care needs like eating, bathing, toileting, dressing, and getting into or out of bed. But Medicare doesn’t cover these services unless they are accompanied by physical therapy or skilled nursing care for specific injuries or treatments. Many states’ Medicaid plans do provide coverage, but according to Johns Hopkins University health economist Karen Shen, many have to pay for these services out-of-pocket — and for people earning low income, these costs were a big chunk of their monthly income.
In fact, according to the study data, people under the federal poverty line who pay out of pocket for home care were spending the vast majority of their income on home care services. And those living with dementia were often paying more than $1,000 per month.
The study’s findings fly in the face of the old assumption that “these agencies either serve Medicaid, or they serve higher income people,” Shen said. However, she thinks her results corroborate the stories she’s heard from her geriatrician colleagues about their patients.
Shen and her team drew on the University of Michigan Health and Retirement Study, which collects biannual data on the finances and health of a representative sample of more than 20,000 Americans as they transition out of the workforce and live through their retirement years.
Between 2002 and 2018, respondents to the survey reported that they had received help with at least one personal care need over 8,000 times. Considering the size of the sample relative to the U.S. population, the researchers estimated that roughly 3 million Americans received home care every year during that span. About a fifth of those people paid out-of-pocket, based on the survey responses.
Shen found that, contrary to prevailing wisdom, the people paying out-of-pocket for home care weren’t exclusively high-income individuals.
In fact, more than half — 52 percent — of the people who paid out-of-pocket for home care agencies earned either near or below the federal poverty level.
Not only did that disprove the income gap that health economists had assumed in home care coverage, but it also showed that even people who theoretically qualified for Medicaid were paying for caregivers out of pocket, instead of using their coverage benefits.
Those out-of-pocket costs were not cheap, and they hit individuals with dementia — which disproportionately afflicts people earning near or below the federal poverty level — especially hard, Shen’s team found. More than half of people with dementia who paid for home care spent over $1,000 every month.
People who earned less than the federal poverty level and paid for home care were spending 87 percent of their income on at-home care agency services.
Even after Shen’s team pooled the respondents income with their savings and other assets, the cost of home care remained burdensome.
Although the Health and Retirement Survey does not include data on the respondents’ adult children, close relatives, or friends, Shen believes older people are likely turning to their support systems to make ends meet.
“They’re having to draw on their networks,” said Shen. “They’re having to draw on any assets or savings that they might have or that their friends and family might have.” She hopes future studies will explore how the cost of long-term care affects the wealth and financial well-being of an older person’s family and community.
Ultimately, Shen is interested in generating information that policymakers can use to provide better coverage for older adults. She acknowledged that the number of people currently paying out-of-pocket for home care could make covering it under Medicare incredibly expensive for the government. But at the same time, she pointed out that the high costs leave people with low incomes in a financially precarious position.
To Shen, the ideal policy would carefully target the most vulnerable individuals. She said, “If we were to somehow expand access to home care, the main people that we would be expanding to would be people in these lower income groups.”
Andrew Saintswing (@AndrewSaintsing) earned a PhD in biology, and now he writes about science for outlets like Drug Discovery News.
