Family caregiving | Understand the looming costs and alternatives

If you are a family caregiver for a loved one, you are far from being alone. Family caregiving is the backbone of caregiving in the United States, with an estimated 41.8 million adults providing caregiving to adults 50 and over. This number will grow to account for aging baby boomers and the fact that people live longer, therefore requiring more care.

Adding to the challenge of increasing complexity of care is the financial toll that caregiving has on families. Approximately 66% of caregivers are women. Many of them take time off of work or quit their employment altogether to care for an aging family member. The financial impact of women providing care is approximately $148 billion to $188 billion a year. Add to that the fact that many caregivers find it difficult if not impossible to re-enter the workforce after caregiving.

Everyone realizes that caregivers need help – financial and otherwise. The good news is that a bipartisan proposal called the Credit for Caring Act would give family caregivers a $3,000 tax credit to help defray the costs of caregiving.

Unfortunately, a coordinated system of financial support for caregivers doesn’t exist. But there are government and state programs that might help. As with all things related to aging, advanced estate planning, knowing the costs of care and understanding alternatives will help you make informed and prudent decisions. Let’s take a look at some of the options.

Costs of care

Many families try to augment the time they contribute as caregivers with private duty-caregivers. This choice can be great, as long as you have planned for the costs of this type of care. Unless you have a long-term care insurance policy that provides a daily rate for private caregiving or meet other federal and state criteria for help, you will be on your own.

There are two factors to consider in hiring an agency to help you provide care. One is the state where you live. Why does this matter? Because every state dictates the tasks that caregivers are allowed to do. For example, in one state, a caregiver can perform insulin checks, dispense medications and provide injections. In other states, the caregivers are only permitted to help with activities of daily living such as bathing, dressing, cooking and transportation.

The second consideration is cost. According to Genworth, the hourly median cost of care in 2020 was $23.50 an hour. This price will be more or less depending on where you live and the number of hours of care you need. To give you an idea of how the hours and cost can add up, let’s say you contract for four hours a day, seven days a week, for your loved one. Based on the median cost of care, that adds up to $2,632 a month. It’s less than assisted living, but no small amount.

Government and state caregiving support programs

The majority of programs that assist family caregivers require that you qualify for Medicaid. That is a good news-bad news scenario in that many middle-income families don’t meet the strict financial criteria to qualify. And each state has different qualifying criteria depending on the program. In general, the person qualifying for Medicaid must have depleted their assets to a very low level and have limited income. States sometimes have waiver programs that reach populations that would not typically qualify. Call your local Area Agency on Aging to get state-specific information on help for family caregivers. Here are some of the programs worth looking into.

Medicaid self-directed care

Medicaid self-directed programs allow qualified individuals to direct their own care, including hiring a family member to provide that care. Each state will have different guidelines, but in general, the recipient has a person-centered plan of care, an individualized budget controlled by the client, and other support services. The advantage of this program is that it keeps people at home and out of nursing home care. Program names vary state by state like Consumer Directed Care, In-Home Supportive Services, or Cash and Counseling.

Medicaid asset protection is a complex and specialized estate planning strategy, and you will want to make sure that you and your loved one’s estate is protected to the extent that it can be. Medicaid has what is referred to as a five-year “look-back” period that prohibits family members from gifting money to children or others in order to qualify for Medicaid. Consulting with a financial professional and an experienced attorney will give you peace of mind.

Veteran’s programs

If you or your spouse qualify for veteran’s benefits, some caregiver support programs are worth investigating. As with most government programs, the criteria are complicated, and the application process is lengthy.

• The first program is the Program of Comprehensive Assistance for Family Caregivers. This VA program is specifically for veterans who have sustained a serious injury in the line of duty. If you are the primary caregiver, you might be eligible for a monthly stipend to provide care for the veteran. As the caregiver, you can receive the following benefits:
• A monthly stipend (paid directly to you as the caregiver)
• Access to health care insurance through the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA)
• Mental health counseling
• Travel benefits when traveling with the veteran to appointments
• At least 30 days of respite care per year for the veteran

• Another VA program is called Veteran Directed Care. This program is for veterans who need personal care and assistance with activities of daily living. The recipient is given a budget to manage and hire their own caregivers. These caregivers can include family members.
• The other caregiver support program for veterans is the Aid and Attendance program. This veterans program requires that the veteran meet eligibility for a veterans’ pension and meet active duty requirements. In addition, there are income and asset limits. The Aid and Attendance program is specifically for veterans over 65 with a permanent disability and would otherwise qualify for nursing home care. The maximum amount a veteran can receive on the Aid and Attendance program if they meet all of the criteria is $1,936 a month. These funds can be used to pay any family member for care.

State programs that pay family caregivers

Here’s where things get complicated. Most states, but not every state, have Medicaid programs that will pay caregivers to provide care to qualified individuals. Some of these programs are called home and community-based services. Through the Affordable Care Act, states now have the authority to expand Medicaid eligibility to individuals under the age of 65 with incomes below 133% of the federal poverty level. The purpose of HCBS programs is to keep people in their communities by providing support for activities of daily living, home modifications, adult day care, respite, transportation and case management.

Some alternatives to pay for care

You can think outside the box at creative ways to pay for care that make sense for your long-term financial plans. Giving up or reducing your employment may not be the best option due to the future consequences of that decision. Some ideas you may not have thought of:

• Become a certified caregiver: You could become a certified caregiver and work for an agency, thereby getting a salary for the care you provide to your loved one. Qualifications for becoming a certified caregiver vary by state. Becoming a paid caregiver could be a temporary solution to get you through until you find other alternatives or your family member becomes eligible for Medicaid or other federal and state programs.
• Pensions, retirement accounts or savings: It is not unusual for older adults to be reluctant to use their retirement or savings to pay for care. Inheritance for children may be a priority, and your loved one does not want to reduce your inheritance.
• Ask a loved one to pay you: If your family member has the funds to pay you, talk openly and honestly about the possibility. If this is agreeable to you both, draw up a contract and consult an attorney to ensure that you have met legal and tax requirements. Also, make sure you speak with other family members about the idea to get their approval. Remember that you have to report wages to the IRS.
• Consider adult day care: If available in your area, adult day care may be a possible way to offset caregiving costs. Every center is a little different, but most offer day-long activities, and some have health screenings and medical services. The average price of adult day care is about $70 a day (some are less), but compared with the hourly costs of a private caregiver, it is a significant savings. Most adult day care centers have flexible hours to meet the needs of families with half days or full days of care, and costs are adjusted accordingly. Some adult day care centers specialize in dementia care, so make sure that your loved one is a good fit. The other advantage of adult day care is that it allows you time off from caregiving and the ability to work and earn income.
• Home health care: Families often don’t take advantage of this time-limited medical care covered by insurance. It is not a long-term solution to family caregiving, but it can offer temporary support and relief to give you time to investigate other ways to pay for care. To qualify for home health services, a person must be homebound and have a skilled need and a doctor’s order. A nurse and other physical and occupational therapies will generally come two to three times a week. An aide can come up to three times a week to help with bathing and dressing. Sometimes home health is just enough to get someone back on their feet and recovered to the point where they don't need as much family caregiving.
• Long-term care insurance: The older someone is, the more expensive long-term care insurance will be, but it might be a viable option for someone on the younger side (50s or 60s). More options are available, such as hybrid plans that return some of the premiums to family members upon the covered individual’s death. Most policies have strict criteria that must be met to start the benefit. Some have an elimination period of up to 90 days where you have to pay out of pocket before the benefit kicks in. But, if and when someone becomes eligible to access their plan, it can be a huge benefit to everyone – especially if the plan has a generous daily allotment. Make sure you purchase a plan that includes caregiving in the home in addition to assisted living and nursing home care.

When to consider assisted living

At some point, you may decide that caregiving has become too much of a burden financially and psychologically. With full time or 24-hour caregiving, whether by family or private caregivers, the cost may exceed the price of assisted living.

According to Genworth, the median cost of assisted living is $4,300, but prices could be lower or much higher where you live. Most assisted living communities can provide almost all of the care that your loved one needs. At that point, if your family member owns their home, they can sell it to pay for assisted living and continued care.

Family caregiving and how to pay for care

As you can see, paying for family caregiving is complicated but possible. Financial planning is the best strategy against unexpected and catastrophic costs of care. Also, involving your loved one in discussions about their personal preferences for care and how to pay for it will ensure a smooth transition through the caregiving journey.

Alliance America can help

Alliance America is an insurance and financial services company dedicated to the art of personal financial planning. Our financial professionals can assist you in maximizing your retirement resources and achieving your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.