As a family caregiver, you may have no more important and enduring decision to make than that of how to pay for care for your loved one. There is no one-size-fits-all answer to the growing need for care for older adults, and families provide most of that care.
In fact, the Family Caregiver Alliance reports that “more than one in six Americans working full-time or part-time report assisting with the care of an elderly or disabled family member, relative or friend. Caregivers working at least 15 hours per week indicated that this assistance significantly affected their work life.”
How much is all of this “free” caregiving worth? Unpaid caregivers provided the equivalent of approximately $470 billion in care in 2019. And the cost is probably higher than that, now factoring in the effects of the pandemic on caregivers. Meanwhile, as a well-meaning and compassionate caregiver, you feel your duty and financial obligation is to provide care to your loved one. That intention is admirable and could be sustainable, but we will help to clarify some of the long-range consequences of reducing or leaving employment to care for someone.
Caregiving usually happens in one of two ways. The first is a crisis that propels everyone into action and sets forth a path of caregiving that can be short-term or longer. The other is a slow decline in physical and or cognitive functioning that impacts independence. Most older adults state they would rather remain at home and receive care than move into a senior long-term care setting. Let's look at some of the typical areas that older adults need help with, whether sudden or gradual.
Activities of daily living (ADLs) are the everyday ways we all engage in to function independently. ADLs include bathing, dressing, transferring, mobility, toileting and hygiene. As these activities begin to erode, sometimes from chronic illness and sometimes from an accident, help is needed. If your loved one can't get from their bed to their walker or bathe safely, someone needs to be there to assist.
Instrumental activities of daily living (IADLs) are the higher functioning activities like paying bills, managing a household, accessing transportation, buying and taking medications as prescribed and effectively communicating needs. Someone may have no problem with ADLs but struggle with IADLs due to dementia or mental health issues. Likewise, someone could need significant help with ADLs but manage IADLs just fine.
Cognitive impairment usually refers to the inability to use reason and judgment due to dementia, Alzheimer’s disease, stroke or a neurological problem. Over time, most of these conditions worsen, leading to serious safety concerns such as wandering, driving, falls and managing health care. Severe cases of cognitive impairment usually require round-the-clock care.
As a caregiver, you may be surprised to discover that you are expected to attend to complex medical needs with no training. Short-term home health can help, but those tasks may remain when home health is finished. In most states, in-home caregivers are not permitted to dispense medications, give injections or provide catheter care, to name a few.
There is a great deal of misunderstanding about paying for senior care. Let’s start with the basics. The vast majority of senior care is private pay. Medicare does not cover assisted living, memory care, independent living or nursing home care. Medicare does pay for short-term rehab under specific circumstances. If you have a long-term care insurance policy and meet the policy’s requirements, you could defray some of those costs.
So, what is the cost of senior care? That answer depends on where you live, the community you choose and how much help your loved one needs. We have some good estimates of costs to help you plan.
Assisted living is a care option that generally meets most of the needs of older adults who need help. Assisted living pricing includes all meals, activities, housekeeping and assistance with ADLs. Most assisted living communities have tiers of care with increasing costs the higher the level of care.
The median monthly cost of care in 2022 in the U.S. is $4,635.
Your costs could be lower or higher depending on where you live.
Home care is not home health. Home health is a time-limited Medicare benefit with nursing, physical and occupational therapy and aides for ADLs. Under Medicare rules, home health aides are not permitted to do housekeeping, cooking, cleaning, shopping or transportation. This is where home care caregivers come in to fill the gaps.
The median monthly cost of home care caregivers in 2022 in the U.S. is $26.78 an hour.
Most people would rather avoid nursing home care. Nursing home care is round-the-clock complex medical care for people who have no other option. It is costly. Most nursing home care is paid for through Medicaid. To qualify for Medicaid, you have to have very few assets and a low income.
The median monthly cost of a nursing home (semi-private room) in 2022 is $8,145.
One way to look at family caregiving is the money that it saves you and your loved one when you don't have to pay for care. But it is critical to consider the long-range consequences and put your decisions in the context of what caregiving means for your financial future. We are not suggesting that you stop caregiving for your loved one but that you take a thorough and critical look at your entire financial and estate planning picture. Here are some factors to consider when choosing:
You can't underestimate the stress of holding a job while caring for a loved one. Your work may suffer as it does for 70% of working caregivers. There is nothing worse than feeling like you are doing a poor job at work and as a caregiver.
However, if you reduce your work hours or leave your employer, the loss of income must be factored into the cost of care. A financial professional can help you calculate your loss of income against the cost of home care or assisted living.
Social Security benefits are determined by the highest 35 years of income. More women are caregivers than men and historically make less than men for the same job. If you lower your income, it could adversely affect the amount of your Social Security benefits later. Also, reducing employment affects your ability to contribute to retirement plans.
If you quit work, will you lose your health care? If so, you will need to find a replacement, which could be expensive. You can sign up for COBRA (where you will pay the total cost of premiums) or buy a plan through the health insurance marketplace under the Affordable Care Act. The cost of replacing health care should be factored into your financial decision-making as a caregiver.
Do you think you can easily return to employment? You might, but it could be more challenging than you think. The employment picture has changed dramatically in recent years. It is hard to evaluate the employment situation, but record numbers of people quit their jobs during the COVID-19 pandemic. How difficult it will be to re-enter the job market depends on how long you have been gone and the area in which you are trying to find employment. Expect fierce competition.
How are employers dealing with the caregiving issue? Not very well, unfortunately. There has been some progress in helping working caregivers, but much more needs to be done. Employers offer benefits under the Family Medical and Leave Act (FMLA), but less than half offer paid time off to care for family members with medical issues. Taking unpaid time off to care for a loved one without fear of losing your job is valuable, but there is a loss of income to consider when you do so.
A report on caregiving in the U.S. by AARP and the National Alliance for caregiving states that “among working caregivers, over half say their employer offers paid sick days 55 (58%, up from 52% in 2015), while 56% report having flexible work hours. About half report having unpaid family leave (53%). Nearly four in 10 say their employer offers paid family leave (39%, up from 32% in 2015) but only a quarter say their employer offers employee assistance programs (26%) or telecommuting (25%).”
If, as an employed caregiver, you feel like you are between a rock and a hard place, you are unless you are lucky enough to have a generous employer who understands the impact of family caregiving. Employers who do not support their employees who are caregivers suffer economic consequences as well: lost productivity and the cost of hiring and training replacement employees.
The most productive way to evaluate your caregiving situation is to consider alternatives that might help you keep your employment while meeting the needs of your loved one. Part of any plan that combines caregiving with a career should focus on maintaining your health and reducing stress. The health consequences of caregiver burnout are well documented.
If you haven't already, meet with your financial professional to evaluate your estate and make a plan for your future that includes caregiving. Do the same for your loved one. It is almost impossible to see where you are going without knowing where you are. It is not unusual for older adults to resist giving detailed financial information. Let your loved one know that you need to understand their financial situation in order to fulfill their wishes for long-term care. As part of estate planning, make sure you designate a financial power of attorney if the person you care for can no longer make decisions.
Hiring in-home caregivers could give you enough cushion and support to continue working. Yes, there is a cost, but it might be less than giving up your job. One of the advantages of working with an in-home caregiving company is flexibility. You can tailor the schedule to accommodate your work needs and those of your loved one.
Like many primary caregivers, you hate to ask for help. But, even small tasks can take a load off of you. Have a family meeting to discuss caregiving needs and who in the family can assume some responsibilities. Use an online app for scheduling and task assignment.
If your loved one qualifies for Medicaid, some states have programs that will pay you to be a caregiver, but the pay is usually low – between $9 and $15 an hour. If your loved one does qualify for Medicaid, it can open up the possibility of other long-term care resources.
At some point, the cost of in-home care and family caregiving could exceed the monthly cost of assisted living. If your loved one owns their home, there are several mechanisms for pulling equity out of the home to support assisted-living costs. Any plans should be discussed with your loved one so they feel included and part of the decision-making process.
Take a proactive approach if you need to change your job or return to the job market during or after caregiving. Online resources such as Linkedin, Indeed and Upwork can be great places to freshen your resume and stay in touch with the job market, even while you are caregiving.
Caregiving for a loved one is an honor and a duty. Balancing your financial needs with caregiving duties can be complicated but achievable. Accept that there is no perfect solution, but stay focused on the bigger picture to ensure economic stability while caring for your loved one.
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.