On Eldercare, The Math Is Unforgiving


$21 per hour times 44 hours per week times 52 weeks per year = $48,048.

$21 per hour times 24 hours per day times 365 days per year = $183,960. (Note: see below for clarification.)

That's the cost, at median, for homemaker-type elder care services in the case of an individual requiring daytime care (e.g., when the primary caregiver, a child or spouse, is at work) or full-time care in shifts, courtesy the Genworth Cost of Care Survey.

The median private-room nursing home cost? $100,375.

Of course, the cost varies by region. In my own neck of the woods, the Chicago metro area, the rates are $24/$52,912/$210,240/$112,238. In Mississippi, the hourly cost is only $17, in rural Louisiana, $14. On the other hand, in San Jose, the median rate rises to $30. And in Maine, featured in a recent Washington Post article on the subject, the rate is $27.

Mind you, this is not the salary that these workers earn — this is the rate families pay to an agency, whose costs include, in addition to the salaries of the workers, all of the associated taxes, benefits where applicable, the overall management of the agency, regulation/compliance costs, and the like. According to the Bureau of Labor Statistics, the median wage for a home health aide (not reflecting any benefits) is $11.16. Among the less-expensive regions, in Mississippi, it's $10.53 and in rural northeast Louisiana, it's $8.72. For comparison, in Chicago, it's $11.20, in San Jose it's $14.61, and in Maine it's $11.98.

All of this adds up: for the year 2017, the Centers for Medicare & Medicaid Services reported that Americans spent $9 billion on out of pocket home healthcare from home health agencies, and $44 billion on nursing homes and other "care communities," out of a total of $263 billion in total expenditure (of this, a further $27 billion was private health insurance and the remainder Medicare, Medicaid, or other government programs). In addition, Medicaid reported spending a further $111 billion on Long-Term Services and Supports for the elderly (2016 data), Medicare $80 billion, other public entities $23 billion, private insurance and other private payers $52 billion, and individuals paid $57 billion out-of-pocket, for a total of $366 billion. It all adds up to $109 billion out-of-pocket and $629 billion in total. This does not appear to include under-the-table care (that is, families hiring an aide directly, who may or may not have legal authorization to work, and skipping the various employment taxes), and it does not include the economic value of family care-giving, which the AARP has calculated as $470 billion, based on 40 million caregivers providing an average of 18 hours of care per week, at an average hypothetical wage of $12.51.

(Why does the economic value of unpaid work matter in a discussion of numbers? Don't we all have an obligation to provide care for our parents/spouses in need, in the same manner as, however much we worry about the cost of care for children during their parents' work hours, we don't expect the state to be responsible for, or have much concern for, the time parents expend changing diapers during non-work hours? For some families, there is a real economic cost as a child or spouse must quit work or reduce their hours in order to provide the care; besides this, various of the Democratic presidential candidates are promising that their new healthcare plans will also include generous provision of long-term care for all, and any cost estimates of such programs must surely take into account costs due to families currently taking on the work themselves, seeking out paid caregivers if someone else begins to pay.)

Oh, and why am I referencing Maine? Because of an article in the Washington Postearlier this month, describing the labor shortage in that state, in which, with wages constrained by state budgets and family budgets, families are struggling to find care for their elders in that oldest-in-the-nation state — finding both that home care workers' wages are unaffordable (the Post cites a rate of $50 per hour for private help, which appears questionable as it's double the Genworth rate cited above) and that nursing home staff shortages result in nursing home bed shortages, as about a dozen nursing homes in Maine have closed their doors in recent years. To what extent the workers are simply not available at any cost, with Maine unappealing to immigrants and American labor-force drop-outs alike, versus the wage hikes on which the Post reports being inadequate to bring in fresh workers due to budget constraints, is not made clear.

What's more, the reflexive answer of "more immigration" is not necessarily an easy fix. While it's true that many immigrants, legal and illegal, have found work in elder care, personal care workers need to be able to communicate with the individuals they are caring for, and care for individuals with specialized medical needs requires specialized training. In addition, again, Maine has not proven itself to be attractive to immigrants. Should the state seek a guest-worker program similar to that used in agriculture, where its workers are tied to specific employers? We accept, more or less, the idea of migrant workers coming to live temporarily to harvest a field; it's much harder to be comfortable with the idea of mom and dad's caregivers coming and going no differently than an au pair, and we would certainly look askance at a nursing home or home health agency with such high turnover.

As it is, in terms of individual caregivers, a 2015 book, The Age of Dignity; Preparing for the Elder Boom in a Changing America, by Ai-Jen Poo, explains that two-thirds of domestic workers (the statistics include nannies and house-cleaners) are foreign born, half are here illegally, and their illegal status results in below-minimum wage pay, uncompensated overtime, and other unfair practices. Poo advocates for a guest worker program as well, but, again, regardless of who's doing the work, it costs money.

What's more, the campaigns to raise the minimum wage state-by-state or nationwide will raise costs further. It won't be as simple as, for instance, Illinois' $11.19 increasing to $15, when its minimum wage hike is fully phased in, as employers will need to offer wages that are sufficiently higher than "minimum wage jobs" to attract workers. And, beyond that, regardless of whether we solve the labor shortage by means of importing elder care workers directly, increasing overall rates of low-skill immigration, boosting birth rates for the next generation of elderly, and regardless of whether wages rise due to supply and demand or mandated pay boosts, we'll inevitably have to find our way to paying more for care services. Whether the money comes from families' additional out-of-pocket spending, or state and federal programs, it still affects the health of our economy and the well-being of Americans.

And, finally, it should go without saying that solving the present-day problems of individuals affected by the burden by eldercare is only the start, as we are in the midst of a skyrocketing old age dependency ratio, which was a stable 20 retirees per 100 workers throughout the 1990s and 2000s, and is now in the middle of a rise to a new level of 35 to 100 at pretty much exactly at that point at which the Trust Fund is exhausted. (See my "Who's Afraid Of The Big, Bad Old Age Dependency Ratio?" from a year ago.)

What are the solutions? Only three. Find ways to reduce cost/labor — that's what the Japanese are doing with their research into robotics for elder care purposes. Find ways to reduce the need for care-giving by improving older Americans' health (hence, the massive expansion in money targeted at research for dementia prevention and treatment). Or, absent progress on either of these fronts, a solution that isn't really much of a solution at all: find ways to make do with less, in other areas of government spending.

Update/clarification: multiplying the average caregiver rate by the number of hours in the day gives the most dramatic number but is not entirely correct for extensive care-giving, and, in particular, for overnight care, which can vary based on needs (in particular, the degree to which the overnight hours require direct care), and might range from $100 to $300 per day, according to SeniorLiving.org.

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Yes, I'm a nerd, and an actuary to boot. Armed with an M.A. in medieval history and the F.S.A. actuarial credential, with 20 years of experience at a major benefits consulting firm, and having blogged as "Jane the Actuary" since 2013, I enjoy reading and writing about retirement issues, including retirement income adequacy, reform proposals and international comparisons.