Health+Benefits

Home Care Catalyst

The cost of long-term care is $20,000 more than you think.
By Katie King Posted on March 14, 2022

Eighty-four percent of retirees plan to rely on their families for long-term care needs. Family caregivers—working age people—are often faced with the high costs of home care and many end up sacrificing their own retirement savings and income to provide the necessary care to their loved ones.

On average, family caregivers ages 50 and older see income-related losses of $303,880 when they leave the workforce to care for a parent. In addition to forgone income and benefits, caregivers typically spend about $7,000 per year in out-of-pocket costs for their loved ones.

If caregivers leave the workforce to focus on caring for a family member, employers also face massive costs: roughly $17 billion a year to address costs of replacing employees, absenteeism, workday interruptions, unpaid leave, reduced hours and other factors. Increasing research in the fields of aging and caregiving focuses on the challenges facing unpaid caregivers in hopes of identifying gaps in funding, insurance coverage, and access to appropriate care. Leader’s Edge sat down with Tom Beauregard, CEO of HCG Secure, a new company offering home healthcare solutions, to learn more about the evolution of the elder care space and how employers are getting involved.

Q
What are some of the employer-based solutions you see cropping up in the elder care space and which aspects of them seem to be the most impactful?
A
Caring for aging parents is taking a toll on the productivity and well-being of employees across large and small companies. On average, these caregivers are spending 20 hours per week caring for a loved one, and many find themselves needing to reduce working hours. Employers are becoming increasingly aware of this strain faced by their employees, especially given that family caregivers make up about 45% of the workforce and cost employers $17.1 billion per year in lost productivity and increased turnover.

Offering increased flexibility, recognition and support programs can make a big difference for employees working to meet caregiving demands. Our understanding is that the lack of options within the long-term care space is frustrating to many large employers and they are trying to find ways to be creative with the policies and practices they implement to provide for greater flexibility and financial support. Some of the more popular ones we are seeing are larger employers offering onsite adult day care centers (similar to what we have seen with childcare sites). We are also seeing others are subsidizing elder care expenses, such as:

DCAP (Dependent Care Assistance Plans)—otherwise known as the ‘day care benefit,’ which allows employees to set aside tax dollars for qualified elder care expenses. In addition, assistance (usually around $5,000/calendar year) helps reduce federal tax burdens.

Respite Care, which provides short-term relief for primary caregivers and is really growing in popularity.

In addition, employers are looking at insurance-based solutions in hopes employees will be better able to manage financial stress and cope with challenging emotional and physical burdens of caregiving.

Q
In addition to the financial stress of caring for an aging or ill loved one, there is often a lack of communication between family members about the availability of resources and the true cost of caregiving. How can a home care or long-term care insurance solution facilitate some of these conversations?
A
Lack of communication between family members is a substantial issue in the long-term care space. A 2018 Wells Fargo survey showed nearly half of older adults reported that only their spouse knows how much money they have (as opposed to their children). This figure is especially startling given that 84% of retirees indicated an expectation for a family member to take care of them as they age, according to a 2020 study conducted by Edward Jones.

While these important conversations about aging and finances are not taking place, most Americans are also not preparing in other ways—such as having advance directives or wills in place. Only 40% of Americans have a will, advance directive, and power of attorney for healthcare and finances. Most Americans have not conveyed their wishes for care and finances in the future leaving family members in a challenging place—to make decisions for a loved one with no true sense of what their loved ones wants or desires.

Massive blind spots around the cost of care and coverage also exist. Most people do not understand government programs are not necessarily there for them and Medicare, in particular, only has a limited home care benefit. The Arctos Foundation recently conducted a survey which found people estimate the cost of long-term care to be $20,000 less than the true national average.

Individuals are reaching critical times of need without having conveyed their wishes and without understanding the high costs of care they are likely to be responsible for. The model we have created aims to address these gaps in communication and in finances. HCG Secure products offer individuals both the money they’ll need to afford the care Medicare will not cover as well as the support and care navigation services necessary to facilitate conversations and planning.

Well-being assessments are also a helpful tool to encourage individuals to reflect on where they are in a particular life stage. Our assessment scores them in the areas of life, health, and money—offering personalized recommendations so individuals understand the steps to take to ensure their ability to age on their own terms and as their needs evolve.

Q
While existing public programs like Medicare and Medicaid don’t offer much funding to support caring for family members at home, do you think there are opportunities through private / public partnerships like Medicare Advantage to pilot new home healthcare solutions?
A
Absolutely, there are opportunities for government and the private sector to come together with well-designed subsidies and coverage approaches which can spur development of a meaningful market for home care services. The Medicare Advantage market is a great example of the kind of private/public partnership that has been successful in addressing gaps in care for seniors, and many are currently experimenting with connecting members to limited in-home support services. We will learn a lot from those efforts, but funding and other limitations ultimately will hold them back.

A better way to think about this would be a public subsidy model, which addresses high long-term costs that really strain families and offers some level of federal or state coverage with funding for services above a reasonable threshold of care, scaled to offer more to families with lower incomes. In that model, a public program might cover care above a threshold of $100,000 for middle income families with meaningful incentives (higher subsidies or lower thresholds) for families who purchased a qualified plan which offers coverage below the threshold. In my view, success here would depend on flexibility offered to consumers in terms of the types of qualified plans.

Overall, this would be an affordable approach for the public sector and a meaningful way to drive better consumer planning and decisions for long-term care expenses.

Another example of public and private sector collaboration is evidenced today in Washington State and being considered by a number of additional states. This model is a mandatory but limited LTC benefit which the state funds through payroll taxes with exemptions for individuals who have an existing private LTC option. In Washington, the basic benefit from the state covers $37,000 in LTC expense and has a set of very specific standards for private sector coverage that gives an employee an exemption. This model, and future iterations by other states, will ensure a minimum level of coverage and shine a light on this issue for individuals who might consider a more comprehensive LTC plan to both qualify for the payroll tax exemption and cover an important gap.

Q
Beyond long-term care or home care coverage, what kinds of strategies could employers consider, like flexible PTO, to mitigate workday interruptions or financial stress?
A
While employers will continue to hold employees accountable for workplace responsibilities, it makes sense to provide resources and support both to differentiate themselves in a competitive employment market and to allow employees to thrive across various roles.

I have seen companies looking to address employee needs approach this in a few different ways, including:

• Offering flexible working hours and work locations

• Providing family benefits—this allows for time away from work without employees having to take it as unpaid leave or depleting their PTO (Paid Time Off) balances

• Enhancing EAP (Employee Assistance Programs) with educational and referral services for Elder Care

• Expanding accommodations under FMLA (Family Medical Leave Act) by modifying qualifying events for less than 8 hours/day

By identifying employees with caregiver challenges and providing them with information, access and support, employers can enhance their talent acquisition and retention strategies.

Q
Do you anticipate seeing a shift in how employers offer voluntary benefits like life insurance or long-term care as the aging population continues to grow?
A
We have already seen an evolution in the types of voluntary benefits being offered over the years due in part to the changing demographics of the workforce, their needs, and available insurance solutions.

For example, in the early days of voluntary benefits, the focus was ensuring employees and their families would continue to maintain their standard of living in the event of the employee’s injury or death. Thus, the focus was on income replacement through such programs as short and long-term disability and voluntary life insurance.

With the aging U.S. workforce and the strain that home and institutional care placed on state Medicaid programs, employers began offering voluntary long-term care coverage for employees who wanted to opt into it. Unfortunately, over time, these programs fell out of favor due to high rejection rates in the underwriting process, expensive premiums, and a number of insurers exiting the market.

Voluntary benefits are increasingly focusing on “caregiver benefits” and include solutions which support employees and their extended families (e.g., parents and in-laws). We are seeing an evolution of insurance products and coverage models, which provide financial assistance and care navigation as well as emotional support to the employee and their family.

Katie King Director, Health Policy & Strategy Read More

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