Policy Memo

1.Sylvia Mathews Burwell, Secretary, U.S. Department of Health & Human Services

2.Doug Feingold

3.Addressing the Increasing Burden on Informal Caregivers in Long-Term Care 4. December 3, 2015

EXECUTIVE SUMMARY For years, the warnings have been dire: the baby boomer crisis is coming; soon, the population of people over age 65 in the United States will outweigh the services the federal government can provide. The warnings are now starting to become a reality. In 2010, 40 million people were age 65 and older, and that number is expected to grow to 88 million by 2050. Unfortunately, approximately 70 percent of those who reach age 65 will need some type of long-term care and support, but there is no US policy that addresses providing the type of day- to-day social services most seniors require. Subsequently, the unofficial policy is to allow loved ones – informal caregivers – to fill the gap. However, that places a large burden on spouses, kids and other relatives or friends, leading to financial issues, exhaustion and harm. As the proportion of Americans above age 65 continues to grow, the US will need to implement policies to alleviate these concerns. Ultimately, I recommend an elder care tax credit and expanding the linkAges pilot program as the new policy. BACKGROUND ON THE PROBLEM

Increasing Burden on Long-Term Caregivers The number of Americans over the age of 65 is growing rapidly, however few policy options exist to help care for them as they age. Therefore, most seniors are forced to rely on loved ones for care, which creates a tremendous burden on their time and resources. As the senior population continues to grow, the growing weight on caregivers will need to be addressed to ensure they have the necessary support for the responsibility.

Long-term care is the range of services (both medical and social) that support the needs of people living with chronic health issues that affect their ability to perform every day activities. The range of services can vary for each individual – from simple tasks such as transportation, cooking or laundry, to the more complex such as bathing or administering medications.

According to the Robert Wood Johnson Foundation (2014), in 2010, 40 million people were age 65 and older, and that number is expected to grow to 88 million by 2050. Approximately 70 percent of those who reach age 65 will need some type of long-term care and support (pg. 2). In 2010, just around 1.5 million people resided in nursing homes (Kaye et al, 2010, pg. 13). Because few policy options currently exist to address the growing number of seniors that require care, millions of seniors rely on ‘informal’ help.

According to the Kaiser Family Foundation (2013), 87 percent of Americans who use long- term care services rely on an unpaid, informal caregiver. An informal caregiver is support provided by a family member or friend to an individual who either temporarily or permanently cannot function completely independently. While certainly virtuous, informal caregiving is a tremendous burden for those who provide care.

A report from the Office of Disability, Aging and Long-Term Care Policy of the Department of Health and Human Services (Spillman et al, 2011) found that nearly 50 percent of informal caregivers are the children of those requiring care. Just below 70 percent of informal caregivers are age 64 and younger, and on average they provided 75 hours of care per month (pg. 12). These are very difficult circumstances for the children, as well as other relatives and friends who help provide care. They are often younger, may have full-time jobs and children of their own, and typically are not living with the person they are caring for. Yet this is all done without compensation. Of course they want to care for their loved and provide assistance as needed, as 89 percent of caregivers said their loved one expressed appreciation (Donelan et al, 2002, pg. 229). However, it’s also a burden, as majorities admitted that caregiving was too much to handle (57 percent), left them exhausted (57 percent) and with little time for themselves (59 percent) (Spillman et al, 2011, pg. 18).

The Robert Wood Johnson Foundation (2014) has found these responsibilities to be costly as well. Informal caregivers spend an estimated $5,000 annually on out-of-pocket costs in caring

2 for a loved one. There are also opportunity costs such as the loss of personal and vacation days spent in care, and even lost wages if a caregiver is forced to reduce their hours at work. This financial burden in turn can lead to additional stress on caregivers (pg. 6). Donelan et al (2002) has found that these costs do take a toll on informal caregivers. One in three indicated that due to financial reasons, they had an unmet personal need (pg. 227).

In addition to financial costs, there are additional risks associated with informal caregivers administering more complex tasks such as medications. Nearly one in five informal caregivers reported receiving no instruction about how to help with medications, while a third said they did not receive training in how to use medical equipment or change bandages. Twelve percent of caregivers have admitted making an error when providing medications (Donelan et al, 2002, pg. 227).

Lack of Attention in United States Healthcare Policy The burden has fallen on informal caregivers because United States healthcare policy has by default allowed it to. The government does not provide much long-term assistance, and outside options can be too expensive. Yee (2001) notes that long-term care policy has long been a difficult debate in the United States, as policy makers have believed that changes would be costly, the expenditures wouldn’t help too much and that resources could be best distributed elsewhere when family members are available for long term care (pg. 37).

The major government health programs Medicare and Medicaid cover very little in regards to long-term care. Medicare only covers care (such as a stay in a nursing home or home health care) when it is medically necessary, such as following an inpatient hospital stay for surgery (Robert Wood Johnson Foundation, 2014, pg. 3). Medicaid though, even for seniors and those requiring long-term care, remains a needs-based program. Therefore, for a senior to be eligible for a nursing home or other care, he or she needs to be below particular thresholds for income and assets, forcing many to spend down their assets to become eligible. Thus, long-term care in a nursing facility largely remains an option only for the poor (Kaye et al, 2010, pg. 17).

Private options also provide little relief. When not covered by Medicaid, nursing homes, assisted-living facilities and at-home help remain an option primarily for the affluent. According to the U.S. Department of Health & Human Services, the average monthly costs in 2010 were $6,235, $3,293 and $21 an hour, respectively (LongTermCare.gov). For complete cost breakdown, see Appendix A. Private long-term care insurance is also costly, as the average healthy 60-year-old pays $2,000 a year in premiums, which can increase with age. At best it defrays the costs of care when it kicks in (Robert Wood Johnson Foundation, 2014, pg. 5). The Wall Street Journal (2015) also notes that newer versions of these policies are costing more, providing less and often what they do cover overlaps with Medicare’s limited coverage.

3 POLICY OPTIONS

1) Connect Seniors in the Community Through the linkAges Program Devising a network to help seniors help each other – or have volunteers provide care – would lessen the need for a caregiver during the day.

A community-based model conceived and implemented by the Palo Alto Medical Foundation and currently being tested in San Francisco, California, linkAges could be adapted to ease the burden on caregivers. According to a Commonwealth Fund (2015) issue brief on linkAges, the program attempts to leverage social interactions to help older Americans continue to live alone and remain engaged in the community (pg. 2). While the total cost is unreported, the program requires only data and healthcare experts and creation of an online network.

The key component is the TimeBank: this is a community-based network that allows members to exchange needed services such as cooking and cleaning. For example, if one person helps out another by cooking a meal, that person has earned a service. A neighbor who owes an hour may then come over and help clean for an hour. While linkAges was designed to alleviate loneliness and allows seniors to remain at home, it could be adapted to help caregivers (Commonwealth Fund, 2015).

Neighborhood and community organizations could setup similar networks, but expand them to include not just seniors, but volunteer organizations, retirees, students and others who may have time to lend a hand. One of the key issues for caregivers is often the time missed at work or from family to drive, cook or clean for a loved one. However, similar to linkAges, perhaps others in the community could lend a hand to cover these activities. The TimeBank program could be utilized to arrange services between seniors, as well as volunteers, students who need community credit and others who just want to help; they could be incorporated into the network to help out some of the basic necessities.

While most of the activities would be volunteer-based, the federal or state governments could provide grants to help setup non-profits which oversee the network, and provide basic training to do more complex tasks such as administering medications. Overall the program would require little funding and could provide some value to seniors still capable of helping out others in limited ways. Whether a community is large or small, a network can be created, and even one less task on a caregiver is valuable.

2) Direct Community Care for Seniors: Expansion of the On Lok Model Direct intervention for seniors through the On Lok Model, which could be revived and revised, could help ease the burden on caregivers.

4 Created in 1971 in Chinatown in San Francisco, On Lok is a managed care program that receives money directly from Medicare and Medicaid to care for local seniors who need daily intervention. For a senior to enroll, they give up their primary care doctor. Services can vary depending on the person, but the typical model would be an On Lok van picking up a senior four days a week and bringing them to one of their health centers. While at the health center, he or she receives meals and medications, participates in recreation activities and basic exercises, showers if needed and is monitored by a trained staff. The center has a medical team that does monthly assessments, provides a detailed care plan and accepts full responsibility for the participants (Bodenheimer, 1999, pg. 1325). By providing daily care and all necessary services, this model completely removes the need for a caregiver for much of the week.

On Lok has been deemed a success, and multiple chapters sprung up. In 1997 Medicare designated it as a permanent program. However, growth and enrollment then stagnated due to a lack of understanding of the program on a large scale, financing concerns and participants’ unwillingness to give up their physician to join (Gross et al, 2004, pg. 257).

As the healthcare system continues to consolidate, the federal government could further implement this policy by encouraging large hospital systems to align with senior or health centers and implement the On Lok model. Hospitals could be encouraged through an increase in Medicare funding, which would ease funding issues, and the opportunity for increased referrals. If the program centers are aligned with well-known hospitals, that could enhance reputation and increase participation. Moreover, to also ease concerns and encourage enrollment, participants could also pay a fee to continue to use their own physician.

When the goal is to provide care to seniors and ease the burden on loved ones, concessions should be made to encourage participation. Although increased funding could be an issue, alignment with hospitals and flexibility in rules could increase interest.

3) Elder Care Tax Credit Providing assistance to caregivers through more money in their pockets could help ease the burden on them.

While the United States tax code does allow some children to claim a parent as a dependent on their tax return to receive some tax breaks if they qualify as caregiver, it doesn’t apply to loved ones who may live outside the home, among other criteria (as noted earlier, only about 50 percent of caregivers are typically the children). Proposals have been introduced in Congress for an elder care tax credit. The most recent version, introduced by Congresswoman Barbara Lee in 2014, would provide caregivers who cannot claim their loved one as a dependent up to $1200 a year in tax breaks. It can be utilized for parents or loved ones who either need care for a short-term illness or who need sporadic care.

5 In an analysis of elder care tax credits, the think tank Third Way estimates the cost for the federal government would be only $750 million a year. Moreover, they propose increasing the break to $2,000 a year for a caregiver, but instituting a $500 deductible to discourage abuse. They deem it simple, relatively cost-effective and believe that it would make a significant difference for caregivers (Kim, Donnell and Stovall, 2009).

Since one of the major issues for caregivers is the lost wages or reduced salaries due to the hours spent caregiving, a tax credit would help limit the losses. Especially when most caregivers are helping out loved ones now for no compensation at all (as noted earlier, they can often spend up to $5,000 a year out-of-pocket). The extra money to pay for groceries, over-the- counter medications and fuel can go a long way. However, this policy would need to be passed by Congress, which is always difficult. Moreover, extra cash would not help reduce hours for caregivers, only make up for them.

4) Expansion of Home Health Aides If the government loosened its rules on paying home aides through Medicare, even splitting the costs with families, it would ease the burden on caregivers and could save in long-term costs as well.

Similarly to how Medicare only covers nursing home stays following a medical event, it restricts home health aides to specific patients as well. To have visits at home by a trained aide paid for by Medicare, a patient needs to be completely homebound. The aides are also restricted to medical care only; they cannot provide cooking or other assistance. Medicare does not cover aides for every day activities or for chronic health issues.

Compared to nursing homes or assisted living facilities, home health aides are far cheaper ($21 an hour, on average) for the government to potentially cover, especially for patients who may only require an hour or two of care during the day. Preventative measures can also save the government far more money over the long-term. Presently, seniors may require loved ones to administer medications or other medical needs, which can cause harm. Similarly, if loved ones are not available, they may attempt to cook or transport themselves, which also has the potential to cause harm, such as a hip injury from a fall. Compared to the $21 an hour on average to cover an aide, on average it costs the government $16,500 to cover a hip replacement, according to the Centers for Medicare and Medicaid Services.

Therefore, Medicare could loosen its rules on paying for home aides, easing the need for family caregivers and preventing larger health issues down the road. Based on a health criteria verified by a physician, Medicare could allot seniors a certain number of home health aide hours per month. To save money, the government could potentially specify as well that it only pay 75 percent of costs, asking families to chip in a small amount.

6 RECOMMENDATIONS

Need to Address Two Concerns In assessing the problem of long-term care and the burden that falls on informal caregivers, there are two chief issues for the caregivers: the financial burden and time burden. In regards to finances, caregivers may be forced to pay for medications, social services or face opportunity costs. The time burden leads caregivers to devote additional hours to loved ones, potentially taking time away from kids, activities and leading to exhaustion. There is also the third issue of potential harm from informal caregivers administering medications or using equipment without training.

Three policy options – linkAges, On Lok and home health aides – directly address the time component to a varying degree. A fourth option, a tax credit, addresses the financial issue. Because it is necessary for a policy recommendation to ease both burdens to be effective, I recommend implementation of the tax credit and continued expansion of the linkAges pilot program.

Implement Tax Credit As stated earlier, informal caregivers spend an estimated $5,000 annually on out-of-pocket costs in caring for a loved one. An elder care tax credit is the most direct and feasible way to ease that financial burden. To provide the most “cash back” to caregivers, I recommend Third Way’s model, in which caregivers are eligible for up to $2,000 following a $500 deductible, which prevents abuse.

The main roadblock here is political, as this tax break would need to pass through Congress, which is always difficult. However, Third Way’s estimate is that it would only cost $750 million a year, which is a drop in the bucket for the federal government, and a small amount compared to trying to cover more nursing home stays or other Medicare increases. Politically, both Democrats and Republicans typically seek the vote of seniors as well, and might be encouraged to pass this credit.

Overall, a tax credit is a simple, feasible and targeted way to cover the financial costs associated with long term caregiving. Most importantly, caregivers would certainly welcome the financial help.

Expand LinkAges While the elder tax credit eases the financial burden, the linkAges program helps with the time burden of caregiving. Compared with home health aides and On Lok, it also relatively inexpensive for the federal government to implement (as noted earlier, the current program required only a health and data staff and creation of a network) especially when it may be necessary to keep costs low when also implementing the tax credit. Therefore, I recommend the federal government provide funding to help implement two additional linkAges programs in the United States.

7 As linkAges is currently a pilot program in San Francisco, its true value and effectiveness remains up for debate. However, the concept remains sound – helping to connect seniors to one another to help each other complete tasks - and thus is worthy of additional pilot programs to raise the stakes and sample size, and see if it can continue to ease the daily time burden on informal caregivers.

San Francisco is currently the 13th largest city in the United States by population. In setting up two additional pilot programs, a top ten city and a city between 20 and 30 should be utilized for diversity. The government should provide grant money to set up an organizational body to oversee the creation of the linkAges network, and should encourage it to move beyond seniors to include volunteers, students and retirees who might want to lend a hand. A robust evaluation mechanism should be included with the program, so if it demonstrates success it can be quickly expanded elsewhere. As informal caregivers can provide on average 75 hours a month in care, there is no shortage of hours to be coordinated between neighbors. While it won’t solve the time burden right away, expansion of the pilot program in a methodical way can begin to lay the foundation for future success.

Two Programs Can Ease the Burden Combined, the elder care tax credit and expansion of the linkAges program will help address the two major issues that informal caregivers face. While the tax credit would cost the federal government $750 million a year, grants to expand linkAges would be cheap; let’s estimate $500,000 for each program. While linkAges would remain a pilot program for now, together these two programs set the stage for redefining the role of informal caregivers, all for less than $800 million a year.

8 Appendix A

According to the US Department of Health & Human Services: some average costs for long-term care in the United States (in 2010) were*:

 $205 per day or $6,235 per month for a semi-private room in a nursing home

 $229 per day or $6,965 per month for a private room in a nursing home

 $3,293 per month for care in an assisted living facility (for a one-bedroom unit)

 $21 per hour for a home health aide

 $19 per hour for homemaker services

 $67 per day for services in an adult day health care center

*From LongTermCare.gov: http://longtermcare.gov/costs-how-to-pay/costs-of-care/

9 Works Cited

Bodenheimer, T. (1999). Long-Term Care for Frail Elderly People - The On Lok Model. New England Journal of Medicine, 1999, 1324-1328

Centers for Medicaid and Medicare Services (2015). Comprehensive Care for Joint Replacement. Retrieved from CMS website www.cms.gov

Congresswoman Lee Introduces Bill to Provide Financial Relief for Caregivers (2014). Retrieved from https://lee.house.gov/news/press-releases/

Donelan, K., Hill, C. A., Hoffman C., et al. (2002). Challenged to Care: Informal Caregivers in a Changing System. Health Affairs, 21, 222-231. Doi: 10.1377hlthaff.21.4.222

Freundlich, N. (2014). Long-Term Care: What are the Issues? Robert Wood Johnson Health Policy Snapshot Issue Brief, 1-8. Retrieved from www.rwjf.com

Gross, D., Temkin-Greener, H., Kunitz, S., & Mukamel, D. (2004). The Growing Pains of Integrated Healthcare for the Elderly: Lessons from the Expansion of Pace. The Milbank Quarterly, 82, 257-282.

Hayes, S., McCarthy, D., & Klein, S. (2015). linkAges: Building Support Systems for Seniors Living Independently in the Community. The Commonwealth Fund, 1-10. Retrieved from www.commonwealthfund.org

Henry J. Kaiser Family Foundation (2013). A Short Look at Long-Term Care for Seniors. Journal of the American Medical Association. Retrieved from www.kff.org.

Kaye, H. S., Harrington C., & LaPlante, M. C. (2010). Long-Term Care: Who Gets it, Who Provides it, Who Pays, and How Much? Health Affairs, 29, 11-21. Doi:10.1377hlthaff.2009.0535.

Kim, A., Donnell, M., & Stovall, T. (2009). Elder Tax Care Credit. Third Way Economic Program, 1-9. Retrieved from www.thirdway.org

Scism, L. (2015, May 1). Long-Term-Care Insurance: Is It Worth It? The Wall Street Journal. Retrieved from www.wsj.com.

U.S. Department of Health & Human Services. (2014). Informal Caregiving for Older Americans: An Analysis of the 2011 National Study of Caregiving. Retrieved from Health and Human Services website www.hhs.gov.

U.S. Department of Health & Human Services (2010). Costs of Care. Retrieved from Health and Human Services website www.hhs.gov.

Yee, D. L (2001). Long-Term Care Policy & Financing as a Public or Private Matter in the United States. Journal of Aging & Social Policy, 13, 35-51.

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