Keeping caregiver costs contained

Shelly Gigante

By Shelly Gigante
Shelly Gigante specializes in personal finance issues. Her work has appeared in a variety of publications and news websites.
Posted on Jul 7, 2021


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Families are our single biggest source of support, cheering us on when we succeed, propping us up when we suffer a setback, and, with growing frequency, stepping in to provide long-term care assistance to an aging parent or relative.

Indeed, many who require help with activities of daily living (ADLs), including meal preparation, transportation, and household chores, never see the inside of an assisted living facility or nursing home. They rely on family caregivers instead.

A 2020 survey by the AARP and National Alliance for Caregiving found 53 million Americans had provided unpaid care to an adult age 50 or older in the prior 12 months. The vast majority (89 percent) were caregivers for a relative, primarily a parent, parent-in-law, or spouse. 1

The National Academy on an Aging Society also reports that two out of three seniors with disabilities who receive long-term care services at home get all their care exclusively from a family caregiver, primarily wives and daughters. 2

“Family caregivers are an increasingly important part of the healthcare system as we seek to reduce the cost of care and keep people happy, healthy and well,” said Grace Whiting, chief executive officer of the National Alliance for Caregiving, in an interview.

The growing national shortage of trained healthcare providers, she said, makes the role of informal caregivers more essential still. “As Americans get older, there are actually fewer providers available so healthcare reformers are looking to shift people who are patients away from hospitals and acute care centers, like nursing homes, to more community- and home-based models,” said Whiting.

The financial toll of caregiving

Most family caregivers readily provide help to an aging or ailing relative out of love and sense of duty. But those who do so regularly can also incur significant out-of-pocket costs that may impact their own financial well-being.

The average family caregiver spends roughly $7,400 per year, or nearly 20 percent of their annual income, on out-of-pocket costs, according to AARP estimates. That figure fluctuates by race, however. Hispanic/Latino caregiver respondents, for example, said they spent closer to $9,000 annually providing care, which represents roughly 44 percent of their income. Why? According to the study, they are more likely to have been caring for a recipient for five or more years and they are more likely to be caring for an aging family member who experienced cognitive decline, such as dementia, which can be more costly to care for. 3

By contrast, African American caregivers reported costs similar to Caucasian caregivers, but that figure represents a far greater percentage of their income – 34 percent versus 14 percent.

Long-distance caregivers who lived more than one hour away from the care recipient incurred the highest annual out of pocket costs, at nearly $12,700. Household expenses claimed the lion’s share of total spending (41 percent), including rent and mortgage payments, home modifications, and other expenses. Medical expenses, for fees associated with assisted living or skilled nursing facilities and insurance costs, account for the second largest share of caregiver spending, at 25 percent of total spending.

Project current and future costs

If you’re among the legion of caregivers doing right by the world, you’ll need to prepare for the costs you incur today, and those that may surface down the road, said Phyllis Shelton, president of LTC Consultants in Hendersonville, Tennessee, which provides financial advisor training and consumer education.

In the case of a cognitive illness, do doctors project a rapid decline or one that may progress more slowly? If your loved one is physically frail, do you have the strength to lift him or her out of a chair or bed as their health declines, help with bathing or transport them to and from the car for medical appointments? Will the care recipient eventually need to move in with you full-time, and if so, might home modifications be required?

Caregivers, married or otherwise, should also crunch the numbers to determine whether they can still pay the household bills if they quit their job to care for a loved one.

“The people who come to me are very often women who had to give up their career to care for an aging parent,” said Shelton. “One client I had provided care to her mom for 14 years and had hardly any savings. She lived on her mom’s Social Security. Now, she’s not set for her own retirement at all.”

Hans Scheil, a financial professional and retirement specialist with Cardinal Financial Planning in Cary, North Carolina, said it is also important to inquire as to the resources of the care recipient. Are their assets sufficient to cover their own expenses, including out-of-pocket medical costs and equipment they will need? Do they have adequate health insurance? Is the best financial solution that they spend down their assets until they are eligible for long-term care coverage through Medicaid, the federal-state health insurance program for low-income and certain disabled Americans? A long-term care specialist or financial professional can help identify the most cost-effective strategies to help your loved one get the care they need.

Relieving stress

As a result of the added expenses they incur, many family caregivers are forced to scale back their own retirement savings, tap their personal savings or retirement fund for extra cash, and slash their budget for things like eating out and vacations, leisure activities that enhance their quality of life and provide much-needed outlets for stress relief.

“Caregivers are often worn out, and in many cases are in danger of getting sick themselves,” said Scheil. “It can be very stressful, especially when you care for those with dementia or Alzheimer’s. You have to be with them all the time and make sure they don’t fall or wander off, or turn on the stove.”

On average, the AARP/NAC study found caregivers spend 24 hours per week providing care to their loved one, and nearly one-quarter provide 41 or more hours of care per week. The majorityhelp their loved one with at least one Activity of Daily Living (ADL), like getting in and out of bed, transportation, grocery or other shopping, and housework. But they also often interact with healthcare providers, agencies, and professionals on behalf of the care recipient.

Caring for a loved one is less stressful if you plan ahead, said Scheil. He notes caregivers often assume the role without warning, after a parent or loved one suffers a stroke or serious injury.

“A lot of the times this is not really well thought out,” he said. “It’s a crisis thrust upon them and they don’t even have the tools to help themselves.”

Legal documents that grant the caregiver, or another designated person, the power to handle their loved one’s financial or medical affairs in the event they become too ill or incapacitated to do so on their own, can be a significant source of stress relief, said Scheil.

Adult children who are likely to serve as future caregivers, especially those who have already agreed to the role, should be sure their parents have in place at least a durable financial power of attorney, which authorizes them to manage their parent’s money, as well as a healthcare proxy, which permits them to make healthcare decisions on their parent’s behalf if needed, said Scheil, who strongly recommends the use of an elder care attorney. Importantly, caregivers also need a HIPAA privacy (Health Information Portability and Accountability Act) form, which authorizes health care providers to share personal health information about their patient with the caregiver for the purposes of medical decision-making.

While you’re at it, be sure your parent also has a living will, sometimes called an advanced healthcare directive, which outlines their wishes for end-of-life care.

“If they don’t have durable power of attorney, they can’t do anything to help their parents with their finances,” he said. “That’s the first order of business.”

Long-Term care protection

For some, Scheil said, there are multiple options to help you plan for possible future care such as hybrid long term care and life insurance policies or annuities, and traditional stand-alone long-term care insurance coverage which may also reduce the financial burden and provide much-needed stress relief.

With coverage for home health care, assisted living facilities, and nursing homes, adult kids can be free to visit their parents out of love, rather than obligation. They may not need to sacrifice their own fulfilling career, or fear their aging parent may need care they can’t afford.

For an added fee, some policies allow policyholders to access their death benefit while alive to help cover the costs of long-term care, called an accelerated benefit rider.

“A lot of LTC policies will also pay for two weeks a year of respite care, which is care to relieve the caregiver,” said Scheil. “Whether you have insurance paying for it or not, my advice to people who are providing care long term solo is to get some relief.”

That may mean asking siblings or another family member to help with meal preparation, transportation to doctor visits, or temporary caregiving when you need a week or two to yourself. Siblings and other family members may also be amenable to kicking in cash to help defray the primary caregiver’s expenses, or paying for a periodic home health aide to help with the more physically demanding parts of the job, including bathing and dressing.

Family caregivers are the most important players in the long-term care continuum. With an open heart, they help the injured, aging and infirm, saving the nation billions of dollars in healthcare costs. But it often takes an emotional and financial toll.

By planning for future expenses, ensuring proper legal documents are in place, and researching various mechanisms to relieve stress, however, caregivers will be better equipped to provide their loved one with the care they need without fragmenting their own financial future.

Learn more from MassMutual ...

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Whiting (May) and Scheil (June) interviews were conducted in 2017 and quotes represent the express opinions of the speakers.

1 AARP, National Alliance for Caregiving, “Caregiving in the U.S.,” 2020.

2 A National Academy on an Aging Society, “The Evolving Balance of Formal and Informal, Institutional and non-Institutional Long-Term Care for Older Americans: a Thirty- Year Perspective, Public Policy & Aging Report 20, no.1,” March 18, 2010

3 AARP, “Family Caregiving and Out-of-Pocket Costs: 2019 Report,” October 1, 2019.


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