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Social Policy

The Big Picture: The True Cost of Taking Care of Aging Americans

An interview with AU Economics Professor Mieke Meurs and AU Scholar in Residence Ariane Hegewisch

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Young woman in scrubs puts hands on the shoulders of elderly woman

Americans are living longer than ever, and as the baby boomer generation—those born between 1946 and 1964—enters its older years, the United States stands on the cusp of a caregiving crisis. According to the US Census Bureau, the oldest boomers will turn 80 this year, marking a critical milestone when long-term care needs typically intensify. Compounding this challenge, age is the leading risk factor for dementia, and as the boomer cohort ages, the number of people affected by dementia is expected to double over the next 35 years, according to a recent study in Nature Medicine.  

As more older Americans require assistance, it becomes increasingly urgent to implement policy solutions that can address the cost of caregiving our aging loved ones.

To better understand the big picture surrounding caregiving costs and policies, we turned to Economics Professor Mieke Meurs and AU Scholar in Residence Ariane Hegewisch. Meurs, who serves as Co-Director of AU’s Program on Gender Analysis in Economics (PGAE), focuses her research and publications on feminist economics, care work, and gender bargaining power. Hegewisch is a Senior Research Fellow at the Institute for Women’s Policy Research (IWPR), a partner organization of PGAE. Her research focuses on policies and legislative approaches to facilitate greater work-life reconciliation and gender equality.
 

Mieke Meurs
Mieke Meurs
 Ariane Hegewisch
Ariane Hegewisch

PH: What are the most significant financial burdens families face when caring for aging relatives?

AH: Providing care takes time, and time unfortunately means money. A family member (women more often than men) may have to give up or reduce the time in their job. Research by AU alumna Binderiya Byambasuren shows that giving up paid work is particularly common for daughters, and mostly so for Black daughters of elderly parents.  

Apart from the immediate loss of earnings, this also reduces contributions to retirement funds, one factor behind steep gender gaps in retirement savings. Alternatively, families have to hire someone to provide the care at home or in elder daycare facilities. When it is no longer possible to provide care at home, families must pay for residential or nursing care.  

When someone needs nursing care or medical care-related visits at home, Medicare and Medicaid cover a share of those costs, yet many care needs are not covered. Typically, substantial out-of-pocket costs remain, requiring families to make up the gap by drawing on their savings and/or by giving up their time in paid work. Such out-of-pocket expenses can rapidly deplete the savings of lower-income households.  

PH: What are the economic and personal implications for family members who take on caregiving roles?

MM: As Ariane noted, family members who provide care lose income and pension contributions, so providing care significantly affects their financial situation. In addition, people who are out of the labor market providing care are more likely to remain out of the labor market even after care is no longer needed. They may have given up their job and be a bit older and have lost skills while out of work, factors which make it harder to find a new job.  

These factors particularly impact women, who already face lower wages and other forms of labor market discrimination, and who may have already stepped out of the labor market earlier while raising children. In fact, AARP has estimated that the cost of unpaid care to caregivers amounts to $600 billion a year.

Caring for aging relatives can also have psychological and physical costs. While people often get immense satisfaction from caring for loved ones, caring for older people is often more taxing and less enjoyable than caring for children. Memory issues or loss of mobility can result in care challenges. Caregivers are often exhausted and socially isolated.

PH: Who are these paid caregivers, and what challenges do they face?

AH: Low wages and poor conditions lead to recruitment difficulties and high staff turnover in elder and nursing care centers, in turn reducing the quality of care. Employment in elder care has grown rapidly in response to aging. Nursing Care Assistant and Personal Care Worker are both in the top 20 largest occupations for women working full-time, both with median earnings of less than $700 per week, despite requiring certifications and specialized training.  

The growing demand for eldercare services would be impossible to meet without its large female migrant and immigrant workforce. According to estimates by the Migration Policy Institute, a third of all adult care workers are migrants or immigrants, and they make up an even higher share of personal care workers. 

PH: Since this care work is often invisible and off the books, what is the importance of integrating care into tools for policymakers?

MM: This is a very important point. Both family care and informal paid care can be difficult to document and quantify. This, in turn, complicates policy analysis. Most existing macroeconomic models do not specifically include the care sector, which makes it impossible to track how people move in and out of the labor market (and pay income and social security taxes) as policies change. Knowing this is very important for understanding the costs and benefits of care policies.  

A number of projects, including the Care Economies in Context project at the University of Toronto, work at the Levy Institute, and the now-completed CWE-GAM project of the Program for Gender Analysis in Economics at American University, are developing macroeconomic models of the care sector with a gender-disaggregated labor supply to provide policymakers with better analytical tools for understanding the costs and benefits of care policy. The International Labor Organization’s Care Policy Investment Simulator is another new tool for policy analysis. 

PH: And what are some effective public policies or economic strategies to mitigate the financial strain of elder care on families and society?

MM: Our recent joint AU IWPR Care Conference focused on this question, and all of the panels are recorded and available online, as are a series of related blogs.  

Paid care workers are important for both paid care institutions and as support for in-home care. Family caregivers need reliable respite care to avoid undermining their own health. Low pay, the lack of training and professional development opportunities, and restrictive immigration policies limit the supply of needed caregivers. In a number of states, labor unions are working with state governments to strengthen home and community-based services (HCBS) under the State Medicaid program. Recent efforts to lower costs of needed care include the Lowering Costs for Caregivers Act, which would allow individuals to use tax-free health savings accounts and flexible spending accounts on medical expenses for their parents and loved ones, and the Credit for Caring Act, which would allow an eligible caregiver tax credits for part of the cost of long-term care expenses.  

These policies could provide important relief to many families, but they leave the responsibility for care squarely on the family, with little support from the government, and will be of limited help to poor households. 

PH: Are there lessons the United States can learn from other countries with aging populations regarding balancing individual, family, and societal costs?

MM: In Germany, the state offers universal support for care for older persons, with significant flexibility in how it is provided. If the older person chooses to have the care provided by a family member, the state pays the caregiver (about 17 euros per hour, or a little less than $18) and also pays their pension contribution. The caregiver can choose to purchase health and unemployment insurance from the state. This option is cost-efficient and appealing to the care recipients, as they can stay in their own homes with their loved ones. At the same time, it recognizes the value of the care work provided by family members and protects them from the most severe economic consequences of providing care. Older people also have the choice of using their care benefits to live in a locally run group residence or care home, some of which are public and some private (often run by local churches or other community organizations).

Denmark offers similar universal support for care, but the benefits are a bit broader. Family members who provide care receive full labor benefits, including health and unemployment insurance, sick pay, and paid vacation. However, in Denmark, more older people choose to live in a publicly subsidized group residence. It is more costly to provide, but it provides a richer social context for aging people and allows them to retain more independence. Support for both family care and paid care is essential, as not all older people have family members able or willing to care for them.  

A different approach can be seen in South Korea, which recently introduced a publicly run long-term care insurance system, financed by contributions from the working-age population (like Social Security) and a government subsidy (20 percent). The insurance covers 80-100 percent of the costs of in-home or nursing home care. This has contributed to a significant reduction in women’s unpaid in-home care work and led to an increase in women’s labor force participation.  

These governments make greater contributions to reducing the care burden than has been proposed to date in the United States, organizing collective financing for care and ensuring a supply of paid care options. These steps really increase the choices for older people and protect families who provide care from catastrophic financial and other costs.