Caregivers spend their days walking a fine line between success and failure, joy and grief—between life and death. There is no tougher task in life.
This is how Karen Henderson described her experience as an informal caregiver to researchers from the Society of Actuaries (SOA) Research Institute.
Informal caregiving, which is unpaid care given to a person with a chronic or other health condition, disability, or functional limitation, is growing more necessary as professional care becomes less accessible and Baby Boomers age, according to a 2023 report on informal caregiving by the SOA Research Institute.
Informal caregiving affects millions of Americans across regions, economic status, and ethnicities. A survey by AARP and the National Alliance for Caregiving (NAC) found that in 2020, 53 million Americans spent 65 billion hours on informal caregiving, while a 2016 report from the National Academies of Sciences, Engineering, and Medicine (NASEM) estimated that 17.7 million Americans spent 30.5 billion hours on informal caregiving for care recipients 65 and older.
Assuming an hourly wage of $17.50 if these informal caregivers had been paid for their time, that comes to a total annual cost of $530 billion (NASEM) to $1.14 trillion (AARP). That’s comparable to the annual U.S. defense budget, with the AARP value equal to more than a quarter of the total cost of health care in the U.S.
Adverse Effects on Health and Employment
While informal caregiving is a valuable service, and providing care can create a sense of fulfillment and accomplishment, it also can take an emotional, mental, and physical toll on the caregiver. A 2018 National Business Group on Health study found caregivers were twice as likely as the general population to develop depression. Additionally, 49% reported experiencing exhaustion, and 27% reported stress in their marriage or relationships.
Caregiving can also impact jobs and employers. In 2022, Milliman, an international actuarial and consulting firm, conducted a firm-wide survey that found 76% of respondents who were providing care or had previously provided care for a loved one had to take time off work at least once or twice a month for caregiving purposes, with many indicating an even higher frequency.
Funding Formal Long-Term Care: Options and Challenges
People often think of formal (i.e., professional) care as a way to replace or ease the stress of informal care, and Long-Term Care Insurance (LTCI) can help finance professional caregiving. However, there are difficulties facing consumers considering the purchase of either traditional LTCI or newer “hybrid” policies that combine LTCI and life insurance, such as not being able to afford the premiums or not qualifying due to medical underwriting.
Medicaid is another way to fund formal care, but care recipients must first drain their own assets to qualify. Furthermore, Medicaid care options might be limited, putting individuals requiring care onto waiting lists.
Self-funding formal care is another alternative for those with the means. But even when funds have been set aside, inflation and a shortage of care professionals pose risks.
Potential Private Sector Solutions to Care Needs in the U.S.
In a recent Harvard Business School study, 78% of employees said a benefit that provided referral services for caregivers was “very important” for their retention, but only 29% of employers offered such benefits. However, more employers are beginning to look at the needs of informal caregivers as they develop benefits that will attract and retain workers.
Additionally, the private sector has seen an emerging market of caregiver support companies. Their services can include educating caregivers on underlying conditions, finding providers, assisting with medical claims, helping with day-to-day tasks, looking for alternative treatments, and more.
State and Federal Government Efforts
On the public side, several states are developing or piloting public programs to address professional care availability. The state of Washington has started on July 1, 2023 a state-funded program to provide long-term care insurance funded through a payroll tax. California has created a Long-Term Care Insurance Task Force to study the feasibility of implementing a statewide insurance program. They have also increased the Medicaid asset limit for long-term care in 2023 and eliminated it entirely starting January 1, 2024.
Meanwhile, Hawaii is focusing on individual unpaid caregivers, providing financial and other forms of support. Additionally, Maine has launched a two-year pilot program that reimburses informal caregivers with up to $2,000 annually.
The U.S. federal government has also instituted programs to help caregivers, such as the Lifetime Respite Care Program, funding approximately $2 to $4 million per year for state programs. Also, in October 2022, the U.S. Department of Health and Human Services released a national strategy to support family caregivers, identifying potential actions by federal and local governments.
Underpinning the stressors on both formal and informal care in the U.S. is the shortage of professional caregivers. Addressing this issue may entail recruiting, training, licensing, higher compensation, and potentially other solutions to increase the labor base for this profession.
Public/Private Responses to Caregiving Shortages
Whether informal caregiving is the preferred option or the only option when professional care is inaccessible, it is an important part of millions of people’s lives, with both positive and negative impacts. Demographic trends will increase caregiving needs in the U.S., and the associated challenges are complex. The integrated efforts of many stakeholders, in both the public and private spheres, are needed to bring about solutions that should be continually assessed for effectiveness as they are implemented.
For more information on caregiving in the U.S., trends, and possible solutions, download the SOA Research Institute’s Informal Caregiving: Measuring the Cost and Reducing the Burden.
About the Author
Matthew Smith is a Consulting Actuary with Milliman.
Contributor since December 15th, 2023
Across the United States, millions of individuals silently shoulder the immense responsibility of providing unpaid care for aging loved ones. These dedicated family caregivers, often spouses, children, or siblings, can face significant challenges. Juggling their own lives with the demands of caregiving can lead to financial hardship, emotional strain, and a decline in their own physical and mental health.
Individual family caregivers lose an average of $522,000 in wages and benefits over their lifetime, in addition to the physical and emotional strain.
The emotional and physical toll of caregiving is equally significant. A 2022 study published in the Journal of Gerontology found that family caregivers experience higher levels of stress, anxiety, and depression compared to non-caregivers. This can negatively impact their relationships, sleep quality, and overall well-being.
Long-Term Care Insurance: A Powerful Solution:
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LTC insurance ensures access to a wider range of quality care options. With the freedom to choose their preferred care setting and providers, individuals can maintain greater control over their lives and receive care that best suits their needs and preferences. This can significantly improve their quality of life and satisfaction with care.
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Perhaps the most significant benefit of LTC insurance is the emotional and physical relief it offers family caregivers. Knowing that their loved one is receiving quality care can alleviate stress, anxiety, and guilt. This allows them to maintain their own lives and health, preventing burnout and strengthening family relationships.
Most people obtain their coverage in their 40s or 50s, but you can find affordable options in your 60s and beyond, depending on your health.
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Top Long-Term Care Insurance specialists, who help hundreds of clients annually, are adept at designing policies to meet your needs. They consider factors such as age, health status, and other factors to provide accurate quotes from leading insurance companies. Working with these specialists goes beyond just saving money; it offers the reassurance of receiving personalized, well-informed advice.
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