How Many Older Adults Can Afford To Purchase Home Care?

04/04/2019

Richard W. Johnson and Claire Xiaozhi Wang

Urban Institute

Printer Friendly Version in PDF Format (22 PDF pages)


ABSTRACT

To estimate home much paid home could possibly be purchased out of income and wealth, we estimated the share of older adults with sufficient monthly income to cover median home care costs as well as other living expenses. Our results show that many older adults with severe LTSS needs could not afford 2 years of paid home care without financial assistance. Although about two-thirds of all adults ages 65 and older not on Medicaid could fund at least 2 years of paid home care using only their income and easily liquated financial assets, only about one-half of those with severe LTSS needs have enough savings to cover paid home care for that long. About 75% of all older adults not on Medicaid could fund at least 2 years of paid home care if they liquidated all their assets, including cars and businesses but not their home equity, and spent that wealth on LTSS. However, only slightly more than one-half of those with severe LTSS needs could cover 2 years of paid home care with their own resources even if they liquidated all their available assets. Four out of 10 older adults not on Medicaid could pay for home care indefinitely because they could fund care out of their income without dipping into their savings, but only about 2 out of 10 of those with severe LTSS needs could fund paid home care with their income alone.

This report was prepared under contract #HHSP23320100025W1 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and the Urban Institute. For additional information about this subject, you can visit the DALTCP home page at http://aspe.hhs.gov/office-disability-aging-and-long-term-care-policy-daltcp or contact the ASPE Project Officers, John Drabek and Pamela Doty, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, S.W., Washington, D.C. 20201; John.Drabek@hhs.gov, Pamela.Doty@hhs.gov.

DISCLAIMER: The opinions and views expressed in this report are those of the authors. They do not reflect the views of the Department of Health and Human Services, the contractor or any other funding organization. This report was completed and submitted on April 2017.


 

Paid home care can significantly improve the lives of older adults with disabilities and their families. Most older people who need help with everyday activities prefer to receive assistance in their homes rather than move into a nursing facility or other type of residential care setting (Barrett 2014). The vast majority rely on unpaid family caregivers--primarily adult children, especially daughters, and, if married, spouses--for help with activities of daily living (ADLs), such as bathing, dressing, and eating, and instrumental activities of daily living (IADLs), such as preparing hot meals or shopping for groceries (Wolff et al. 2016). However, providing care to older family members often creates significant physical and emotional burdens, and sometimes has negative financial repercussions (e.g., Pinquart and Sorenson 2007; Seltzer and Li 2000; Schulz and Eden 2016; Schulz and Sherwood 2008; Spillman et al. 2014). Paid home care can relieve stressed family caregivers and allow frail older adults to remain at home longer.

However, relatively few older adults who need long-term services and supports (LTSS) receive paid home care. Johnson and Wiener (2006), for example, found that among community-dwelling adults ages 65 and older living in the community in 2002, only 14 percent of those with one or more ADL or IADL limitations and 39 percent of those with three or more ADL limitations received assistance from paid helpers. Pooling data from 1998 to 2012, Ankuda and Levine (2016) estimated that only 18 percent of adults ages 55 and older with four or more ADL or IADL limitations received monthly paid home care. The high out-of-pocket cost of paid home care may at least partly explain its low prevalence rate. A provider survey found that the national median hourly rate for home health aide services in 2016 was $20 (Genworth 2016). Third-party reimbursement for paid home care is relatively rare, because only 11 percent of adults ages 65 and older were covered by private long-term care insurance (LTCI) in 2014 (Johnson 2016a), Medicare does not generally cover nonmedical home care services, and Medicaid finances home care only for people with very limited financial resources.

This research brief examines the out-of-pocket affordability of paid home care by simulating for a nationally representative sample of older adults the out-of-pocket costs they would incur if they purchased the median amount of paid home care obtained by recipients and then comparing these payments to their financial resources. Analyses included the full sample of older adults living in the community as well as a subsample of older adults with severe LTSS needs, because people with disabilities tend to have fewer resources than better-abled people (Johnson 2016b). We excluded people covered by Medicaid because they generally make only limited out-of-pocket payments for services they receive.

We estimated the share of older adults with sufficient monthly income to cover median home care costs as well as other living expenses. For older adults with insufficient income, we estimated how long they could fund paid home care out of their financial wealth, which can easily be liquidated, before exhausting their resources, and how long they could fund paid home care if they liquidated all of their assets except their primary residence, including any other real estate, vehicles, and businesses. We also estimated the share of older adults with enough resources to self-finance two years of paid home care. Several recent proposals would create a government program to cover catastrophic LTSS expenses or promote private insurance to cover catastrophic expenses with a two-year waiting period for benefits (Bipartisan Policy Center 2016; Favreault, Gleckman, and Johnson 2015; Long-Term Care Financing Collaborative 2016).

Our results show that many older adults with severe LTSS needs could not afford two years of paid home care without financial assistance. Although about two-thirds of all adults ages 65 and older not on Medicaid could fund at least two years of paid home care using only their income and easily liquated financial assets, only about one-half of those with severe LTSS needs have enough savings to cover paid home care for that long. About 75 percent of all older adults not on Medicaid could fund at least two years of paid home care if they liquidated all their assets, including cars and businesses but not their home equity, and spent that wealth on LTSS. However, only slightly more than one-half of those with severe LTSS needs could cover two years of paid home care with their own resources even if they liquidated all their available assets. Four out of ten older adults not on Medicaid could pay for home care indefinitely because they could fund care out of their income without dipping into their savings, but only about two out of ten of those with severe LTSS needs could fund paid home care with their income alone.

For comparison, we also estimated how much assisted living and nursing home care Americans ages 65 and older not on Medicaid--especially those with severe LTSS needs--could afford to purchase out-of-pocket. Home care is often considerably less expensive than assisted living or nursing home care, mainly because paid home care users seldom need the on-call paid help that is available round-the-clock in residential care settings. Instead, most users of paid home care rely primarily on unpaid help from spouses, adult children, or other relatives and therefore use limited amounts of scheduled home care. Despite home care's lower cost, however, it is generally less affordable than assisted living for older adults paying out-of-pocket because home care users must reserve a much greater share of their financial resources to cover community living expenses (such as food, shelter, utilities, and home maintenance costs), which are covered by the all-inclusive daily rates charged for assisted living. Moreover, once older adults with disabilities have moved permanently into assisted living facilities or nursing homes, homeowners can cash in their home equity to help pay for their care, unless they have a nondisabled spouse who wishes to remain in the home.

Nursing home care, which is quite expensive, is less affordable out-of-pocket than assisted living or paid home care. However, nursing home residents can turn to Medicaid to finance their care once they have exhausted their financial resources (or if they did not have much wealth when they entered a nursing home). Medicaid also generally covers paid home care and assisted living through waiver programs, but beneficiaries often face long waiting lists for these services. Moreover, the income allowances that state Medicaid programs grant to home care beneficiaries are often too low to support community living (Johnson and Lindner 2016), limiting the usefulness of Medicaid coverage for community-dwelling elders. Limitations in Medicaid coverage for home care users and their need to maintain a home typically make home care less affordable than residential LTSS options and go a long way toward explaining why many disabled elders end up moving into specialized residential elder care settings when they would otherwise have preferred to remain at home.

 

Data and Methods

Our data came from the Health and Retirement Study (HRS), a longitudinal survey conducted by the Survey Research Center at the University of Michigan that collects detailed information on older Americans every two years. All respondents live in the community, not in nursing homes, when first interviewed, but the HRS follows them into nursing homes as necessary. The survey solicited proxy responses from spouses and other close relatives when respondents are living in nursing homes or otherwise unable to respond themselves. The HRS also collects information from next of kin after respondents die, providing information about disability and care received in the last months of life. We used data from the 2014 HRS, the latest wave available, which interviewed 18,748 respondents, including 9,966 who were ages 65 and older and living in the community.

The HRS collects detailed information on demographics, household income and wealth, disability, cognitive status, and the monthly receipt and intensity of paid and unpaid help with ADLs and IADLs. The HRS income measures refer to amounts received in the previous calendar year. Our measure of financial wealth includes the value of Individual Retirement Accounts (IRAs); Keoghs; stocks; mutual funds; investment trusts; bonds; bond funds; Certificate of Deposits (CDs); government savings bonds; treasury bills; checking, savings, and money market accounts; and other savings, net of nonhousing debt. Each wave the HRS asks respondents whether they have any difficulty with various activities expected to last at least three months, including the following ADLs: eating, dressing, bathing, getting in and out of bed, walking across a room, and using the toilet. The survey also asks respondents whether they received any assistance with ADLs or IADLs over the past month, how much assistance each helper provided over the past month, and whether each helper was paid.

The analysis classified individuals as having severe LTSS needs if they received paid or unpaid LTSS and had two or more ADL limitations or severe cognitive impairment (SCI), a disability threshold similar to that specified in the Health Insurance Portability and Accountability Act (HIPAA) for collecting tax-free benefits from private LTCI.[1] The HRS assesses cognitive impairment by administering a cognitive test to self-respondents. The test measures episodic memory and mental status. Interviewers read a list of ten nouns and ask respondents to recall as many words as possible. After about five minutes of questions on other topics, interviewers again ask respondents to recall as many words as possible from the original list of ten nouns. The test measures mental status by asking respondents to subtract 7 from 100 five successive times; count backwards ten times; report the month, day, year, and day of the week when interviewed; name an object they "usually used to cut paper" and the "kind of prickly plant that grows in the desert;" and name the president and vice president of the United States. HRS uses these responses to create a cognitive score, assigning 1 point for each correct word recalled (for a maximum score of 20 points), 1 point for each successful subtraction of seven (for a maximum score of 5), 2 points for successfully counting backwards (1 point if successful on the second try but not the first), and 1 point for correctly naming each object, the president, the vice president, and each element of the date (for a maximum score of 8). The total possible score, then, is 35 points. The HRS imputed missing cognition data for self-respondents, based on demographic, health, and economic variables, as well as cognitive variables from the current and prior waves (Fisher et al. 2015).

Respondents who provide survey information through proxies are more likely than self-respondents to have cognitive impairments, yet the HRS cannot administer a cognitive test to them. Instead, the survey asks proxies about several behaviors that are often symptomatic of SCI--whether a respondent ever gets lost in a familiar environment, ever wanders off and does not return by himself or herself, or ever sees or hears things that are not really there. The HRS also asks proxies to rate respondents' memory, from excellent to poor. Exit interviews administered to the next of kin of deceased respondents include this battery of questions about memory and behaviors associated with cognitive impairment.

We classified respondents as having SCI if they scored 7 points or less on the cognitive test or if their proxy respondents (or next of kin) reported that they had poor memory or ever exhibited symptoms of SCI. The 7-point threshold is the average of the 8-point threshold used by Herzog and Wallace (1997) to define cognitive impairment and the 6-point threshold used by Langa, Kabeto, and Weir (2009).

To assess the affordability of paid home care, we compared paid home care charges and other living expenses to respondents' financial resources. Using pooled HRS data from 2010 to 2014 to boost the number of respondents observed obtaining paid home care, we estimated that the median monthly amount of paid care provided to recipients ages 65 and older was 90 hours. Our estimate included information from both the standard interviews and the exit interviews about paid home care, because paid home care is more common near the end of life. Genworth's 2013 survey of providers indicates that the median hourly rate for home health aide services in 2013 was $19 (Genworth 2013). Multiplying these two estimates, we assigned a monthly 2013 out-of-pocket paid home care cost to each respondent of $1,710.

To estimate other living expenses, we examined data from the Consumption and Activities Mail Survey (CAMS), a companion survey to the HRS. It asks a subset of HRS respondents about household expenses over the past 12 months in the years that the full HRS was not administered. CAMS collects detailed expenditure data for 38 spending categories, asking respondents how much they spent over the past month or week. We aggregated essential spending into seven broad categories--housing, health care, durable goods, food, transportation, clothing and personal care--annualizing the measures by multiplying weekly estimates by 52 and monthly estimates by 12 and using hotdeck procedures to impute missing data.[2] We set necessary living expenses for respondents in the full HRS equal to median essential household expenditures in the 2013 CAMS for married and single households within income groups--high (top 25 percent), moderate (between the 25th and 75th percentile), and low (bottom 25 percent).[3] Five percent of adults ages 65 and older in our HRS sample did not own or rent their homes because they lived rent-free with family or friends, typically an adult child. For these respondents, we set housing expenses equal to zero and estimated their necessary living expenses as the median of the remaining spending categories.

The final step of our analysis was to subtract median living expenses and paid home care expenses from respondents' monthly income and financial wealth. If those expenses exceeded monthly income, we subtracted the excess monthly expenses from household wealth and calculated how long their wealth would last. We considered financial wealth, which is easy to liquidate to cover expenses, and all of their available household wealth, including any businesses, vehicles, or real estate other than a primary residence. The computations excluded the net value of a primary residence because home care recipients must remain in the community. We estimated the share of respondents who could cover their expenses using only their monthly income, and the median number of months that wealth would last for those who lacked sufficient income to cover all of their expenses. In addition, we computed the share of older adults who could afford to finance at least two years of paid home care. Our sample excluded Medicaid recipients from these estimates, because they do not generally incur many out-of-pocket costs when they use paid home care. We also generated estimates for a subset of respondents with severe LTSS needs.

For comparison, we repeated the analysis for nursing home care and assisted living, estimating the share of older adults with incomes high enough to finance these services and, for those with insufficient incomes who would have to dip into their wealth to fund these services, the number of months that could be covered before they depleted their assets. We compared how long older adults could finance stays if they used only their financial wealth or all of their available household wealth (i.e., home equity and the value of any other property). For married adults in nursing homes, however, we always excluded the value of the primary residence so that their spouse could remain living at home. The analysis set the daily price of nursing home care at $207, the median 2013 price for a semi-private room in a nursing home according to Genworth's 2013 national survey of providers, and the monthly price of assisted living at $3,450, the median 2013 price of a one-bedroom unit in an assisted living facility according to that survey (Genworth 2013).

We assumed that the cost of LTSS provided in assisted living and nursing homes includes basic living expenses (food, housing, utilities, recreational activities) so that additional funds would be needed only to cover costs associated with medical care not provided by the facility (e.g., premiums for Medicare Parts B and D and Medigap and the cost of uncovered vision, dental and hearing services), clothing, and incidental personal care expenses. In addition, we assumed that married people join their spouses in assisted living, which would also cover most of their spouse's living expenses except for medical care, clothing, and personal care. We did not, however, assume that spouses of nursing home residents would also move into the nursing home. In computing the affordability of nursing homes for single people and assisted living for everyone, then, we subtracted an estimate of spending on medical care, clothing, and incidental personal care expenses from income and applied the remaining income to LTSS costs. Estimated spending on these items equaled the median amount reported by CAMS respondents ages 65 and older within each income and marital status group. Married residents in nursing homes must reserve some household income to support their community-dwelling spouse. To estimate these expenses, we summed total household spending on housing, health care, durable goods, and transportation reported by married adults ages 65 and older in the 2013 CAMS. Because households can reduce their spending on other items when a spouse moves into a nursing home, we added half of household spending on food, clothing, and personal care. We set living expenses for married adults equal to the median value of this spending within each income group, and subtracted it from total household income to determine how much income was available to cover nursing home expenses.

 

Results

Pooled HRS data from 2010 to 2014 show that 36 percent of community-dwelling adults ages 65 and older with severe LTSS needs receive some paid home care, 89 percent receive some unpaid home care, and 28 percent receive both paid and unpaid home care (Table 1). Paid home care is more prevalent among single adults, those with Medicaid coverage, those with zero or negative nonhousing wealth (who often receive Medicaid-financed home care), and those ages 85 and older than other older adults. Women are also more likely to receive paid home care than men.

Among paid home care recipients ages 65 and older with severe LTSS needs, the median monthly amount of paid home care received is 90 hours (Table 2). The variation in median monthly hours is similar to the variation in the prevalence of paid care, with median hours relatively high among women, single adults, people with no wealth other than their primary residence, people on Medicaid, and people ages 85 and older. In addition, median hours of paid care are relatively high among people with more than $100,000 in nonhousing wealth. The median amount of monthly unpaid home care among care recipients is 93 hours, only slightly higher than the median number of paid home care hours, although many more older people with severe LTSS needs receive unpaid care than paid care. However, median hours of unpaid care vary quite differently across the population than paid care hours; median hours of unpaid care are relatively high among married people, men, and people of color.

Median 2013 annual living expenses were $23,200 for single adults ages 65 and older and $42,800 for married couples ages 65 and older (Table 3). Living expenses increased with income. Compared with median expenses among low-income older people (with incomes in the bottom 25 percent of the distribution), median expenses among high-income older people (with incomes in the top 25 percent of the distribution) were about three times as high for single people and more than twice as high for married couples.

Financial Resource Levels

Median 2013 household income was $26,400 for single adults ages 65 and older and $61,200 for married people (Table 4). Median incomes were about 25 percent lower for people with severe LTSS needs. Median 2014 household financial wealth was $24,800 for single people and $108,700 for married people. However, financial wealth is very unequally distributed. A quarter of single adults held financial assets worth at least $176,300--the 75th percentile of the distribution--while another quarter had less than $400--the 25th percentile of the distribution. Among married older adults, one-quarter held more than $421,300 in financial assets, while another quarter held no more than $7,800. Total household wealth levels were much higher, although a quarter of older single adults held no more than $30,400 and a quarter of older married adults held no more than $141,100. As with income, older people with severe LTSS needs held much less wealth than older people in better health; median financial wealth for older people with severe LTSS needs was $4,900 for single people and $18,600 for married people.

Household income and wealth levels were much higher for nonHispanic Whites than people of color (Table 5). Among older adults with severe LTSS needs, for example, the median nonHispanic Black and median Hispanic held little or no financial wealth in 2014, whereas the median older nonHispanic White couple held $49,000 in financial wealth. Median household income was higher among those ages 65-74 than older adults, although the patterns are less dramatic for those with severe LTSS needs. However, adults ages 85 and older held more financial wealth than those ages 65-84.

Affordability of LTSS

Forty percent of adults ages 65 and older could cover their monthly paid home care costs, as well as normal living expenses, with their monthly income, under the assumption that they received the median amount of paid home care and paid the median hourly rate (Table 6). However, adults ages 85 and older and single adults--who are most likely to need paid help--are much less likely to have enough income to pay for home care. Only 22 percent of older adults with severe LTSS needs, including just 11 percent of those who were unmarried and 15 percent of those who were ages 85 and older--could cover typical paid home care expenses with their income.

By comparison, 49 percent of older adults could pay for assisted living with their monthly incomes and 14 percent could pay for nursing home care. Assisted living is more affordable than paid home care because assisted living costs cover most living expenses, including room and board, so residents can save on housing and food costs. Nonetheless, only 24 percent of single people, 30 percent of people with severe LTSS needs, and 26 percent of adults ages 85 and older had enough income to pay for assisted living. Nursing home care, which is much more expensive than assisted living, is not affordable for the vast majority of older people with severe LTSS needs, only 5 percent of whom could pay for a nursing home stay out of their income.

Among those with insufficient monthly income to cover paid home care who would have to dip into their savings to cover the shortfall, the median amount of time that their financial wealth would last was 18.8 months, about a year and a half (Table 7). However, one-half of older people with severe LTSS needs could fund paid home care with their financial wealth for no more than 3.4 months. Moreover, 22 percent of those with insufficient income (or 13 percent of the overall population, computed by multiplying 0.22 by (1-0.4)) had no (or negative) financial wealth, including about one-half of Hispanics and nonHispanic Blacks and three in ten older adults with severe LTSS needs (Appendix Table A-1).

Older adults' financial wealth would generally not be able to fund long-term stays in assisted living or nursing homes for people with inadequate income to fully cover their LTSS expenses. The median fundable stay would last only 11.7 months for assisted living and 11.3 months for nursing home care.[4] Among older people with severe LTSS needs, the median amount of time that their financial wealth would last was only 2.3 months in assisted living and 1.8 months in a nursing home.

Nearly all older adults have some available household wealth that might be liquidated to pay for LTSS, including businesses, vehicles, and, for people in residential care and single people in nursing homes who do not need to maintain a home, home equity (Appendix Table A-2). When we assume that all available resources are devoted to LTSS expenses, we find that many older adults could finance LTSS for many years. The median amount of care that could be financed by liquidating all available household wealth for older adults with insufficient incomes to fully cover their costs would be 43 months of paid home care (or about three-and-a-half years), 34.4 months of nursing home care (or nearly three years), or 106.4 months of assisted living (or nearly nine years) (Table 8). Older adults with severe LTSS needs would not be able to finance nearly as much LTSS by liquidating all of their available wealth, which could cover only 14.1 months of paid home care or 13.3 months of nursing home care. However, older adults with severe LTSS needs could finance 55.6 months, or more than four years, of assisted living by liquidating all their wealth, because unlike paid home care recipients who need to live at home or married nursing home residents whose spouses need to live at home if they are not disabled, people in assisted living could devote all of their home equity to financing their care.

About two-thirds (68 percent) of older adults could fund at least two years of paid home care using only their income and easily liquated financial assets, and about three-quarters (74 percent) could fund at least two years of such care using all their available household wealth, including any vehicles, businesses, and real estate they might own except for their primary residence (Table 9). Fewer single adults, people of color, and people with severe LTSS needs could fund paid home care for that long. Only 49 percent of older adults with severe LTSS needs could fund at least two years of paid home care by dipping only into their savings, while 56 percent could fund two years of care if they used all their available assets.

Assisted living is generally more affordable than paid home care, especially when older adults devote all their available wealth to LTSS, but nursing homes are less affordable. Eighty-seven percent of all older adults and 75 percent of those with severe LTSS needs have enough income and wealth, including the net value of their home, to cover at least two years of assisted living. However, only 63 percent of all older adults and 44 percent those with severe LTSS needs have enough income and wealth to cover two years of nursing home care.

 

Conclusions

Paid home care is unaffordable for many older adults, especially those with severe LTSS needs who could benefit most from such services. We found that about one-third of all older adults ages 65 and older not on Medicaid, including about one-half of those with severe LTSS needs, lacked enough income and easily liquated financial assets to fund two years of paid home care. Even if older adults liquidated all their available household wealth, including any vehicles, businesses, and real estate they might own except for their primary residence, about one-quarter would be unable to fund two years of paid home care, including slightly less than half of those with severe LTSS needs.

Four out of ten older adults not on Medicaid could pay for home care indefinitely because they could fund care out of their income without dipping into their savings, but only about two out of ten of those with severe LTSS needs could fund paid home care with their income alone. For older adults who would have to dip into their savings to pay for home care, the median length of time that their financial resources would last was about 19 months overall. However, the median duration was less than four months for older people with severe LTSS needs. Nearly one-quarter of older adults with insufficient income to fully cover paid home care lacked any financial assets, including nearly one-third of those with severe LTSS needs. If older adults liquated all their assets except for their primary residence, the median affordable paid home care spell for those with insufficient income to cover costs would be about three-and-a-half years overall, but one only a little more than a year for older adults with severe LTSS needs. On average, severe LTSS needs last three years, although an estimated 12 percent of older adults with severe LTSS needs experience such needs for more than six years (Johnson forthcoming).

Most paid home care recipients do not receive round-the-clock paid care. The median amount of paid home care received is only 90 hours per month, with unpaid family care usually supplementing paid services. Nonetheless, many older people are better able to cover assisted living with their available resources than paid home care because they could, in theory, devote all their wealth to these expenses. Recipients of paid home care need to cover housing and food expenses, whereas assisted living provides room and board. In addition, assisted living residents could use their housing wealth to cover LTSS expenses. Nearly half of all older adults could fully cover assisted living expenses with their incomes, and one-half of those with insufficient incomes have enough wealth to cover assisted living expenses for almost nine years. Few older adults receive enough income to fully cover nursing home costs, but nearly two-thirds have enough wealth to cover two years of nursing home costs. Older people with severe LTSS needs have less wealth, but 75 percent have enough to fund two years of assisted living and 44 percent can fund two years of nursing home care. One caveat, however, is that our analysis has not incorporated any of the transaction costs associated with selling a home and using the proceeds to fund LTSS expenses. Factoring in those costs might reduce the stay lengths that could be funded with household wealth by as much as 10 percent.

The unaffordability of paid home care might partly explain its low prevalence among older adults with severe LTSS needs. It limits their ability to remain at home longer, where most prefer to live (Barrett 2014), instead of moving into assisted living or moving into nursing homes and qualifying for Medicaid after their financial resources run out. Our previous analyses of the relationship of severe disability to financial resources (Johnson 2016b) speak to the challenges faced by individuals at highest risk of developing severe disabilities of planning ahead so as to be better able to afford LTSS. These analyses found that older Americans who developed disabilities prior to advanced old-age and, especially, before age 75 had lower incomes and wealth ten or more years before they developed disabilities. Other analyses we carried out (Johnson and Lindner 2016) show that, even when "spend-down" to Medicaid eligibility for home care may be possible for severely disabled Americans with incomes below 300 percent of Supplemental Security Income, the monthly post-eligibility contributions required in many states would not leave Medicaid home care recipients with sufficient income to pay for all of their essential community living, such as food, housing, and utility costs, that Medicaid covers only in institutional settings.

 

Endnotes

  1. HIPAA stipulates that an individual must be unable to perform two or more ADLs for at least 90 days without substantial assistance from someone else or must require substantial supervision because of SCI. However, the HRS does not ask respondents if they need assistance with various ADLs; it only asks if they have any difficulty with ADLs. To create a threshold more consistent with HIPAA, we added the requirement that individuals must also receive some LTSS.

  2. We excluded expenditures on entertainment, reading materials, education, tobacco, cash contributions, personal insurance, pensions, and miscellaneous expenses, because we considered these expenditures to be less essential than other types of household spending. They accounted for about 15 percent of total household expenditures.

  3. We computed income distributions separately for married and single households.

  4. As noted earlier, however, nearly half of older adults could finance assisted living indefinitely because their income exceeds assisted living costs, whereas only about one in seven could stay in a nursing home indefinitely.

 

References

Ankuda, Claire K., and Deborah A. Levine. 2016. "Trends in Caregiving Assistance for Home-Dwelling, Functionally Impaired Older Adults in the United States, 1998-2012." JAMA, 316(2): 218-20.

Barrett, Linda. 2014. "Home and Community Preferences of the 45+ Population, 2014." Washington, DC: AARP. http://www.aarp.org/content/dam/aarp/research/surveys_statistics/il/2015/2014-Home-Community-45plus-res-il.pdf.

Bipartisan Policy Center. 2016. "Initial Recommendations to Improve the Financing of Long-Term Care." Washington, DC: Bipartisan Policy Center. https://cdn.bipartisanpolicy.org/wp-content/uploads/2016/12/BPC-Health-Long-Term-Care-Financing-Recommendations.pdf.

Favreault, Melissa M., Howard Gleckman, and Richard W. Johnson. 2015. "Financing Long-Term Services and Supports: Options Reflect Trade-Offs for Older Americans and Federal Spending." Health Affairs, 34(12): 2181-91.

Fisher, Gwenith, Halimah Hassan, Jessica D. Faul, Willard L. Rodgers, and David R. Weir. 2015. "Health and Retirement Study Imputation of Cognitive Functioning Measures: 1992-2012." Ann Arbor, MI: Survey Research Center, University of Michigan. http://hrsonline.isr.umich.edu/modules/meta/xyear/cogimp/desc/COGIMPdd.pdf.

Genworth. 2013. "Genworth 2013 Cost of Care Survey." https://www.genworth.com/dam/Americas/US/PDFs/Consumer/corporate/130568_032213_Cost%20of%20Care_Final_nonsecure.pdf.

Genworth. 2016. "Cost of Care Survey 2016: Summary of 2016 Survey Findings." https://www.genworth.com/dam/Americas/US/PDFs/Consumer/corporate/131168_050516.pdf.

Herzog, A. Regula, and Robert B. Wallace. 1997. "Measures of Cognitive Functioning in the AHEAD Study." Journals of Gerontology, Series B: Psychological Sciences and Social Sciences, 52: 37-48.

Johnson, Richard W. 2016a. "Who Is Covered by Private Long-Term Care Insurance?" Washington, DC: Urban Institute. http://www.urban.org/research/publication/who-covered-private-long-term-care-insurance.

Johnson, Richard W. 2016b. "Later-Life Household Wealth before and after Disability Onset." Washington, DC: Urban Institute. https://aspe.hhs.gov/basic-report/later-life-household-wealth-and-after-disability-onset.

Johnson, W. Richard. Forthcoming. "The Lifetime Risk of Receiving Long-Term Services and Supports." Washington, DC: U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation. Forthcoming at http://aspe.hhs.gov.

Johnson, Richard W., and Stephan Lindner. 2016. "Older Adults' Living Expenses and the Adequacy of Income Allowances for Medicaid Home and Community-Based Services." Washington, DC: U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation. https://aspe.hhs.gov/basic-report/older-adults-living-expenses-and-adequacy-income-allowances-medicaid-home-and-community-based-services.

Johnson, Richard W., and Joshua M. Wiener. 2006. "A Profile of Frail Older Americans and Their Caregivers." Washington, DC: Urban Institute.

Langa, Kenneth M., Mohammed Kabeto, and David Weir. 2009. "Report on Race and Cognitive Impairment Using HRS." In 2010 Alzheimer's Disease Facts and Figures. Chicago, IL: Alzheimer's Association. http://www.alz.org/documents_custom/report_alzfactsfigures2010.pdf.

Long-Term Care Financing Collaborative. 2016. "A Consensus Framework for Long-Term Care Financing Reform." Washington, DC: Convergence Center for Policy Resolution. http://www.convergencepolicy.org/ltcfc-final-report/.

Pinquart, Martin, and Sylvia Sorenson. 2007. "Correlates of Physical Health of Informal Caregivers: A Meta-Analysis." Journals of Gerontology Series B: Psychological Sciences and Social Sciences, 62(2): P126-37.

Schulz, Richard, and Jill Eden, editors. 2016. "Families Caring for an Aging America." Washington, DC: National Academies Press.

Schulz, Richard, and Paula R. Sherwood. 2009. "Physical and Mental Health Effects of Family Caregiving." American Journal of Nursing, 108(9): 23-27.

Seltzer, Marsha M., and Lydia W. Li. 2000. "The Dynamics of Caregiving: Transitions during a Three-Year Prospective Study." Gerontologist, 40(2): 165-78.

Spillman, Brenda C., Jennifer Wolff, Vicki A. Freedman, and Judith D. Jasper. 2014. "Informal Caregiving for Older Americans: An Analysis of the 2011 National Study of Caregiving." Washington, DC: U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation. https://aspe.hhs.gov/report/informal-caregiving-older-americans-analysis-2011-national-study-caregiving.

Wolff, Jennifer L., Brenda C. Spillman, Vicki A. Freedman, and Judith D. Kasper. 2016. "A National Profile of Family and Unpaid Caregivers Who Assist Older Adults with Health Care Activities." JAMA Internal Medicine. doi:10.1001/jamainternmed.2015.7664.

 

Tables

TABLE 1. Percentage of Adults Ages 65 and Older with Severe LTSS Needs Receiving Paid or Unpaid Home Care, 2010-2014
(by payment status and personal characteristics)
  Any Paid Home Care Any Unpaid Home Care Both Paid and
Unpaid Home Care
All 36 89 28
Marital Status
   Single 45 86 33
   Married 25 94 22
Annual Income
   No more than $10,000 41 85 29
   $10,001-$20,000 37 88 28
   $20,001-$30,000 31 90 24
   More than $30,000 35 92 29
Nonhousing Wealth
   Zero or negative 46 85 34
   $1-$10,000 27 90 20
   $10,001-$100,000 29 92 22
   More than $100,000 37 92 32
Medicaid
   No 32 91 26
   Yes 48 84 34
Race and Ethnicity
   NonHispanic White 35 90 28
   NonHispanic Black 35 88 28
   Hispanic 39 84 27
   Other 41 92 33
Sex
   Female 40 88 31
   Male 29 91 23
Age
   65-74 27 90 19
   77-84 33 90 26
   85+ 46 88 36
SOURCE: Authors' estimates from the HRS.
NOTE: The sample was restricted to 5,996 adults ages 65 and older with severe LTSS needs. The analysis classified individuals as having severe LTSS needs if they received paid or unpaid LTSS and had 2 or more ADL limitations or SCI. Receipt of home care was measured at the survey interview for surviving respondents and over the last 3 months of life for deceased respondents, as reported by next of kin in exit interviews. Financial amounts were measured in constant 2013 dollars.

 

TABLE 2. Median Monthly Hours of Help Received by Adults Ages 65 and Older with Severe LTSS Needs Who Obtained Paid or Unpaid Home Care, 2010-2014
(by payment status and personal characteristics)
  Any Home Care Paid Home Care Unpaid Home Care
N Median N Median N Median
All 5,813 126 1,729 90 5,454 93
Marital Status
   Single 3,420 128 1,148 107 3,144 78
   Married 2,393 124 581 62 2,310 120
Annual Income
   No more than $10,000 855 124 284 93 782 93
   $10,001-$20,000 2,120 133 619 86 1,987 96
   $20,001-$30,000 1,167 125 306 80 1,107 93
   More than $30,000 1,671 124 520 99 1,578 93
Nonhousing Wealth
   Zero or negative 2,279 155 747 100 2,100 93
   $1-$10,000 1,328 124 333 60 1,252 104
   $10,001-$100,000 1,023 124 263 89 969 101
   More than $100,000 1,183 124 386 107 1,133 81
Medicaid
   No 4,183 124 1,188 84 3,970 93
   Yes 1,630 148 541 100 1,484 93
Race and Ethnicity
   NonHispanic White 4,033 124 1,117 90 3,970 90
   NonHispanic Black 1,028 172 336 80 959 126
   Hispanic 653 145 240 100 589 120
   Other 99 186 36 87 93 131
Sex
   Female 3,660 133 1,161 108 3,408 93
   Male 2,153 124 568 62 2,046 100
Age
   65-74 1,339 100 337 62 1,254 93
   77-84 2,119 124 589 75 2,006 93
   85+ 2,355 185 803 129 2,194 94
SOURCE: Authors' estimates from the HRS.
NOTE: The sample was restricted to adults ages 65 and older who obtained home care and had SCI or reported any difficulty with 2 or more ADLs. Receipt of home care was measured at the survey interview for surviving respondents and over the last 3 months of life for deceased respondents, as reported by next of kin in exit interviews. Financial amounts were measured in constant 2013 dollars.

 

TABLE 3. Distribution of Annual Living Expenses, Ages 65 and Older, 2013
(2013 constant dollars)
  Single Adults Married Couples
All
   60th percentile 28,400 52,600
   50th percentile (median) 23,200 42,800
   40th percentile 19,300 34,300
   Mean 37,200 64,600
   N 1,182 1,014
High-Income
   60th percentile 43,800 75,700
   50th percentile (median) 38,100 66,900
   40th percentile 31,800 58,500
   Mean 59,900 84,600
   N 275 203
Moderate-Income
   60th percentile 25,100 48,500
   50th percentile (median) 21,300 40,600
   40th percentile 18,700 33,100
   Mean 33,300 66,100
   N 629 513
Low-Income
   60th percentile 14,200 34,000
   50th percentile (median) 11,700 28,700
   40th percentile 10,300 23,700
   Mean 18,200 41,000
   N 278 298
SOURCE: Authors' computations from the 2013 CAMS and 2014 HRS.
NOTES: Estimates were based on a sample of 2,196 CAMS respondents ages 65 and older and living in the community in 2013. High-income was defined as the top 25% of the income distribution, moderate-income as between the 25th and 75th percentiles of the distribution, and low-income as the bottom 25% of the distribution. Income thresholds were defined separately for married couples and single adults.

 

TABLE 4. Distribution of Household Income, Financial Wealth, and Total Wealth, Ages 65 and Older
(2013 constant dollars)
  Single Adults Married Couples
All Severe LTSS Needs All Severe LTSS Needs
Annual Income, 2013
   75th percentile 45,900 30,300 103,000 67,300
   50th percentile (median) 26,400 19,400 61,200 44,400
   25th percentile 16,000 13,600 37,800 27,200
   Mean 43,900 32,800 92,800 59,500
High-Income
   75th percentile 176,300 98,000 421,300 181,200
   50th percentile (median) 24,800 4,900 108,700 18,600
   25th percentile 400 0 7,800 0
   Mean 191,200 111,700 380,800 211,400
Moderate-Income
   75th percentile 252,800 144,000 646,600 370,800
   50th percentile (median) 48,900 19,600 203,800 58,800
   25th percentile 5,800 1,600 36,700 8,900
   Mean 275,000 153,700 602,800 373,900
Low-Income
   75th percentile 424,800 252,400 891,900 592,700
   50th percentile (median) 151,900 83,300 370,300 187,100
   25th percentile 30,400 6,000 141,100 73,900
   Mean 392,700 224,500 798,300 515,300
SOURCE: Authors' computations from the 2014 HRS.
NOTES: Estimates were based on a sample of 9,966 respondents ages 65 and older, not on Medicaid, and living in the community in 2014 and rounded to the nearest $100. Financial wealth included the value of IRAs; Keoghs; stocks; mutual funds; investment trusts; bonds; bond funds; CDs; government savings bonds; treasury bills; checking, savings, and money market accounts; and other savings, net of nonhousing debt. Total wealth included net housing wealth (including the net value of a secondary residence), other real assets (including vehicles, businesses, and other real estate), and financial wealth. The analysis classified individuals as having severe LTSS needs if they received paid or unpaid LTSS and had 2 or more ADL limitations or SCI.

 

TABLE 5. Median Household Income and Financial Wealth by Personal Characteristics, Ages 65 and Older
(2013 constant dollars)
  Single Adults Married Couples
All Severe LTSS Needs All Severe LTSS Needs
Annual Income, 2013
Race and Ethnicity
   NonHispanic White 28,100 19,900 63,400 47,100
   NonHispanic Black 19,800 18,000 50,200 40,500
   Hispanic 15,600 14,400 38,800 39,200
Sex
   Female 24,800 18,600 59,400 42,600
   Male 30,400 27,200 62,700 44,800
Age
   65-74 32,500 20,400 68,000 46,800
   77-84 24,100 18,100 50,100 43,700
   85+ 21,400 19,200 43,700 44,300
Financial Wealth, 2014
Race and Ethnicity
   NonHispanic White 39,200 12,100 137,200 49,000
   NonHispanic Black 100 0 2,500 0
   Hispanic 500 2,400 1,200 0
Sex
   Female 24,500 4,900 112,700 15,700
   Male 25,500 9,800 102,900 24,100
Age
   65-74 19,600 300 98,000 3,400
   77-84 21,600 3,100 114,600 59,800
   85+ 36,200 15,700 137,200 76,400
SOURCE: Authors' computations from the 2014 HRS.
NOTES: Estimates were based on a sample of 9,966 respondents ages 65 and older, not on Medicaid, and living in the community in 2014 and rounded to the nearest $100. Financial wealth included the value of IRAs; Keoghs; stocks; mutual funds; investment trusts; bonds; bond funds; CDs; government savings bonds; treasury bills; checking, savings, and money market accounts; and other savings, net of nonhousing debt. The analysis classified individuals as having severe LTSS needs if they received paid or unpaid LTSS and had 2 or more ADL limitations or SCI.

 

TABLE 6. Percentage of Adults Ages 65 and Older Who Could Finance LTSS with Their Monthly Income
  All With Severe LTSS Needs
Paid Home Care Assisted Living Nursing Home Paid Home Care Assisted Living Nursing Home
All 40 49 14 22 30 5
Marital Status
   Single 20 24 9 11 12 4
   Married 52 64 16 34 47 7
Race and Ethnicity
   NonHispanic White 42 52 15 25 32 6
   NonHispanic Black 25 35 6 13 19 0.4
   Hispanic 26 31 8 18 25 7
Sex
   Female 34 43 12 16 22 4
   Male 47 57 16 31 41 7
Age
   65-74 49 59 18 29 39 7
   77-84 31 39 8 23 29 6
   85+ 18 26 6 15 23 3
SOURCE: Authors' computations from the 2014 HRS.
NOTES: Estimates were based on a sample of 9,966 respondents ages 65 and older, not on Medicaid, and living in the community in 2014. The analysis classified individuals as having severe LTSS needs if they received paid or unpaid LTSS and had 2 or more ADL limitations or SCI.

 

TABLE 7. Median Number of Months that Older Adults Could Fund LTSS with Their Income and Financial Wealth
(adults ages 65 and older who cannot finance care with only their income)
  All With Severe LTSS Needs
Paid Home Care Assisted Living Nursing Home Paid Home Care Assisted Living Nursing Home
All 18.8 11.7 11.3 3.4 2.3 1.8
Marital Status
   Single 11.7 7.5 4.5 3.3 2.4 1.0
   Married 30.1 23.8 18.6 3.5 2.3 3.4
Race and Ethnicity
   NonHispanic White 33.1 22.9 16.7 7.4 5.1 4.7
   NonHispanic Black 0.0 0.0 0.0 0.0 0.0 0.0
   Hispanic 0.0 0.0 0.1 0.0 0.0 0.0
Sex
   Female 18.3 11.3 9.7 2.1 1.7 1.1
   Male 19.4 12.1 13.3 6.5 4.1 3.1
Age
   65-74 12.3 7.3 10.1 0.1 0.1 0.4
   77-84 23.4 17.2 13.2 5.0 2.9 3.0
   85+ 28.9 16.5 11.5 13.4 6.0 5.2
SOURCE: Authors' computations from the 2014 HRS.
NOTES: Estimates were based on a sample of 9,966 respondents ages 65 and older, not on Medicaid, and living in the community in 2014. The analysis classified individuals as having severe LTSS needs if they received paid or unpaid LTSS and had 2 or more ADL limitations or SCI. Financial wealth included the value of IRAs; Keoghs; stocks; mutual funds; investment trusts; bonds; bond funds; CDs; government savings bonds; treasury bills; checking, savings, and money market accounts; and other savings, net of nonhousing debt.

 

TABLE 8. Median Number of Months that Older Adults Could Fund LTSS with Their Income and Total Available Wealth
(adults ages 65 and older who cannot finance care with only their income)
  All With Severe LTSS Needs
Paid Home Care Assisted Living Nursing Home Paid Home Care Assisted Living Nursing Home
All 43.0 106.4 34.4 14.1 55.6 13.3
Marital Status
   Single 25.3 62.6 31.5 11.6 34.2 17.5
   Married 69.6 198.9 37.4 17.3 112.7 9.7
Race and Ethnicity
   NonHispanic White 60.8 135.6 42.4 22.9 72.7 20.2
   NonHispanic Black 4.8 26.2 7.7 1.8 23.2 4.6
   Hispanic 4.0 38.0 3.8 4.6 35.0 2.1
Sex
   Female 39.1 91.6 34.1 11.3 45.7 14.3
   Male 50.0 132.8 35.1 19.0 93.9 11.6
Age
   65-74 40.1 111.2 34.3 7.4 56.6 4.9
   77-84 46.8 121.3 35.0 16.0 58.5 17.6
   85+ 44.4 85.4 33.1 27.5 48.2 23.0
SOURCE: Authors' computations from the 2014 HRS.
NOTES: Estimates were based on a sample of 9,966 respondents ages 65 and older, not on Medicaid, and living in the community in 2014. Computations of paid home care affordability excluded the net value of a primary residence for both married and single people, and computations of nursing home affordability excluded the net value of a primary residence for married people. The analysis classified individuals as having severe LTSS needs if they received paid or unpaid LTSS and had 2 or more ADL limitations or SCI.

 

TABLE 9. Percentage of Adults Ages 65 and Older Who Could Finance LTSS Out-of-Pocket for at Least 2 Years
  All With Severe LTSS Needs
Paid Home Care Assisted Living Nursing Home Paid Home Care Assisted Living Nursing Home
Using Only Income and Financial Wealth
All 68 71 48 49 51 29
Marital Status
   Single 54 53 37 40 38 24
   Married 77 82 55 57 63 34
Race and Ethnicity
   NonHispanic White 73 75 53 54 56 35
   NonHispanic Black 40 44 17 25 30 7
   Hispanic 37 40 19 39 38 16
Sex
   Female 65 67 45 44 43 27
   Male 73 76 52 55 61 32
Age
   65-74 72 76 51 41 50 22
   77-84 65 67 46 50 50 32
   85+ 61 60 40 54 52 32
Using income and All Available Wealth
All 74 87 63 56 75 44
Marital Status
   Single 60 75 60 48 62 46
   Married 83 95 64 63 88 42
Race and Ethnicity
   NonHispanic White 79 90 67 62 80 50
   NonHispanic Black 48 69 33 33 58 23
   Hispanic 44 72 33 42 64 27
Sex
   Female 71 85 62 50 70 44
   Male 78 90 64 63 83 44
Age
   65-74 78 89 64 53 77 33
   77-84 71 86 61 56 75 47
   85+ 66 82 60 59 74 50
SOURCE: Authors' computations from the 2014 HRS.
NOTES: Estimates were based on a sample of 9,966 respondents ages 65 and older, not on Medicaid, and living in the community in 2014. Computations of paid home care affordability excluded the net value of a primary residence for both married and single people, and computations of nursing home affordability excluded the net value of a primary residence for married people. The analysis classified individuals as having severe LTSS needs if they received LTSS and had 2 or more ADL limitations or SCI.

 

Appendix Tables

TABLE A-1. Percentage of Older Adults with No Financial Wealth
(adults ages 65 and older who cannot finance care with only their income)
  All With Severe LTSS Needs
Paid Home Care Assisted Living Nursing Home Paid Home Care Assisted Living Nursing Home
All 22 24 19 30 31 27
Marital Status
   Single 24 24 23 28 28 28
   Married 21 23 17 32 35 26
Race and Ethnicity
   NonHispanic White 16 17 14 21 21 18
   NonHispanic Black 50 54 46 59 62 58
   Hispanic 51 55 48 50 50 47
Sex
   Female 21 23 19 29 29 26
   Male 23 25 19 31 33 28
Age
   65-74 26 28 21 43 43 38
   77-84 21 23 18 29 31 26
   85+ 13 14 12 20 21 19
SOURCE: Authors' computations from the 2014 HRS.
NOTES: Estimates were based on a sample of 9,966 respondents ages 65 and older, not on Medicaid, and living in the community in 2014. Financial wealth included the value of IRAs; Keoghs; stocks; mutual funds; investment trusts; bonds; bond funds; CDs; government savings bonds; treasury bills; checking, savings, and money market accounts; and other savings, net of nonhousing debt. The analysis classified individuals as having severe LTSS needs if they received paid or unpaid LTSS and had 2 or more ADL limitations or SCI.

 

TABLE A-2. Percentage of Older Adults with No Available Household Wealth
(adults ages 65 and older who cannot finance care with only their income)
  All With Severe LTSS Needs
Paid Home Care Assisted Living Nursing Home Paid Home Care Assisted Living Nursing Home
All 10 7 7 17 10 12
Marital Status
   Single 13 9 8 19 12 12
   Married 8 4 6 15 6 12
Race and Ethnicity
   NonHispanic White 7 5 5 12 6 8
   NonHispanic Black 26 15 16 33 18 22
   Hispanic 22 15 18 25 22 25
Sex
   Female 11 6 7 18 11 12
   Male 10 7 7 16 8 12
Age
   65-74 12 8 8 23 14 18
   77-84 10 6 6 17 9 10
   85+ 8 6 5 13 8 9
SOURCE: Authors' computations from the 2014 HRS.
NOTES: Estimates were based on a sample of 9,966 respondents ages 65 and older, not on Medicaid, and living in the community in 2014. Computations of paid home care affordability excluded the net value of a primary residence for both married and single people, and computations of nursing home affordability excluded the net value of a primary residence for married people. The analysis classified individuals as having severe LTSS needs if they received paid or unpaid LTSS and had 2 or more ADL limitations or SCI.

 


Where Do People with Disabilities Live?

This report was prepared under contract #HHSP23320100025W1 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and the Urban Institute. For additional information about this subject, you can visit the DALTCP home page at http://aspe.hhs.gov/office-disability-aging-and-long-term-care-policy-daltcp or contact the ASPE Project Officers, John Drabek and Pamela Doty, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, S.W., Washington, D.C. 20201; John.Drabek@hhs.gov, Pamela.Doty@hhs.gov.

Reports Available

How Many Older Adults Can Afford To Purchase Home Care?

How Much Nursing Home Care Can Home Equity Finance?

Later-Life Household Wealth Before and After Disability Onset

Older Adults' Living Expenses and the Adequacy of Income Allowances for Medicaid Home and Community-Based Services

What Is the Lifetime Risk of Needing and Receiving Long-Term Services and Supports?