Private Capacity to Finance Long Term Care. Defining Impairment

03/01/1983

The definitions of impairment used in this analysis are based on two questions asked on the Survey of Income and Education:

  • Does [the person] need help from others in looking after [his or her] personal needs, such as eating, dressing, undressing or personal hygiene?
  • Does [the person] need help from others to go outdoors or to get around outside [his or her] home?

The broadest definition of impairment includes persons for whom either of the above questions would be answered yes. Alternatively, if the definition of impairment were based only on the first question, 64 percent of the persons included under the first definition would be considered impaired. Using the mobility question, 81 percent of those who answered either of the two would be included. Within the broadest definition, about 45 percent of impaired persons have both personal care and mobility problems.

TABLE 13. Distribution of Relationship of Impaired Person to Family Head by Definition of Impairment
(1977 Data)
Relationship to Family Head Needs Help Eating, Dressing
(Personal Care)
Has Problems With Mobility Has Either Personal Care or Mobility Problems
Head 30.7% 26.9% 28.7%
Wife 16.3 19.3 18.2
Childa 17.7 10.8 13.8
"Other" Relativeb 22.1 21.5 20.0
Primary Individual 13.2 21.5 19.4
TOTAL 100.0 100.0 100.0
SOURCE: Survey of Income and Education.
  1. "Child" refers to relationship to head and not to age.
  2. "Other" relative means a relative other than wife or child of the family head. In most cases, this will be a parent of the head or spouse.

Children of heads are more likely to have personal care than mobility problems. The opposite is true for primary individuals--persons who live alone. Table 13 shows the distribution of impaired persons by relationship to family head using three definitions of impaired. Interestingly, the largest group reporting impairments are family heads--although these persons are also the largest group in the population as well.

Unless otherwise noted, the definition of impairment used in this section is a person who has either mobility or personal care problems.

Characteristics of Impaired Persons and Their Families

Data from the Survey of Income and Education provide some insight into the socioeconomic characteristics of impaired persons. Just under 17 percent are nonwhite and 62 percent are women. More than two-thirds live in families with an owned home and 59 percent are in one or two person households.

As Table 14 indicates, few impaired persons are under age 45--and even fewer reside in households where the head is under 45. The percentage of impaired persons age 80 and older is over 22 percent--although persons 80.and above constitute a much smaller percentage of all households. As would be expected, heads of these families are, on average, younger than the impaired persons in the household. This implies that impaired persons are less likely to be children of the family head than spouses or other relatives, as was shown in Table 13.

TABLE 14. Relative Frequency of Age of Impaired Persons and Family Heads
(1977 Data)
Age Group Age of Impaired Person Age of Head of Family Containing Impaired Person
18 6.8% 0.1%
18-44 13.5 14.0
45-64 26.0 37.8
65-69 10.3 11.0
70-74 9.5 10.6
75-79 11.8 10.4
80-84 11.3 9.6
85+ 10.9 6.6
Total 100.0 100.0
SOURCE: Survey of Income and Education.

The relationship between age of impaired persons and their relationship to the family is shown in Table 15. If impaired, the head of the family is, in most cases, age 45 or over. Among the very old, the husband rather than the wife is likely to be impaired. Older women with impairments are more likely to be widowed and thus would be shown in this table as other relatives or as primary individuals--persons living alone. Impaired children living with parents are usually under 45. As such children age, they are likely to form households of their own or to be institutionalized and therefore outside our sample. Three-fourths of other relatives and primary individuals are 65 and older.

TABLE 15. The Relationship Between Age of Impaired Person and Relationship to Family Head
Relationship to Family Head Age of Impaired Person All Ages
18 18-44 45-64 65-69 70-74 75-79 80-84 85+
Head a 3.2% 10.0% 3.3% 3.0% 3.4% 3.2% 2.5% 28.7%
Wife 0 2.1 7.4 3.0 2.1 1.9 1.1 0.5 18.2
Child 6.1 6.2 1.4 a 0 0 0 0 13.8
Other Relative 0.6 1.2 3.2 2.1 1.6 2.9 3.4 5.0 20.0
Primary Individual 0 0.8 4.0 1.9 2.8 3.4 3.6 2.8 19.4
ALL PERSONS 6.7 13.5 26.0 10.3 9.5 11.6 11.3 10.8 100.0
SOURCE: Survey of Income and Education.
  1. Less than 0.1%

The final summary table of characteristics (Table 16) shows mean incomes for families differentiated by the relationship of the impaired person to the family head. The third column represents the definition of impaired used consistently hereafter. Highest average incomes occur in those families where the impaired person is a child or other relative. In such cases, the head, and in some cases the wife, will have earnings similar to the rest of the population. In fact, the presence of an impaired "other" relative, such as an aged parent, may indicate that the family feels it has the financial resources to care for that person.16 When the impaired person is the head of the family, average income is lower, reflecting the impact of the disability on earnings for the family. Lowest average income is reserved for primary individuals. Since by definition these persons live alone, they also have fewer obligations as compared to the other households where average family size ranges between 2.8 and 4.4. Again, howeverr resources for these individuals are likely to be even lower if the impairment worsens and affects earnings ability.

TABLE 16. Average Income of Families with Impaired Persons By Definition of Impairment and Relationship of Impaired Persons to Family Head
(1976 Data)
Relationship of Impaired Person to Family Head Definition of Impairment
Needs Help With Personal Care Has Problems With Mobility Has Either Personal Care or Mobility Problems
Head $9,420 $9,449 $9,537
Wife 10,789 11,294 11,310
Child 13,273 13,363 12,181
Other Relative 13,574 13,921 13,566
Primary Individual 3,972 3,834 3,885
ALL PERSONS 10,531 9,983 10,073
SOURCE: Survey of Income and Education.

Since it is the goal of this paper to look at resources available to these families, this table shows mean incomes for the three different definitions of impairment to illustrate the sensitivity of results to the definition of impairment used. On the whole, the results are very similar. The differences in income by relationship to head are consistent across all three definitions. The higher overall average incomes for families with an impaired person who has problems with personal care (Column 1), is more a result of the distribution of the relationship of the impaired members to family heads than to differences in average incomes within any one category.

Defining Resources

The resource definitions included here (and shown in Table 17 for all families) are similar to those used for the elderly:

  • Income;
  • Income minus the earnings of the impaired family member;
  • Income minus earnings plus the value of food stamps and a partial 10 year annuity; and
  • Income minus earnings plus the value of food stamps and a full 10 year annuity.

Unlike the elderly households, only the earnings of the impaired member are subtracted from case income (as defined by the Census).17 For these families, additional impairment of the affected family member may not preclude labor force participation by other members. This is particularly true for household heads when the impaired person is a child or "other" relative. The other major difference from elderly households is that a separate measure showing the marginal effect of food stamps is not included -- although these benefits are added to the last two alternative definitions. The relatively high incomes of many of these families means that food stamps are not vitally important. For example, average incomes (minus earnings of the impaired person) rise by only 1.2 percent as a result of including food stamps.

TABLE 17. Distribution of Resources and Average Resources by Alternative Definitions for All Families With Impaired Members
(1977 Data)
Family Resource Level Income Income Minus Earnings of Impaired Person Income Minus Earnings Plus Food Stamps and Partial Annuity Income Minus Earnings Plus Food Stamps and Full Annuity
$2,500 and less 13.1% 15.3% 12.8% 9.8%
$2,501 to $5,000 23.3 23.9 23.4 19.3
$5,001 to $7,500 16.1 16.1 16.1 14.7
$7,501 to $10,000 11.4 11.1 11.5 11.9
$10,001 to $15,000 14.8 14.4 15.1 16.8
$15,001 and above 21.3 19.2 21.3 27.5
TOTAL 100.0 100.0 100.0 100.0
Average $10,073 $9,447 $10,340 $12,112
SOURCE: Survey of Income and Education.

As Table 17 indicates, the distributions and averages in columns 1 and 3 are very similar: the effect of subtracting labor income of the impaired person is just about exactly offset by the benefits of food stamps and an annuity based on net worth (excluding the value of an owned home). When the value of the home is added, the average resource level rises by almost $1800 and the percentage of families in the lowest four levels of resources declines. Families with relatively low levels of other resources have some net worth in a home. Nonetheless, almost 44 percent of all families with impaired persons have resources under $7,500.

It is, however, misleading to look at overall averages. As shown earlier, average incomes vary considerably with the relationship of the impaired person to family head. Moreover, age of the impaired person may also matter as shown in Table 18. The overall resource level using the last comprehensive definition is $12,110 but varies from $4,046 for primary individuals under 65 to $18,055 when the impaired person is another relative aged 65 or over. These differences would be lower if per capita resources levels are compared, although considerable variations remain.

TABLE 18. Average Family Resource Levels and Family Size by Age and Relationship to Head of Impaired Persons
(1976 Data)
Relationship to Head and Age of Impaired Person Income Income Minus Earnings Income Minus Earnings Plus Food Stamps and Partial Annuity Income Minus Earnings Plus Food Stamps and Full Annuity Average Family Size
Head or Spouse $10,223 $9,247 $10,211 $12,105 2.8
   Age 44 and under 10,582 8,234 8,722 9,931 4.2
   45 to 64 11,965 10,370 11,132 13,172 3.0
   65 to 74 9,072 8,718 9,784 11,724 2,4
   75 and above 8,726 8,606 9,954 11,891 2.3
Child 12,181 12,783 13,566 15,429 4.4
Other Relative 13,565 13,316 14,312 16,479 3.2
   64 and under 10,274 9,574 10,184 11,733 3.1
   65 and above 14,655 14,558 15,682 18,055 3.3
Primary Individual 3,885 3,557 4,246 5,247 1.0
   64 and under 3,929 2,957 3,244 4,046 1.0
   65 and above 3,872 3,757 4,578 5,645 1.0
All Persons 10,072 9,448 10,339 12,110 2.8
SOURCE: Survey of Income and Education.

Tables 19 through 22 present the distribution of resources for four groups--where the impaired person is a head or spouse under 65; a head or spouse 65 or over; a child or other relative of the family head; and, finally, a primary individual. The age 44 and under heads and spouses differ somewhat from their age 45 to 64 counterparts, depending more upon earnings and having fewer assets. Nonetheless, both these groups are likely to have similar concerns and the relatively small size of the under age 45 group necessitates combining them with other heads and spouses. Combining children and other relatives, on the other hand, does seem to be reasonable in terms of income levels. In addition, problems faced by the family are likely to be similar when impaired persons are relatives other than head or spouses.

As Table 19 demonstrates, the loss of the earnings of a head or spouse under age 65 produces a major reduction in resources at all levels. In this case, it is not until the house is included in the annuity that the distribution of resources compensates for that earnings loss. Since both husband and wife are likely to be of working age in this example, the non-impaired spouse might be able to increase his or her labor force participation somewhat. However, since average family size for these households is over 3, the burden of a disabled person and other dependents could lower the healthy spouse's participation in work outside the home.

TABLE 19. Distribution of Resources by Alternative Definitions of Resources When Impaired Person is Head or Spouse Under Age 65
(1976 Data)
Family Resource Level Income Income Minus Earnings Income Minus Earnings Plus Food Stamps and Partial Annuity Income Minus Earnings Plus Food Stamps and Full Annuity
$2,500 and less 5.0% 10.4% 8.1% 5.6%
$2,501 to $5,000 19.0 21.4 20.5 17.2
$5,001 to $7,500 13.5 14.5 15.9 14.3
$7,501 to $10,000 15.1 14.6 14.0 13.1
$10,001 to $15,000 19.5 18.3 19.4 20.4
$15,001 and above 27.8 20.6 22.0 29.4
TOTAL 100.0 100.0 100.0 100.0
SOURCE: Survey of Income and Education.

Families with impaired older family heads and spouses (Table 20) face a different set of circumstances. There are fewer very low income and fewer very high income persons in this group by any of the resource definitions. The value of the home, however, adds relatively more to well-being. This is not surprising since older families generally own their homes (or at least owe less on them than younger families).

TABLE 20. Distribution of Resources by Alternative Definitions of Resources When Impaired Person is Head or Spouse Under Age 65 or Over
(1976 Data)
Family Resource Level Income Income Minus Earnings Income Minus Earnings Plus Food Stamps and Partial Annuity Income Minus Earnings Plus Food Stamps and Full Annuity
$2,500 and less 3.3% 3.7% 3.0% 2.2%
$2,501 to $5,000 28.0 18.8 25.8 17.4
$5,001 to $7,500 27.1 27.4 25.4 19.6
$7,501 to $10,000 14.8 14.7 15.5 17.1
$10,001 to $15,000 13.9 13.6 14.9 19.6
$15,001 and above 12.9 12.4 15.5 24.1
TOTAL 100.0 100.0 100.0 100.0
SOURCE: Survey of Income and Education.

Families whose impaired relatives are neither the head nor wife have the greatest proportion of families in the above $15,000 resource categories. Even after subtracting earnings of the impaired member, over half of these families have $10,000 or more. Since resource levels are relatively high to begin with, adding food stamps and annuities have a less dramatic impact except for those with low incomes. It should also be noted, however, that average family size is relatively high for this group.

TABLE 21. Distribution of Resources by Alternative Definitions of Resources When Impaired Person is Child or "Other" Relativea of Household Head
(1976 Data)
Family Resource Level Income Income Minus Earnings Income Minus Earnings Plus Food Stamps and Partial Annuity Income Minus Earnings Plus Food Stamps and Full Annuity
$2,500 and less 9.2% 10.1% 8.0% 5.8%
$2,501 to $5,000 12.4 12.3 12.2 10.9
$5,001 to $7,500 14.3 14.3 14.5 12.3
$7,501 to $10,000 10.8 11.0 11.4 10.3
$10,001 to $15,000 19.2 19.1 18.7 18.9
$15,001 and above 34.2 33.3 35.3 41.9
TOTAL 100.0 100.0 100.0 100.0
SOURCE: Survey of Income and Education.
  1. "Other" relative means a relative other than wife or child. In most cases this will be a parent of the head or spouse.

Primary individuals with physical impairments are least able financially to care for themselves. Even after accounting for the contribution of food stamps and all assets, almost 70 percent of this group has resources of less than $5,000.

TABLE 22. Distribution of Resources by Alternative Definitions of Resources When Impaired Person Lives Alone
(1976 Data)
Family Resource Level Income Income Minus Earnings Income Minus Earnings Plus Food Stamps and Partial Annuity Income Minus Earnings Plus Food Stamps and Full Annuity
$2,500 and less 41.0% 44.4% 38.7% 31.0%
$2,501 to $5,000 41.6 41.3 43.6 38.8
$5,001 to $7,500 8.4 7.1 7.5 13.7
$7,501 to $10,000 3.8 2.9 3.7 6.9
$10,001 to $15,000 3.1 2.6 3.7 5.3
$15,001 and above 2.0 1.7 2.7 4.3
TOTAL 100.0 100.0 100.0 100.0
SOURCE: Survey of Income and Education.

The Ability to Finance Private Care

As discussed with the elderly, the existence of resources for these families does not dictate the amount which can be used to finance long term care. In particular, the younger families considered here have, on averager two or more additional members whose needs must also be met.

The final determination of financial capacity therefore should look at resources available after subtracting necessary expenses (including tax liability). Since the Survey of Income and Education does not have consumption data, these two parts cannot be combined.

On balance, it would appear that families with resources over $10,000 may be able to contribute to a considerable share of their long term care. If families--particularly younger families with several dependents--are not asked to sell their homes, however, the number would drop. Consequently, using the, third resource definition for all but families consisting only of primary individuals, 28.5 percent of all the impaired should be able to contribute. For primary individuals, all their resources could technically be devoted to purchasing institutional care, accounting for another 19.4 percent of the impaired. Perhaps a more realistic estimate would be that all such individuals with resources over $5,000 by the fourth definition could finance a substantial portion of long term care needs. This would add 5.9 percent to the 28.5 percent (for families with more than one member)--thus resulting in the conclusion that over one-third of families with impaired members should be capable of providing for much of their own care.


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