Informal Elder Care By Family and Friends Worth Billions

MedicalResearch.com Interview with:
Dr. Amalavoyal Chari PhD

Department of Economics, University of Sussex
Brighton UK

Medical Research: What is the background for this study? What are the main findings?

Dr. Chari: It is well-known that in the United States, informal (unpaid) caregiving by family members and friends is the primary source of long-term care for the elderly population: Recent estimates indicate that nearly 1 in 5 adults in the United States provides care to an elderly relative or friend over the age of 50.

Informal care is not really “free”: Rather, it diverts caregivers’ effort from other productive activities, and the value of these displaced activities is the opportunity cost of informal elder-care. Estimates of this cost have been limited by the lack of nationally representative data with detailed information to allow an assessment of the value that caregivers attach to time and time spent providing care. Our study utilizes new and unique data from the American Time Use Survey (ATUS) to remedy this deficit, and to provide careful, up-to-date estimates of the opportunity costs of informal eldercare in the United States.

We find that informal care is mainly provided by working-age adults, who consequently bear most of the economic burden in terms of opportunity costs. We find that the price tag for informal caregiving of elderly people by friends and relatives in the United States comes to $522 billion a year. Replacing that care with unskilled paid care at minimum wage would cost $221 billion, while replacing it with skilled nursing care would cost $642 billion annually.

Medical Research: What should clinicians and patients take away from your report?

Dr. Chari: Quantifying the costs helps stress the importance of informal care: Two and a half times more money is “spent” on informal care compared to spending on formal long-term care services. The time that family and friends spend caring for elder adults is thus a valuable resource and not to be taken lightly. Our report will remind clinicians that their care decisions for elder patients have consequences not only for the patients themselves but also for their informal caregivers. Furthermore, clinicians will be reminded that many of their working age adult patients are giving informal care to elders and that the physical, mental and emotional demands of this care are likely to affect the health of these working age patients. Likewise, our report will remind patients, both elder and working age, that the caregiving relationship has economic value as well as the obvious value to the health of the elder.

Medical Research: What recommendations do you have for future research as a result of this study?

Dr. Chari: Our findings touch on a particularly important policy question, namely who should provide elder-care and how informal care should be supported. For example, programs such as Medicaid’s Cash and Counseling program are being piloted that allow family caregivers to be paid for their assistance. Our estimates suggest that, in the aggregate, although the economic value of informal caregiving is substantially greater than what it would cost to replace this care with paid unskilled care, informal caregiving remains more economical than paid skilled care. Therefore, if the beneficiaries enrolled in Cash and Counseling programs prefer to receive care from family members, there may be cost savings to Medicaid relative to a situation in which the care is provided by skilled replacements. This conclusion, however, is predicated on the assumption that compensating informal caregivers will not affect the quality and/or quantity of care provided by them. Careful evaluations of such programs are, however, warranted to examine whether this assumption is justified.

Citation:

Chari, A. V., Engberg, J., Ray, K. N. and Mehrotra, A. (2014), The Opportunity Costs of Informal Elder-Care in the United States: New Estimates from the American Time Use Survey. Health Services Research. doi: 10.1111/1475-6773.12238