How Inflation and Rising Labor Costs are Increasing the Costs of Senior Care

Overview of the Current State of Senior Care

The senior populace has become one of the most vulnerable populations due to several factors. Senior populations can be defined as those individuals who are age 65 and older, and they currently comprise 17.34% of the population in 2022.[1] Factors that may affect them are: general aging maladies, related disabilities that often accompany aging, Alzheimer’s, dementia, and other health issues. As a result of these factors, the senior population will stand in need of long term care. The level and duration of long term care varies from individual to individual, however, there are some statistics provided by LongTermCare.gov to consider: [2]

• Individuals turning age 65 have almost a 70% chance of being in need of some type of long-term care services and support in the years they have remaining.
• Women need longer care (3.7 years) than men do (2.2 years).
• One-third of today’s 65-year-olds may never find themselves in need of long-term support, however, 20 percent of individuals will need it for longer than 5 years.

In addition, recent research has shown that the senior population will need long-term services due to:[3]

• Living arrangements: Those who live alone will likely need paid care due to the absence of a partner or spouse.
• Disability: 69% of people aged 90 or more have a disability.
• Age: The older you are, the more likely long-term care will be needed.

According to Genworth, a financial solutions company, “Every day until 2030, 10,000 Baby Boomers will turn 65 and 7 out of 10 people will require long term care in their lifetime.”[4] Long term care has several associated costs for seniors. This care can either be provided as home-based or it can be provided outside of the home. According to Genworth, the following are estimated national monthly median costs for senior care in 2023: [4]

• In-home care: The homemaker services’ cost is $5,259.00, and the home health aide cost is $5,462.00.
• Community and assisted living: The adult day health care cost is $1,793.00, and the assisted living facility cost is $4,774.00.
• Nursing home facility: A semi-private room costs $8,390.00, and a private room costs $9,584.00.

The current cost structure in senior care is multi-faceted and as evidenced above can be quite costly. The elements involved in this cost structure are further delineated according to home health care (medical home care) versus non-medical home care. Home health care, according to Olera, is “in-home skilled nursing care that is provided to older adults, either temporarily or long-term, to manage an ongoing health condition.[5]

This type of care is often the most expensive due to the quality and complexities of the individual's care and is due to the fact that it’s a more “personal touch” as it relates to individuals receiving medical care in the comforts and confines of their own homes. Although the costs vary by location, at-home skilled nursing care can range from $40 to $80 per hour.

Non-medical home care is a type of care that provides individuals with the assistance they need to carry out daily living tasks.

The following assistance that’s provided is: meal preparation, light housekeeping, companionship, personal care (such as bathing and dressing), transportation, and medication reminders.6 The cost of non-medical home care greatly varies from medical home care because this form of care can be carried out by less-skilled professionals. The average rate for a home health aide is about $17 per hour.[6]

Impact of Inflation on Senior Care Costs

Inflation has had a tremendous impact on senior care costs. Inflation can be defined as, “The general upward price movement of goods and services in an economy.”[7] The present effects and future residuals of inflation have often thrown this generation into a panicked frenzy. This is not a new conundrum, as inflation has heavily impacted individuals over 40 years ago as well, as is evidenced by an article produced by The ANNALS of the American Academy of Political and Social Science. In this article, we see that inflation causes problems for the elderly, a group that has special characteristics that cause difficulty for them to cope, such as:[8]

• They have a less flexible mindset.
• They have differing expenditure patterns.
• Their income is reduced to half upon retirement.
• The period of retirement is lengthened quickly and significantly.

Each of the problems listed above has a direct impact due to inflation. The effects of aging cause the senior population to be less flexible in their dealings. Many view their past and current situation as unchangeable, thus maintaining the same mindset. As a result of receiving less income due to retirement, they may change their spending habits.

Senior populations shoulder the costs of long-term care through personal funds, private financing options, and government programs such as Medicaid or Medicare.[9] Rates at long-term care providers, which consists of assisted-living and independent-living facilities, surge as providers deal with the growing costs of utilities, food, insurance, supplies, and wages.[10]

Everything flows downhill as inflation continues to grow at an astronomical rate. A recent study concluded that by 2033, more than 11 million middle-income seniors aged 75 and above might find themselves unable to pay for assisted living and are also unlikely to qualify for Medicaid, according to research provided by NORC at the University of Chicago.[10]

Consequences for Senior Citizens and Families

The escalating costs of services and items directly impact both seniors and their families. According to key findings by AARP in 2020, more than one in five Americans (21.3%, or an estimated 53.0 million adults) are caregivers.[11]

Key findings also surmised that:[11]

• 19% (1 in 5) of caregivers provided unpaid care to an adult with health or functional needs.
• 26% of Americans are caring for someone with dementia or Alzheimer’s disease.
• 26% of Americans are having difficulty coordinating care.
• Family caregiving isn’t singular and it spans all generations, including Gen-X, Gen-Z, Boomers, Silent, and Millennials.
• 61% of family caregivers continue to work.

With the landscape of the caregiver now being established, we can now delve in and see the consequences that rising costs have on these caregiving families. Families provide care to their senior loved ones often unpaid. In 2021, the estimated economic value of family caregivers’ unpaid contributions was approximately $600 billion dollars, which was based on 38 million caregivers who provide on average 18 hours of care per week.[12]

Due to many caregivers being unpaid, they shoulder the financial burden of costs associated with the care they provide. As costs rise on commodities, food, and other personal items, their accounts are lowered due to meeting the demand of those needs. Caregivers can also be impacted by losing income, reductions in savings and career opportunities, and the receipt of lower retirement benefits and Social Security due to the unpaid care they provide.[12]

Escalating costs, such as food and healthcare costs, are causing dire consequences for seniors. According to Gallup, many older adults are severely sacrificing essentials to accommodate rises in healthcare costs. The following findings demonstrate this impact:[13]

• African-American women aged 50-64 are more apt to cut back on the basics.
• Well over 1 in 3 adults age 50 and above have forgone the basics, such as food, in order to pay for their healthcare needs.
• Some older Americans are skipping medication and care that is needed in order to reduce costs.

As we can see, rising costs are not only affecting the incomes of the senior population, but their health as well. Costs are also significantly rising for senior care as well. According to the Washington Post, “Long term care costs represent the single largest financial risk facing seniors and their families.”[14]

Consumer Price Index and its Effect on Seniors

The Consumer Price Index (CPI) of the Bureau of Labor Statistics (BLS) measures the change in prices over time for a fixed market basket of goods and services for two population groups, CPI for All Urban Consumers and CPI for Urban Wage Earners and Clerical Workers.[15] CPI also calculates an experimental price index for Americans ages 62 and older, our senior population. The market basket is expenditure items that are lumped into more than eight major groups which include: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services. [16] In the consumer price index, it is estimated and indicated that there is a higher overall inflation rate for older Americans compared to other population groups that they study. [15]

The CPI’s prediction provides a high-level look and estimation into the rising costs of housing, food and goods and services for the senior population. CPI tracks the change of U.S. inflation over time and the percentage change in CPI over a period of time is referred to as the inflation rate.[13] It seems as though the rise in cost is outpacing senior’s income, more notably those who rely on Social Security for their monthly retirement incomes. About 66 million seniors rely on Social Security, and the cost-of-living adjustment that was provided to them is lagging due to the highest inflation seen in 40 years. 14 The effects that it’s having on seniors is:[17]

• People are being pushed to the edge.
• Seniors are cutting back on medications, which can lead to major health complications.
• Seniors are cutting down on the amount of food they are getting.
• Seniors have rising housing costs that are causing stress levels to elevate.
• Gasoline and energy prices are also putting a major strain on their finances.

An example of just how high CPI inflation is, $100.00 in 2013 has the same buying power as $133.66 in 2023.

Challenges with Paying for Dementia Care

In our 2022 study of the challenges associated with senior care among family caregivers in Houston Texas, participants mentioned that the overall expenses for care, especially professional assistance, were too high, preventing them from initiating or maintaining such services.

One participant shared that finding affordable care was the primary challenge regarding eldercare, saying, “She needs someone with her pretty much most of the time. It’s something that we’re not sure we can afford yet. That’s the biggest thing is not being able to afford it” (PID022).

Another participant shared the high cost of constant care for an elderly parent, saying, “We have 24/7, 365 care for him. It’s costly, but he can’t be left alone for any real period of time” (PID021). Some caregivers immediately recognize their inability to pay for professional caregiving services, with one participant saying, “I know that I financially could not pay for the cost of nursing home care” (PID058).

Another participant shared the difficulties of obtaining financial assistance due to specific qualifying parameters, saying, “Medicare doesn't step in and won't help even with the in-home health unless she has a broken hip. And then they'll help with that. But for dementia alone, they don't want you to put them in a nursing home, but they also won't let you keep them [at] home or [give] help” (PID064).

Another financial challenge was caregivers’ or care recipients’ inability to qualify for certain financial healthcare benefits. One participant shared their difficulty utilizing benefits, saying, “He is a veteran. I’ve contacted the veteran association (VA), but you have to have a 70% or higher disability to gain access to their homes… He could eventually go on a waiting list, but the waiting list is long” (PID058).

Family caregivers can find managing property, estate, and funds stressful and confusing. For many, understanding the process of setting up financial documents is a daunting task; as one participant said, "For me, the most challenging has been finding out what I needed to do, getting the right paperwork done" (PID109).

One participant expressed the difficulties of navigating the financial aspects of caregiving, saying, “That was hard. There's just a lot of paperwork with being a power of attorney, the financial power of attorney, because every bank, every medical office, everything wants a copy of all this stuff... It's just very daunting and time-consuming for a person that doesn't know that going into it” (PID003).

For many family caregivers, navigating insurance or other benefits that cover some caregiving costs was also challenging. One participant mentioned insurance policies, saying, “Understanding the insurance and health things is overwhelming for me. I don't like sitting down trying to read insurance policies... Trying to navigate through that is overwhelming” (PID093). Many participants expressed difficulties completing the necessary steps to qualify for financial assistance programs.

One participant shared their experience with such difficulties, saying, “I guess the biggest thing is I'm having some issues with her [Social] security. My father passed away in March. And when he passed away, she was supposed to get his social security automatically, and they haven't done that yet. And I'm still in the process of working on that… But with all the COVID and nobody having offices open, it's been tough” (PID034).

Family caregivers are usually responsible for providing additional financial support and paying for needed resources if the care recipients' resources (savings, benefits, insurance, etc) do not cover these expenses. One participant expressed the financial burden of caregiving, saying, “[We pay] all out of pocket. There's no help that I know, and I have to pay for this kind of stuff... You know, you're always trying to calculate… What are we going to do if he lives beyond his money? It's not a great position to be here” (PID021). Another participant discussed the high out-of-pocket costs, saying “We don’t have any long-term care insurance, and the costs are pretty high. It’s going to go into our savings” (PID027).

Possible Measures to Mitigate Escalating Costs

Measures can be put in place in order to mitigate the rising costs associated with senior care. These measures can be enacted in order to help support the financial well-being of many unpaid familial caregivers. Creation of policies that will focus on the following key areas:[15]

• Strengthening of the federal Family and Medical Leave Act (FMLA) and state (FMLAs). This would include, but is not limited to the expansion of protections that apply to all caregivers and all workplaces.
• Provision of financial relief and financial assistance to caregivers through federal and state tax credits.
• Utilization of the National Strategy to Support Family Caregiver’s plan for the implementation of coordinated support for family caregivers across the areas of social support, economic support, and healthcare.

The creation of these policies and their usage will help mitigate escalating costs because it will hopefully give caregivers more financial backing. With this extra money, they will be able to alleviate the burden of higher costs, and not have added stress of trying to make ends meet.

State and federal initiatives are in place currently that family caregivers can avail themselves of at the state and federal levels. Some major federal initiatives:[12]

• Expanded Supports for caregivers of veterans: The VA MISSION act, which was enacted in 2018, provided the expansion of the Department of Veteran Affairs (VA) Program of Comprehensive Assistance for Family Caregivers (PCAFC). This expansion now included caregivers of veterans who served prior to September 11, 2001.
• American Rescue Plan Act of 2021: In this Act, a temporary increase was included for certain Medicaid home- and community-based services expenditures. These expenditures were used to expand service capacity and address HCBS workforce issues.
• The National Strategy to Support Family Caregivers: This act was enacted in 2018 and provides a unified approach to the improvement of recognition of and support for caregivers.
• Supplemental benefits under Medicare Advantage: These Medicare Advantage plans provided beneficiaries with expanded and new supplemental services, such as support services for family caregivers of Medicare enrollees.
• Spousal impoverishment protections: Ensures that the spouse of a person receiving Medicare HCBS isn’t required to spend all of their assets in order for their spouse to receive supportive services.
• Public Health Emergency (PHE) Acute Hospital Care at Home (AHCaH) Waiver: This is a CMS waiver that provided expansion of the Hospital at Home initiative. This initiative is a long-standing United States care model that provides individuals with acute hospital care in their homes.

The state initiatives that are currently in place are:[12]

• Paid sick leave: 14 states now require paid sick leave.
• Paid family leave: 11 states and the District of Columbia now have paid family leave programs.
• Caregiver Advise, Record, and Enable Act (CARE Act): 45 states and territories have CARE Act laws in place that support family caregivers during their hospital stay and following discharge home.

Seniors have measures in place as well that can help them mitigate the costs of rising healthcare, services, and commodities. Some of the common suggestions include: retiring later, unifying portable indexed pension plans, reverse annuity mortgages, revision of the tax code in order to slow down condominium conversions, better usage of housing stock, and changes in behavior to cope with higher energy and cost demands.[7] These suggestions can help stave off some of the rising costs, but they are not all-encompassing.

Seniors can utilize government programs in order to mitigate rising costs. These programs can be provided on the state or federal level and can be used to help defray healthcare costs. Medicare is a federal government health insurance plan. This federal plan helps pay some medical costs for individuals age 65 and over.[13]

• Hospital stays
• Skilled nursing facility
• Lab tests
• Home health care
• Doctors and other healthcare providers
• Durable medical equipment
• Some preventive services
• Surgery

Medicare can comprehensively ease the burden of rising costs.

In addition to Medicare, the senior population can avail themselves of Medicaid. The Medicaid program is a combined state and federal program that is available for low-income people.[12] Medicaid also covers the cost of long-term care for seniors. Some of the benefits of Medicaid are:

• Assistance in the cost of prescription drugs
• Physician services
• Lab and X-ray services
• Hospitalization costs
• Outpatient services

The following are additional programs that seniors can use to help curb rising costs. These programs are:[12]

• Program of All-Inclusive Care for the Elderly (PACE): PACE is a combined Medicaid and Medicare program that provides services and care to people who would otherwise need nursing home care. This program is offered by some states and it covers social service, long-term care costs, and medical services. Individuals can also receive coordinated care from a team of healthcare professionals.
• State Health Insurance Assistance Program (SHIP): This is a national program that is offered in each of the states. SHIP provides one-on-one counseling and assistance with Medicare, Medicaid, and Medicare supplemental insurance.
• Department of Veteran Affairs: This department provides coverage for long-term care at home or in a facility for some veterans.
• Supplemental Security Income (SSI): This program provides monthly payments to adults 65 and over who have a disability. In order to qualify, however, your resources and income must be under certain limits.

Future Implications and Predictions

The future seems to be trending upward in some instances and downward in some others. According to Insider Intelligence, “The United States home care market is expected to grow from $100 billion in 2016 to $225 billion by 2024.”[13]

The home care pricing growth is sure to cause some further issues with the senior population and those who service them. As evidenced, and currently, seniors are having issues keeping up with pricing demands as is. In addition, this increase will cause a shortage of United States home health aides and physicians.[13] Insider Intelligence also predicts that new digital technologies will help bring down costs, improve quality, and create a more sustainable business model for senior care.[13]

This future prediction is predicated upon technologies being leveraged in senior care. Emerging technologies will drive the future of senior care and involve several changes needed in the future.[14] This will produce the following as it relates to senior care.[14]

• Improvement of staff efficiencies.
• Better resident experiences.
• Better patient outcomes in senior and post-acute care.

Conclusion

The current state of senior care is multi-faceted and contains several dimensions. Inflation and rising costs have placed the senior population in often dire straits. These factors are continually rising providing little to no leeway for seniors to remain above water financially. The factors not only impact the senior population but their caregivers as well.

As evidenced in the paper, we saw where most caregivers were unpaid and felt the pinch of inflation both personally and as it relates to the care provided. Strategies and measures were provided in order to mitigate these rising costs and hopefully place both seniors and their family caregivers on the path to financial stability. There is a pressing need for seniors to have adequate long-term care that will not break the bank.

Author Bio

TJ Falohun, co-founder and CEO of Olera, is a trained biomedical engineer passionate about developing novel digital health and medical technologies. His passion for innovative solutions drives him to write about the cost of healthcare in America and to revolutionize the senior healthcare industry.

References

1. Organization for Economic Co-operation and Development. (n.d.). Elderly Population.
2. LongTermCare.gov. (n.d.). How Much Care Will You Need?
3. LongTermCare.gov. (n.d.). Who Needs Care?
4. Genworth. (n.d.). Cost of Care Survey.
5. Olera. (n.d.). Home Health Care.
6. Olera. (n.d.) Home Care (Non-medical).
7. U.S. Department of Labor. (n.d.). Inflation and Consumer Spending.
8. Leeds, M. (1981). Inflation and the Elderly: A Housing Perspective.
9. National Institute on Aging. (n.d.). Paying for Long-Term Care.
10. The Wall Street Journal. (2022). Another Inflation Stress: Rising Costs of Senior-Living Homes Strain Families.
11. AARP Public Policy Institute. (2020). Caregiving in the United States 2020.
12. U.S. Bureau of Labor Statistics. (n.d.). Attachment F: Experimental CPI for Americans 62 Years of Age and Older.
13. U.S. Bureau of Labor Statistics. (n.d.). Consumer Price Index.
14. CBS News. (2022). Inflation is slamming U.S. seniors. "It's a scary time," one disabled widow said.
15. AARP Public Policy Institute. (2023). Valuing the Invaluable 2023 Update: Strengthening Supports for Family Caregivers.
16. Gallup. (2022). Older Adults Sacrificing Basic Needs Due to Healthcare Costs.
17. Insider Intelligence. (2022). Future demand for elderly care services like assisted living & in-home care are rife for digital disruption.
18. HealthTech. (2022). LeadingAge 2022: 3 Emerging Technologies Driving the Future of Senior Care.