I. Family Caregiving — A Snapshot

The phrase “long-term care” encompasses a wide range of long-term services and supports to persons who are unable to live by themselves because they require assistance from other people to perform basic activities of daily living such as eating, bathing, getting out of bed, and toileting. The most common image of such care is residency in a skilled nursing facility more commonly denominated a “nursing home.” But such institutions represent only the most intensive point on the continuum of long-term care that usually begins with informal home care and often — but not always — progresses to formal home healthcare agencies, adult day care centers, continuing care retirement communities, and assisted living facilities. The first stop on this continuum, however, is the focus of this article because of the largely unrecognized impact of informal home care on the persons who provide this care.

Older persons with physical and/or mental impairments generally prefer to receive whatever assistance they require in their own home and from family members. In fact, a recent survey found that 77% of older Americans “would prefer to receive care in their own home” and “7 out of 10 [said] they would prefer to receive care from family members, including spouses or partners, children, or other relatives.”¹ Family care-givers, for their part, undertake this responsibility for various reasons, including a sense of family obligation, filial piety, religious dictates, cultural imperatives, or some combination of all of these. As a result, the importance of informal caregiving is difficult to overstate. In the United States, approximately 80% of long-term care received by older Americans is provided by informal caregivers, generally family members,^{Reference Migliaccio and Cutler2} constituting an estimated annual value of $470 billion in 2013.^{Reference Reinhard and Chari3}

It is no exaggeration to say that admission into a nursing home is a universal dread among older persons and many younger family members alike. The prospect of ongoing and ever-escalating expenditures often combines with guilt and feelings of inadequacy by family members to make family caregiving the option of choice for as long as the family caregiver can provide appropriate care. In some cases, the older person can completely avoid the need for more intensive long-term care while in others, that need is postponed or at least minimized. To that end, half of family care-givers spend five or more years providing care, according to the recent report of the National Academies of Science, Engineering and Medicine on family caregiving in the United States.⁴

With few exceptions, the care that family caregivers provide is gratis; that is, these caregivers generally receive no monetary compensation for their efforts. The central premise of this article, however, is that this “free” care is not without cost to the family care-givers. While many family caregivers certainly derive great personal satisfaction from caring for their older relatives, providing such care is typically a substantial time commitment with important financial implications in terms of foregone wages and reduced retirement benefits. Indeed, those implications often result in the impoverishment of the family caregivers who literally sacrifice their future financial well-being for the sake of their relatives' care. This issue is likely to become even more critical in the years ahead as more Americans reach the advanced ages where assistance with daily activities is not uncommon.

II. The Attendant Costs of Family Caregiving

Family caregivers are a diverse lot and vary considerably in their ability to provide the needed care, as most family caregivers have undertaken little or no formal training in this activity.⁵ At the same time, almost 60% of family caregivers in the United States also work in other vocations, according to a recent survey by the National Alliance for Caregiving.⁶ Those caregivers, however, often restrict their job-related travel, reduce their employment hours, and decline promotions to accommodate their caregiving responsibilities.⁷ The previously referenced Associated Press survey found that 44% of caregivers under age 65 reported missing work because of their caregiving responsibilities. In many cases, a family caregiver takes early retirement or otherwise terminates his or her outside employment because of caregiving obligations,^{Reference Pavalko and Artis8} a decision with significant immediate and long-term financial consequences for these caregivers.

Caregivers who leave the compensated workforce obviously earn less money and forfeit possible raises. They also lose their employer-provided health insurance and whatever other workplace fringe benefits — such as group life insurance — that they previously were able to access. To that point, a recent report noted that a woman caregiver who leaves the workforce loses an average of $324,000 in wages and benefits.⁹ Moreover, a different recent study found that family caregivers spend an average of 35% of their monthly budget on expenses of caregiving and 18% of such caregivers spend more than half of their monthly budget on such costs.¹⁰ As a result, the present financial condition of family caregivers is seriously compromised, but their future financial condition may be made even more perilous for four distinct reasons.

First, caregivers who do not work in the formal economy lose the ability to earn “quarters of coverage” under Social Security¹¹ and as a consequence may not qualify for retirement benefits under that program. A “quarter of coverage” requires earning a specific amount in “covered employment,” and that amount changes to take account of inflation. In 2018, the required compensation was $1,320.¹² A person who fails to accumulate 40 “quarters of coverage” does not qualify for Social Security retirement benefits.¹³

Second, even if a person does accumulate the required 40 “quarters of coverage,” the Social Security benefit itself may be substantially diminished due to missed earnings caused by family caregiving. Although the mechanics of Social Security benefit calculations need not be explored here, the most salient points are: (1) such benefits are derived from a claimant's 35 highest years of earnings,¹⁴ and (2) Social Security computes that average on the basis of 35 years even if that person does not have 35 years of earnings. Thus, if Janice worked for 20 years before becoming a full-time caregiver to her mother, her Social Security benefit would be calculated by averaging her 20 years of earnings over 35 years. The imputed 15 years of zero earnings will significantly reduce the Social Security benefit she ultimately receives.

Third, failing to accumulate 40 quarters of coverage also means no automatic entitlement to Medicare's coverage of future healthcare expenses when the family caregiver retires.¹⁵ Specifically, the family caregiver may not be eligible for premium-free Medicare Part A benefits for hospital, limited nursing home, home healthcare, and hospice services.^{Reference Frolik and Kaplan16} These are potentially very valuable coverages, depending on the care-giver's future medical condition.

To be sure, family caregivers may be able to secure Social Security and Medicare benefits as the spouse¹⁷ (or a divorced spouse, if their marriage lasted at least ten years)¹⁸ of a qualifying beneficiary of those essential programs, but many family caregivers lack such status. Similarly, Medicare Part A benefits can be purchased by any citizen or resident of the United States who has resided in this country at least five years,¹⁹ but the cost is adjusted every year for inflation and was $422 per month in 2018.²⁰

Finally, a family caregiver who no longer participates in the formal workforce cannot contribute to an employer-sponsored retirement program like a 401(k) plan or receive employer matches to such plans. Nor can that person fund his or her Individual Retirement Account or other self-directed retirement program, because those plans generally require the receipt of earned income.²¹ An inability to fund tax-preferred retirement savings plans does not preclude a family caregiver from saving funds for her retirement outside such plans, but doing so forgoes potentially significant tax advantages and requires more financial self-discipline than many people can muster on a consistent basis.

As a consequence, family caregivers often find themselves without certain basic financial supports when their caregiving responsibilities finally conclude, having only inadequate or non-existent health insurance, minimal savings, no or radically reduced Social Security benefits, no entitlement to Medicare Part A's invaluable medical cost coverages, and no workplace retirement savings plans. A principal legacy of being a family caregiver, in other words, is often impoverishment or at least seriously compromised financial status in retirement. In some instances, the former caregiver may need to depend on public expenditures for basic income support through welfare programs like Supplemental Security Income and for medical care through Medicaid. As one comprehensive study found, “[c]aregivers who spent 20 hours a week assisting their parents with personal care were 25 percent more likely than noncaregivers to live in poverty, 27 percent more likely to be recipients of public assistance, and 46 percent more likely to receive Medicaid eight years later.”^{Reference Wakabayashi and Donato22}

III. Compensating Family Caregivers

Caring for an older person with physical and/or cognitive impairments is serious work that should be acknowledged as such, regardless of whether the caregiver is related to the care recipient.^{Reference Linsk23} Non-family caregivers choose to spend their working hours on this endeavor in exchange for monetary compensation provided on a regular basis. Family caregivers, in contrast, are often conscripted into providing their services with little or no advance warning,²⁴ on an indeterminate schedule, and generally without a predictable endpoint for their responsibilities. That distinction notwithstanding, their duties and burdens are essentially the same, though family caregiving is sometimes accompanied by additional personal stress.^{Reference Schulz and Beach25} Accordingly, family caregivers deserve appropriate financial recompense from public resources to prevent impoverishment being the result of their efforts. Such recompense, in its most straightforward form, would be direct compensation, but could also take the form of Social Security credits or tax benefits. These alternative mechanisms are now considered.