The Economic Impact of Family Caregiving

By Donna L. Wagner, Ph.D.
Director, Center for Productive Aging, Towson University, Towson, MD
and
Paul Alper
President and Co-Founder, The Caregivers Marketplace, Charlestown, RI

Most people realize that taking responsibility for a relative or friend who needs care and assistance requires an investment of both time and emotional energy. Few realize that a financial commitment is often involved as well.

Many research projects on family caregiving have focused on the personal trade-offs associated with caring for a loved one—less time for friends, other family members, and travel and leisure activities, and time missed from work. Researchers have also measured the burden of stress on family caregivers and the relationship between caregiving and illness. Estimates on the value to society of family caregiving show an astounding $257 billion a year saved on care for adults and children with special needs.

But less is known about the economic impact of caregiving on the family. Costs to the family caregivers can be long- or short-term, difficult to predict, and vary according to the caregiving situation.

When caring for an older person, costs are often unrelated to that person’s financial status. Many caregivers report, for example, making purchases for an older person and feeling uncomfortable asking for reimbursement.

The deeper, long-term economic effects of caregiving are usually determined by decisions related to employment. One of the few studies that estimates some of the long-term economic consequences of caregiving is “Juggling Act,” conducted in 1999 by the National Alliance for Caregiving (NAC) and the National Center on Women and Aging at Brandeis University.

Looking at a small group of respondents (55 individuals) from a larger NAC/AARP survey of caregivers conducted in 1997, “Juggling Act” suggests that the long-term financial repercussions of caregiving can be far-reaching and significant, particularly in terms of reduced pensions. The study concluded that diminished contributions to Social Security caused lifetime benefit losses of approximately $25,000 among family caregivers, while reduced contributions to pension plans resulted in average losses of over $67,000. Overall, the average lifetime loss of wealth estimated for this group totaled $659,139.

The short-term costs of family caregiving are related to out-of-pocket spending on two levels: goods and services for the person with special needs, and costs associated with providing care—travel, phone, etc. Research suggests that about half of all caregivers for older adults report spending their own money on essential products or services. The amount and types of expense vary, based on individual needs.

Among family caregivers who participated in a 2001 survey conducted by The Caregivers Advisory Panel, almost 80 % reported that they were the primary purchasers of health products. More than half purchased incontinence products, specialty bathing and skin care supplies, and nutritional supplements. More than a third bought wound care or wound prevention products, while more than one fourth of family caregivers provided home safety accessories. A family involved in caregiving can, for example, expect to spend approximately $1,500 annually for incontinence products and as much as $2 a day on nutritional supplements.

The 1997 NAC/AARP survey of caregivers found that those who paid their own money for needed products or services spent an average of $171 per month; a total estimate of $1.5 billion per month was spent on a national basis by all caregivers.

For the approximately 6.7 million long-distance caregivers who live at least an hour away from the care recipient, the costs can be even higher. The 1997 study found that these caregivers spent $1.3 billion monthly to cover their out-of-pocket expenses for travel and phone, and an additional $222 million monthly in direct purchases of needed products and services.

Today, the individuals who provide essential care to an older adult receive scant support for their important contributions. Their costs for needed services, for example, are not tax deductible unless the older person is a legal dependent. And, although Congress passed the National Family Caregivers Act last year, the companion $3,000 tax credit proposed by the previous administration has not yet been enacted. Some states have financial support mechanisms for caregivers, but for the most part, caregiving expenses are the sole responsibility of the family.