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Hiring home caregivers directly

By Jennie L. Phipps · Bankrate.com
Tuesday, April 15, 2014
Posted: 12 pm ET

The median cost of hiring a homemaker or a home health care aid through an agency is $19 and $19.75, respectively, according to long-term care insurer Genworth's annual cost of care survey released this week.

Genworth emphasized that the cost for these home care services hasn't risen very much over the past five years. The average annual wage for homemakers increased 1.2 percent over the past five years, while home health aide services rose 1.32 percent annually.

"This is good news for consumers, as almost three-quarters of people needing long-term care prefer receiving it in their homes," Genworth said in the announcement of this data, culled from nearly 40 years of long-term care insurance experience.

Compared with the increase in the cost of assisted living or nursing home care, this is a retirement planning bargain. The median annual cost for care in an assisted living facility is $42,000, a cost that has risen 4.29 percent annually over the past five years. The median cost of a private room in a nursing home room is $87,600, which has risen 4.19 percent annually over the past five years.

But there are a couple of things worth keeping in mind before you conclude that the cost of home care is a stable part of your retirement budget.

The number of Americans age 65 and older is on a path to double, projected to rise from 40.2 million in 2010 to 88.5 million in 2050. Under new federal regulations, home care aides will be covered under the Fair Labor Standards Act, the primary wage and hour law, beginning Jan. 1, 2015. This will make these workers eligible for minimum wage and overtime pay. Industry experts say that while most workers currently receive minimum wage, they don't get overtime pay, according to a report in the The New York Times. This extension will drive up costs for anyone who hires health care workers.

One way to control the cost of home health care has long been to hire friends and neighbors, but the long-term care insurance industry is moving away from allowing insureds to hire home care workers directly rather than through an agency. "The trend is to require an agency," says Beth Ludden, senior vice president of long-term care insurance at Genworth. "Reliability is key. Without an agency, the family member has to bridge the gap if a home health care worker fails to show up. An agency takes care of that problem."

Although that may be true, it is also true that when an agency takes its cut, the cost of home care can double, and there are plenty of qualified, reliable people who operate independently. If you are in the market for a long-term care policy, ask whether the policy you are about to buy gives you flexibility in whom you hire as a caregiver. Being able to pay someone directly can help stretch your long-term care dollars simply by keeping a third party out of the transaction.

Read about 3 ways to buy long-term care insurance.

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