Elder Care Problems Best Fixed by Private Sector

Published March 1, 2009

The nursing home industry is one of the most regulated industries in the country. It’s also dominated by government as a payer. One of every two nursing home residents in America is receiving his or her coverage through Medicaid, and many patients in private homes are future Medicaid enrollees.

It’s also an industry rife with quality problems, which show themselves over and over again in objective studies.

Outside of nursing homes, however, custodial care for the elderly is largely a private affair, with very little government or third-party involvement or payment of any sort. Here we find a bustling, innovative sector employing many and caring for millions of people while offering high-quality services at competitive prices.

Growing Private Market

The most visible response to the quality problems present in government-sponsored elder care is the growing market for private assisted-living communities. This highly entrepreneurial development, which occupies the high end of the private elder care market, offers seniors a progression of services ranging from normal condominium living to full-service nursing home care.

In essence, seniors check in to these communities with the ability—and the intent—to remain there for the rest of their lives. As their health deteriorates, the services they receive change accordingly.

The average cost of this type of care is $3,031 per month, according to the MetLife Mature Market Institute—a price that is out of some patients’ reach. However, that does not mean the rest of the elderly population is relegated to government-run hospice care. In fact, in some ways there is even more innovation occurring at the lower end of the price spectrum.

Army of Caregivers

One in five U.S. adults—roughly 44 million Americans in all—is providing unpaid care to another adult, according to the National Alliance for Caregiving. If we assume an average of five hours per week and conservatively attach a value of $10 per hour to these services, we find the private sector is providing more than $114 billion in elder care every year.

That figure, which will surely grow as the Baby Boom generation retires, is larger than the total amount the Obama administration claims single-payer health care for every American will cost.

Of course, if government were providing these services, that dollar amount would at least double in response to astronomical growth in the hourly wage paid and the amount of services demanded. This would leave taxpayers with a burden in excess of $400 billion they don’t have now, for services currently being provided at no taxpayer expense and with a higher level of quality.

Private Sector Filling Needs

According to a survey by the American Association of Retired Persons, nine out of 10 people would rather stay in their current home than live in formal retirement housing, which most cannot afford anyway. How can that be done?

One way is a “service corps,” which utilizes the concept of a time bank. People volunteer hours of service while they are healthy. These services include cooking, grocery shopping, taking another person to the doctor, taking notes on a doctor’s instructions, help with pharmaceuticals, etc. Each hour of help is an hour “banked,” against which the caregiver can draw when fortunes are reversed and the need goes in the other direction.

People who need assisted living are also turning to medical tourism. There are 1.2 million retired Americans and Canadians living in Mexico, where assisted living can cost as little as $1,100 per month. The Cielito Lindo project, for example, north of Mexico City, charges an average of $1,500 per month for care and offers options such as ’round-the-clock Alzheimer’s care for a gradually increased cost.

Another idea is the naturally occurring retirement community, or “NORC.” There are about 2,000 communities across the country where senior citizens live in large numbers. To help them remain there, associations charging $500 or $600 a year are established to provide seniors with transportation, help with grocery shopping and meal preparation, technical assistance with their home computers and DVD players, and many other varieties of assistance.

Changing Public Paradigm

For low-income people, such as residents of public housing, local governments are using taxpayer dollars to provide some of these services, as through transportation vouchers.

They see this as a less-expensive way of meeting needs than other taxpayer-funded alternatives, such as the government-run nursing homes that currently serve as models of low quality and inefficient care.

John C. Goodman ([email protected]) is president of the National Center for Policy Analysis.