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By Monica E. Oss

This is a new concept for me – “Next Friend Risk.” What is it? The assumed “burden” on friends and family – financial, emotional, time, and more – to participate in the care and support of a consumer in need of long-term care. Allison Hoffman, in her Health Affairs BlogRisk And Reform Of Long-Term Care, reviews the factors that have increased “next friend risk” and the estimate of the burden:

…the average informal caregiver faces losses—forgone income, pensions, benefits, and retirement savings, including Social Security—between $200,000 and $300,000. Considering that the median household net worth in the U.S. was just under $70,000 in 2011, loss at this level is devastating for all but the wealthiest households. More than one-third of people caring for aging parents leave the workforce or reduce working hours, and women are more likely to leave the workforce altogether. Family caregivers face significant non-economic costs, including health and psychosocial harm. For example, studies report 40 to 70 percent of people caring for older adults have symptoms of depression and 25 to 50 percent meet diagnostic criteria for major depression, far outpacing the rates in the general population. These costs are, in effect, the invisible copayment of long-term care policy…

This is consistent with other published studies of the cost of care giving, in the U.S. and internationally – see:

  1. The MetLife Study of Caregiving Costs to Working Caregivers
  2. National Estimates Of The Quantity And Cost Of Informal Caregiving For The Elderly With Dementia
  3. Health-Related Quality Of Life And Strain In Caregivers Of Australians With Parkinson’s Disease: An Observational Study
  4. Economic Burden To Primary Informal Caregivers Of Hospitalized Older Adults In Mexico: A Cohort Study
  5. 75% Of Informal Caregivers Report Caregiving Affects Health
  6. Youth Caregivers Spend 2.5 Hours Of Each School Day Caring For A Family Member With Disability Or Behavioral Disorder
  7. By 2050, U.S. Alzheimer’s Costs Projected To Reach $1.5 Trillion Annually

There are a number of factors contributing to “next friend risk.” I think the four key ones are lack of long-term care insurance in the U.S., shorter lengths of inpatient and residential stays, higher expectations of consumer out-of-pocket payments, shrinking social service budgets, and the push for deinstitutionalization and use of home- and community-based waivers. Each factor contributes in its own way to expectations of support by friends, families, and consumers themselves.

Lack of long-term care insurance – If you remember just five years ago, a part of the Patient Protection and Affordable Care Act (ACA) called the CLASS Act, was designed to provide long-term care insurance. The funding mechanism for this program was determined to be actuarially unsound and this provisions was repealed. Yet, many Americans mistakenly believe that Medicare and Medicaid provide more coverage for the consumers who need long-term services or supports than they actually do. (For more on this, see Medicaid Coverage Of Long-Term Services And Supports, The Growth Of Managed Long-Term Services And Supports Programs, and Rising Demand For Long-Term Services & Supports For Elderly People.)

Shorter lengths of inpatient and residential stays – There is no doubt that health plans use of inpatient and residential levels of treatment are on the decline.  The average length of stay for a breast cancer patient is 2.5 days.  For a knee replacement is four days. These short lengths of stay assume consumers are going home to some level of support.  (For more on trends in length of stay, see Hospital & Regional Characteristics Affect Length Of Psychiatric Stay At Hospitals, Average Length Of Stay Varies By Diagnosis, But Is Stable Over Time, Shorter Hospital Stays Not Linked To Higher Readmission Rates In VA Hospitals, and One-Third Of Medicare Hospice Stays For General Inpatient Care Lasted Five Or More Days).

Higher expectations of out-of-pocket contributions and shrinking social service budgets – In the U.S. health system, the expectation of consumer out-of-pocket payment is on the rise, see Consumer Out-Of-Pocket Inches UP. This is happening at the same time that social service spending is on the decline, see Health Care Spending Vs. Social Service Spending. Both factors are based on the assumption that the “gap” will be picked up by families and caregivers.

Increasing deinstitutionalization and HCB waivers – Last but not least, we have the increasing use of home- and community-based (HCB) waivers and the move of consumers into the community.  The conflict in policy is summarized by Ms. Alson:

Medicaid’s evolving approach amplifies burdens on family and friends of people who need care. Especially because supporters of home-based care favor it as a way to save money, programs tend to be underfunded and many have long waiting lists for services. Without the economies of scale that enabled 24-hour care in nursing homes, it is difficult to finance the wraparound care that people might need in a home setting.

This has led to the recent call for a return to asylums – for more on that, see Penn Medicine Bioethicists Call for Return to Asylums for Long-Term Psychiatric Care and Improving Long-term Psychiatric Care: Bring Back the Asylum. And for more on HCB waivers, check out our Market Intelligence ReportWhat Are Medicaid Waivers & Why Do They Matter?

There are three groups of citizens most affected by this situation.  Consumer with chronic conditions need more services longer. Poor consumers will suffer the greatest proportional economic impact from this situation.  And, woman will be disproportionately penalized due to their longer life span (see Average U.S. Life Expectancy Is 78.8 Years In 2013) and lower earnings and savings. Informally, we are trying to solve this problem by limiting the wages of home care worker (see Labor Dept. Mandates Minimum Wage, Overtime Pay For Home Health Workers) – a Dickensian solution at best. But the demographics will win out, with an aging and more chronically ill population and a projected labor shortages that will boost wages in any event (see Looming Workforce Shortage Affecting Long-Term Care Costs).

Why does “next friend risk” matter? Because any organization managing value-based contracts will face the daunting task of managing “next friend risk.” Health plans with capitated rates, medical homes with performance-based contracts, hospitals subject to readmission penalties – all will face hard choices. The less that families and caregivers can contribute to support and care, the more the responsible organization needs to contribute in staffing and other supports. Whether programs like the one sponsored by the U.S. Department of Veterans Affairs – Demand For The Veterans Family Caregiver Program Triple Expectations – become more common remains to be seen.

This is an area where good planning and technology can provide part of the solution (see Making Remote Monitoring Work and The Number Of Tech-Enabled Professionals, Caregivers & Consumers On the Increase), but given the current trends in demographics, health care financing, and shrinking social service budgets, this is not an issue that is going to go away.


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