Informal Caregiving: The Real Costs, Risks and Considerations

The role of “caregiver” can sneak up on us.  It’s not necessarily something we plan to do. But when a parent grows old and needful, a spouse has a sudden health setback, or a friend/neighbor is visibly struggling, it’s both easy and natural to offer support.  It may begin with an hour or so per week, and slowly blossom into 20, 40 or even more hours of care. Quite unexpectedly, and with little or no planning, we find ourselves in the role of informal caregiver.

Also falling under the umbrella of informal caregiving is the arrangement made with an acquaintance or “freelance” caregiver who is not affiliated with an agency.  They are paid, though at a lesser rate than professional caregivers, and without the comforting structure of a service agreement, insurance or formal payroll.

In either scenario, both caregiver and client/payer should be aware of the costs and risks associated with the informal arrangement, and should go into it with their eyes open.

The Caregiver’s Job

Without question, the role of caregiver is both rewarding and challenging. Making life easier for a person who is unable to care for themselves feels good much of the time.  It’s important, though, to be aware of some of the difficulties that can come with this territory, along with possible remedies to reduce the risk these problems can introduce.

Social Isolation
Few jobs are as isolating as caregiving can be.  Care recipients who are medically fragile, suffering from Alzheimer’s disease or difficult to move may require confinement to the home most of the time.  Even when caregivers are still working, their social opportunities may be severely curtailed by the demands of providing care in what used to be free time.

Financial loss
Six in ten caregivers report some impact on their work status when the caregiver role is assumed.  Many must reduce their hours or leave the workforce. The average financial loss is $300,000 to $600,000 in income, pension, benefits and retirement savings.  In aggregate, Baby Boomers have lost $3 trillion in wages, Social Security and pension due to the provision of care.  Retirement resources can be severely impacted when Social Security and 401K contributions are reduced or eliminated.

Lack of training
Many informal caregivers are not trained, but rather learn about the care recipient’s needs as they go.  Sixty-three percent of higher-hour caregivers report performing medical/nursing tasks and one in eight reports being aware of a medical mistake they made.  Simple care can easily advance to complex care.

Physical and mental strain
It is not unusual for caregivers to set aside their own health care in order to focus on the care recipient’s wellbeing.  Twenty-percent of caregivers who have provided care for five or more years describe their own health as “fair” or “poor”.  One in five report a high level of physical strain, four in ten perceive their caregiving situation as highly stressful.

Considerations for the Care Recipient

Whether the care recipient or another party is arranging the care, it is important to make provisions for emergencies and to contemplate potential risks that could cause the entire situation to unravel or cause harm.  Among those things the care receiver/payer should weigh are:

Long-term care insurance coverage
If the care receiver has a long-term care policy, it is important to determine if the policy will honor care provided informally.  Many policies will not – they require that the provider be licensed, and that professional invoices and care notes for each shift worked be submitted before a claim will be paid.  The cost of having informal care without long-term care insurance benefits must be weighed against a professional arrangement where the insurance benefits will apply.

Protection of the estate
Caregivers get hurt on the job.  Many do not have medical coverage, and there is no workers compensation coverage in most informal arrangements.  Umbrella policies may not cover an “employee”.  Family members may not seek remuneration for injury-related costs, but non-family members probably will…..and it can be devastatingly costly.

Safety
In a loose, informal arrangement, the possibility of exploitation or abuse looms large.  There is often little oversight and only self-reported information on criminal history and drug use. We have seen instances where the private caregiver has left the care receiver alone to attend to personal business, or has invited other parties to live in the house, as well.  Some have availed themselves of the care receiver’s credit card.

Plan B
There should always be a plan in place should the caregiver take ill, leave on an extended trip, or mysteriously fail to show up.  Midwestern winters offer plenty of occasions where cars may not start or snowfall keeps the caregiver trapped at home.  Caregivers need respite, too – who will be the backup care provider?

When Family Dynamics are Prickly

If the dynamics in the family are complicated or contentious, there are special precautions to keep in mind.  If you are providing care for a family member, or have hired someone privately and might be held responsible should something go wrong, be mindful of the allegations that could be leveled by siblings and other family members:

Allegations of elder abuse – Document any injuries and seek appropriate medical attention, as needed, if the care recipient falls, sustains bruises or otherwise exhibits a change in status.  Follow care directions offered by the doctor and keep a record that you have done so.  Withholding care can be interpreted as a form of abuse.

Allegations of financial mismanagement – The handling of funds, no matter how routine, is probably the area most ripe for scrutiny and accusations of inappropriate behavior.  Keep all receipts and use credit cards, not cash, to be assured every expenditure is documented.

Allegations of personal property theft – Are there valuables in the house?  Have they been properly documented? If family members believe a particular piece of jewelry is still in Mom’s collection and it’s missing later on, the caregiver might be accused of theft when, perhaps, Mom gave that piece away ten years ago and didn’t mention it to anyone.  Have an inventory of household contents done and distribute it to all interested parties.

Allegations of poor care – If the care recipient’s status is deteriorating, communicate with the family.  Seek appropriate care.  If the care receiver’s needs are beyond the ability of the caregiver, get a professional assessment and consider other options.Always, always be mindful of how things might look to someone outside the situation, especially if that someone has an axe to grind.

Protection for All Concerned

There are tools and methods by which all parties in an informal caregiving arrangement might find protection from negative outcomes.  Some involve the services of an attorney.  Others can be provided or facilitated by professionals who can document the appropriateness of the care and set up household systems:

• Consider a formal payroll and contributions to a SEP IRA;
• See an attorney about a Personal Care Agreement that maps out the terms of care and documents any compensation at the onset of the arrangement;
• Investigate insurance options to protect the caregiver and the care recipient;
• Carry out a professional assessment at least annually, and more often if the care receiver’s status has changed. The resulting document will confirm that care is appropriate or signal that a change is in order;
• Engage professionals to provide training and oversight. Don’t be alone in the situation.  Have a third party involved who can attest to the appropriateness of the care and the way expenditures have been handled;
• Keep impeccable records of the care provided and the hours worked. If the care recipient passes away and a family care provider wants to file a custodial claim against the estate to be compensated for the services provided, detailed records are essential.

Informal care arrangements offer some economy and, in some cases, may appear to be the only choice. Seek professional input on the best way to protect both care provider and care recipient, and involve others to avoid being alone in a complicated scenario that may not stand up to familial or legal scrutiny.