1. Evaluating Three Models for Compensating Family Caregivers
Richard L. Kaplan University of Illinois College of Law
International Long-Term Care
Policy Network Conference
September 5, 2016

2. Order of Presentation
I. Context of Informal Caregiving: 80% of all long-term care in U.S. II. Cost to Caregivers III. Model 1: Social Insurance IV. Model 2: Tax Incentives V. Model 3: Private Contracts

3. Profile of Family Caregivers
Female = 60%
Average age = 50.3 years
Average care provided = 24.1 hours/week
Average caregiving period = 3.7 years
Have minor child/grandchild = 28%
Employed = 59%
Source: National Alliance for Caregiving, Caregivers of Older Adults: A Focused Look at Those Caring for Someone Age 50+ (June 2015)

4. Cost to Family Caregivers
Reduction of formal employment
Fewer years of Social Security participation
Possible ineligibility for benefits
Lower retirement benefit payments
Possible ineligibility for Medicare
No contribution to retirement savings plans
Emotional stress
Physical injuries

5. Model #1: Social Insurance
Publicly administered and funded
Mandatory enrollment → universal applicability
Indirect, or no, means-testing of benefits
Classic example: Medicare
Recent U.S. effort: Community Living Assistance Services and Supports (CLASS), enacted in the Affordable Care Act

6. The CLASS Program
Funds used “to maintain independence at home or in another residential setting of their choice in the community”
Payments to caregivers, including relatives
Voluntary enrollment; five years required before benefits available
Programmatic self-sufficiency required
Never implemented; repealed in 2013

7. “Deemed” Wage Credits
2014 proposal to “deem” Social Security wage credits for caregivers (H.R. 5024)
Caregivers must provide at least 80 hours of care per month.
Caregivers must be younger than age 66.
Amount of “deemed” wages = 50% of average wages credited that month
Maximum of 60 months of deemed credits

8. Model #2: Tax Incentives
Medical expense deduction for amounts paid to caregivers
Payments to relatives qualify only if they are licensed professionals
Proposals for tax credits require that the caregiver live in the same abode as the care recipient
Stipulated amount vs. based on out-of-pocket expenses (capped)

9. Model #3: Family Caregiver Agreement
Available presently
Sets forth caregiver’s responsibilities and benefits, including current pay
Versus testamentary provision
Contemporaneous recognition by family of caregiver’s importance
Issues of contractual capacity and caregiver compliance in an unmonitored setting

10. Some Key Contingencies
Caregiver pay increases and benefits
Caregiver becomes ill or disabled
Caregiver gets married or relocates
Caregiver dies
Needs of care recipient change
Care recipient requires special equipment or outside services
Care recipient requires institutional care

11. Impact on Caregiver
Taxable income to caregiver vs. gifts are tax-free (inheritances also)
Enhancement of Social Security benefits
Possible entitlement to Medicare benefits
Ability to make retirement plan contributions
Timely payment vs. possible will contests and protracted litigation

12. Impact on Medicaid Benefits
Eligibility for benefits is restricted by assets: unmarried persons may have no more than $2,000 of all assets other than a home.
Penalty for “uncompensated” transfers made during the preceding 60 months: amount transferred divided by private pay rate = months not eligible for benefits
Caregiver payments are compensated transfers, so there is no penalty.