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The Consequences of Insufficient Household Income

This new Consequences of Insufficient Household Income report provides a deeper level of understanding of the choices that ALICE and poverty-level families across the country make when they do not have enough income or assistance to afford basic necessities, and the consequences of those choices.

caregivers

caregivers of all ages spent an average of $6,954 each in out-of-pocket caregiving costs in 2016. Caregivers earning less than $32,500 are under significant financial strain, spending an average of 44 percent of their annual income on caregiving. Caregivers report dipping into savings, cutting back on personal spending, saving less for retirement, or taking out loans to make ends meet (Rainville, Skufca, & Mehegan, 2016). Lost income due to decreased hours or loss of a job: Nationally, 18 percent of caregivers report experiencing extreme financial strain as a result of providing care (4 or 5 on a 5-point scale), and another 20 percent report moderate financial strain. For the 60 percent of caregivers who are working, caregiving is costly in the time it takes away from employment. Six in 10 caregivers report having experienced at least one impact or change to their employment situation as a result of caregiving, such as cutting back on their working hours, taking a leave of absence, or receiving a warning about performance or attendance (AARP Public Policy Institute, 2015). A 2010 MetLife Mature Market Institute study quantified the opportunity cost for adult children caring for their elderly parents. For women, who are more likely to provide basic care, the total per-person amount of lost wages due to leaving the labor force early and/or reducing work hours because of caregiving responsibilities was on average $142,693 over the care period. The estimated impact of caregiving in lost Social Security benefits was $131,351, and a very conservative estimate for reduced pensions was approximately $50,000. In total, nationally, the cost impact of caregiving on an individual female caregiver in terms of lost wages and retirement benefits was $324,044 (MetLife Mature Market Institute, 2010). Mental and physical strain on the caregiver: According to an AARP survey, 19 percent of caregivers report a high level of physical strain resulting from caregiving, and 38 percent consider their caregiving situation to be emotionally stressful. The challenges increase with the patient’s type and severity of illness as well as the resources available to the caregiver. Some caregivers, such as those caring for veterans or people with an acute injury, are thrust into the situation suddenly, while 70 UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME

others, such as caregivers of elderly people with dementia, face a long, gradually declining situation (AARP Public Policy Institute, 2015; Ramchand, et al., 2014; Tanielian, et al., 2013). BROADER COSTS OF UNAFFORDABLE HEALTH CARE When ALICE households forgo health care and insurance in an attempt to save money, their health and household finances suffer, but there are effects on the broader community as well: • When regular in-office care is hard to access, families often turn to the ER, where the cost of treatment increases significantly for them or, if they cannot pay, for the state. Households that go without preventative care and health insurance are more likely to use the ER for non-emergency care than less costly doctor’s offices or even urgent care clinics. The consequences of greater ER use for the wider community include longer wait times in ERs as well as increases in health insurance premiums, costs of charity care, and hospital community assistance (Bureau of Labor Statistics (BLS), 2010; Kaiser Family Foundation and Health Research and Educational Trust, 2011). • Families who don’t have routine dental care also rely on the ER for treatment. The number of ER visits for dental conditions in the U.S. doubled from 2000 to 2012, and it continues to rise as the number of dental office visits declines. In 2012, ER dental visits cost the U.S. health care system $1.6 billion, with an average cost of $749 per visit. Up to 79 percent of ER dental visits could be diverted to more cost-efficient community settings. For example, an analysis in Maryland estimated that the state Medicaid program could save up to $4 million each year through these types of diversion programs (Wall & Vujicic, 2015). • Without regular preventative care and coverage, people are more likely to develop chronic health conditions. Preventable chronic diseases now account for 86 percent of U.S. health care costs and affect 50 percent of Americans (Centers for Disease Control and Prevention (CDC), 2015; Ward, Schiller, & Goodman, 2014). • Untreated mental health and substance abuse issues shift problems to other areas. These issues increase ER costs, increase acute care costs, and add to caseloads in the criminal justice, juvenile justice, and corrections systems, as well as increasing the costs of assisting the homeless and the unemployed. Untreated or improperly treated mental illness also costs employees lost wages for absenteeism, and companies feel the cost in decreased productivity. A National Alliance on Mental Illness study estimated that the annual cost to employers for mental-health absenteeism ranged from $10,000 for small organizations to over $3 million for large organizations (Harvard Medical School, February 2010; Parity Project, NAMI-New York City Metro, 2003). On the other hand, nationally, each $1 spent on substance abuse treatment saves $7 in future health care spending (Glover, Miller, & Sadowski, 2012). • Family caregiving exacts a toll on the broader economy. Family caregiving offers substantial health care savings, since it is much less expensive than hospital care or a nursing home. But it incurs significant costs for employers. The dollar value of the informal care that family and friends provide for older Americans totals an estimated $522 billion a year – more than total Medicaid spending ($449 billion in 2014). Replacing that care with unskilled paid care at minimum wage would cost $221 billion, while replacing it with skilled nursing care would cost $642 billion annually. Because most caregivers are employed, family caregiving for the elderly costs employers approximately $13.4 billion in excess health care spending each year on employees who are caregivers, due to the toll that caregiving takes on the caregiver’s own health. In addition, an analysis of the Gallup Well-Being survey found that the UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME 71

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