The gap in home healthcare workers
Baby Boomers are aging. As their health fails, an increasing number of the elderly are turning away from nursing homes and opting for home health care instead. The problem is finding enough trained caregivers to handle demand.
The demographics in the U.S. indicate two trends—an aging population as well as a declining birth rate. By 2034, there will be more adults over the age of 65 than children under the age of 18. Between 2018 and 2060, the population of seniors will double.
An overwhelming majority of Americans (88%) would rather receive long-term care services in their homes as they age, according to a recent study by the Associated Press and NORC Center for Public Affairs. Being cared for at home instead of in a clinical setting has many benefits according to studies. Daily routines in housekeeping, mealtimes, and things like prescription reminders seem to alleviate feelings of isolation and alleviate stress and depression while helping to improve memory and physical stability and fostering a sense of independence. And it is not just the elderly, individuals recovering from short-term surgery, rehab, or chronic illnesses prefer to recover at home as well.
About 12 million Americans are receiving some kind of home care services at any given time and that number is increasing. There are 45 million seniors, based on Medicare statistics, of which 15 million will end up in the hospital every year. Of those, more than 3 million suffer from five or more chronic conditions and will be hospitalized several times a year. That is why home care is one of the fastest-growing segments of the healthcare sector.
The median costs of in-home care are different depending upon the state, but a survey by Genworth Financial believes the national average is approximately $4,000 per month. Private insurance companies, Medicare, and Medicaid foot some or most of that bill depending on the individual's circumstances.
The total home care market was valued at $301.09 billion in 2021. It is expected to top $813.17 billion in the next five years. That is a compound annual growth rate of 15.25%. The U.S. Bureau of Labor Statistics indicates that the demand for home health care and personal care aides is expected to rise by 34% from 2019 to 2029, which would surpass the average growth rate of all other occupations. Last year, home care spending hit a historical high of $113.5 billion.
Unlike trends in other segments of health care that have seen high levels of corporate concentration, the home care industry is made up of more than 33,200 small businesses as of 2022. In total, there are an estimated 3.4 million home care workers providing health care support to older adults with disabilities in the U.S. Overall, roughly 78% of providers employ fewer than 50 workers. The facts are that there is a growing gap between the number of home care workers and patients. This is nothing new. Between 2013 and 2019, the number of available home care workers for every 100 patients has fallen by nearly 12%. The gap has widened since then. Some recent studies indicate that as many as 25% of referred patients have been turned away from home healthcare providers due to a lack of workers.
The physical, mental, and emotional stress required to care for these individuals is often overwhelming. It is not an easy job. More than half of these current home care workers have no formal education beyond a high school degree. Many are immigrants from various ethnic, economic, and cultural backgrounds.
Nationally, home healthcare workers are paid an average of about $13.50 per hour. In some states such as Louisiana, West Virginia, Texas, Mississippi, and Oklahoma, workers make less than $12 an hour. Almost 43% of workers' income is below the poverty level. In addition to the low pay, poor communication, lack of recognition and challenging work hours conspire to discourage workers from continuing in this field. In 2022, the professional caregiver turnover rate was more than 77%.
But before we pin the blame on unscrupulous home care agencies, recognize that these companies face enormous challenges in financial, operational, and clinical areas. Providing health care services is extremely complicated, beset by logistical challenges, system inefficiencies, complex payment systems, and lack of care coordination. Private insurance companies, Medicare, Medicaid, differing reimbursement policies, eligibility, and all sorts of differing care requirements must be included in the mix.
It is an industry that is difficult to apply economies of scale because no two agencies address these problems in the same way. Usually, the owners as well as their employees, are overrun with existing duties, and as such expanding is just not worth considering. Paying higher wages might increase the supply of workers, but training them to understand, communicate, and deliver quality services to an expanding patient base is just as important.
If ever there was an industry in need of data-driven technology, it is this one. The industry could benefit greatly from communication tools, such as data access and secure data information exchange. If workers were able to access easy-to-use technology that could connect them to experts while on the job, both the stress levels and the probability of making medical mistakes would be lessened considerably. Software that could improve care delivery, while reducing paperwork, as technology has done in countless other areas, is just begging to be developed and introduced to an important area looking for solutions.
Bill Schmick is a founding partner of Onota Partners, Inc., in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners, Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or e-mail him at bill@schmicksretiredinvestor.com .Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.