Assessing Biden’s
“Caring Economy” Proposal
Tara O'Neill Hayes, Isabel Soto July 29, 2020
Executive Summary
·
Presidential candidate
Joe Biden released the third part of his “Build Back Better” initiative,
which primarily aims to improve caregiving options for working
parents and primary caregivers of elderly individuals in need of long-term
care.
·
The resources in Biden’s
plan do not match the scale of the long-term care challenge: The annual cost of
unpaid long-term care currently stands at an estimated $674 billion, and while
the proposed 1.5 million new workers may be adequate, Biden’s proposal
dedicates just $450 billion over 10 years to cover the health
care needs he seeks to address, a sum likely trillions short of what would be
needed.
·
Biden’s childcare plan
involves various avenues to address supply, access, and affordability, but the
money allocated will almost certainly not be enough to cover his proposed
expenses and could drive up costs.
Introduction
Last week, presumptive Democratic presidential
nominee Joe Biden released a plan “for Mobilizing American Talent and
Heart to Create a 21st Century Caregiving and Education Workforce.” This
proposal focuses on improving childcare and care for the
elderly, specifically those with long-term care needs, as well as other
health care workforce needs. The policies outlined are projected by
the Biden campaign to cost $775 billion over 10 years; $450 billion will cover the various
health care costs and the remaining $325 billion will cover the costs of
expanding childcare options. In order to pay for these policies,
Biden plans to roll back tax breaks for real estate investors with incomes over
$400,000 and better enforce tax compliance for high-income earners.
These proposals primarily seek to increase the
supply of health care workers and childcare providers and facilities, but they
drastically underestimate the cost required to do so while simultaneously
increasing the cost beyond what is necessary to meet the needs.
Improving the Public Health
Infrastructure and Health Care Workforce Needs
Biden’s plan calls for adding over a million new
health care workers to address shortages in care, along with funding innovative
care options. The plan is ambitious in terms of the number of people it aims to
put to work and the number of challenges it aims to tackle, but it is severely
lacking in details as to how any of these plans will be executed or even the
specific outcomes the proposals seek to achieve. The proposal also
significantly underestimates the cost of the primary issue it aims to
solve—long-term care needs—likely by more than $1 trillion.
The Plan
Biden’s plan calls for adding 1.5 million new
health care workers, including 150,000 community health workers to work in the
neediest communities and another 100,000 in a newly created Public Health Jobs
Corps. Biden defines the neediest communities as those with the highest rates
of chronic conditions and largest racial disparities. The Public Health Jobs
Corps would be dedicated to identifying communities at risk of contracting and
spreading infectious diseases and strengthening the public health
infrastructure, of which Biden includes efforts to address the opioid epidemic
and social determinants of health. The plan also calls
for providing tens of thousands of workers to care for
veterans and those served by the Indian Health Service. The more than 1
million remaining workers would be dedicated to eliminating the
existing Medicaid waitlist for people needing home or community-based health
care services. Finally, Biden’s proposal would establish
a long-term services and supports innovation fund to implement
cost-effective measures for providing care.
The Need for Long-Term Care
Previous research from the American Action Forum
(AAF) details the growing long-term care crisis the United States is facing. An
estimated 14 million people in the United States currently need long-term
support services.[1] According
to the Department of Health and Human Services, 7 in 10 seniors reaching
65 years old are now expected to need some type of long-term care (LTC) before
the end of their life.[2] By
2030, 24 million Americans will need LTC, but the supply of caregivers is
shrinking rapidly relative to the demand. The number of people aged 45-64—the
typical age of a caregiver—for each person aged 80 or older will be reduced to
three by 2050 (down from seven currently).[3] The
amount and complexity of care needed per person will also increase, as a result
of the increasing number of chronic conditions per person.
Unfortunately, private insurance for LTC is hard
to find, public insurance programs offer limited coverage or have restricted
eligibility, and most people have not saved sufficiently for the cost of such
care. An estimated $849 billion worth of LTC was provided in 2018, nearly 80
percent of which ($674 billion) was provided by unpaid family caregivers,
typically in their 40s and 50s, often with children who also need their
attention.[4] It
is estimated that 26 million unpaid caregivers provided care for an average of
nearly 18 hours per week in 2017; lost lifetime earnings as a result of
caregiving rather than working are estimated at $300,000.[5]
Medicaid pays for the largest share of
LTC costs (roughly 60 percent), as the benefits it covers are much more
comprehensive than those covered by Medicare. Medicaid’s benefits include LTC
services in nursing homes, intermediate care facilities, and at-home care,
including custodial (non-medical) care provided by non-licensed caregivers. The
most widely used of Medicaid’s several LTC programs is the Home and Community Based Services (HCBS) Waiver,
which allows states to expand financial eligibility while simultaneously
capping enrollment (unlike traditional Medicaid rules, which require states to
cover all individuals who qualify). Common benefits include additional therapy
services, meal preparation, and housekeeping; some states also cover nutrition
counseling and aid at the beneficiary’s work site.[6] In
2018, roughly 4.3 million people received care through an HCBS waiver program
at a cost of $92 billion; another 707,000 individuals were on state waiting
lists, as of 2017.[7], [8] Biden
claims the waitlist has now reached 800,000, growing by roughly 100,000 in
three years. The existence of the waitlists reflects the lack of funding
and insufficient supply of caregivers; its rate of growth reflects the
ever-increasing number of seniors in need of care. Biden’s proposal calls for
giving states the option of turning their existing waiver program into a new
state-plan option with an enhanced federal funding match rate.
Assessing the Proposal
Biden’s plan to hire 1.5 million health care
workers may suffice to cover projected long-term care needs.
Based on estimates of the current amount of unpaid care provided (roughly 26
million people provided an average of nearly 18 hours of care per week), this
care represents the equivalent of 225,000 full-time workers.[9] Moving
forward, the need will continue to grow. Medicare enrollment is expected to
increase 25.6 percent by 2030.[10] Assuming
the same proportion of the elderly needing care as is needed now, and using
Medicare enrollment as a proxy for the elderly population, the existing
workforce of 4.5 million paid long-term care workers, plus the 225,000
full-time equivalent unpaid workers, would need to grow by more than 2.3
percent annually to keep pace with demand.[11] This
growth requires adding 1.2 million more workers by 2030. As discussed, however,
it is expected that care needs will also increase per person needing care, and
thus the number of caregivers will need to increase further, suggesting the 1.5
million new workers Biden plans to hire may suffice, if they
are all dedicated to the provision of long-term care. But his plan calls for a
quarter million of the newly hired health care workers to be dedicated to
public health efforts and tens of thousands to care for veterans and those
served by the Indian Health Service.
The cost of caring for the millions of seniors
who will need care over the next decade will dwarf the budget allocated under
this proposal. The cost of employing 1.5 million health
care workers full-time at an hourly wage of $22 (less
than the wage of the typical unpaid caregiver but more than the average wage of
home health aides) is $33 billion for a single year, but the cost of care
is much more than the cost of the labor of the care provider.[12] Many
people will need full-time care and ready access to medical equipment,
which will necessitate moving into long-term care facilities; such a
facility can cost around $100,000 per year currently. While most
seniors prefer to age at home, for many it will not be an
option; simply providing more home health care workers will not
solve the entirety of the long-term care crisis. AAF previously estimated that the cost of various types
of long-term care over the next decade will increase between 20 percent for
home health aides and up to 47 percent for assisted living
facilities, based on current trends. Given these projections, the total
cost of LTC needed in 2030 could reach between $1.3 trillion and $2.5 trillion.[13]
Based on these estimates, Biden’s estimated
cost of $450 billion, which is also intended to fund innovative new
treatment options, is woefully unrealistic. Further, it is unclear whether
the plan envisions these LTC workers being hired by the government or
the private sector; if the idea is for the private sector to hire them,
there are no details as to how the government would facilitate that uptake and
cover those costs.
Addressing the Childcare Crisis
Biden has acknowledged the longstanding problem
of accessible and affordable childcare and that it has been exacerbated by the
COVID-19 pandemic. To address persistent problems and new challenges, he plans
to tackle the childcare crisis in a number of different ways including
providing federally backed universal pre-k, tax credits to families to help pay
for childcare, creating rigorous quality standards, renovating or building
new childcare facilities, and increasing pay for childcare workers.
The Problem
While there was already a childcare shortage in
many areas of the United States, the pandemic has only worsened the challenges.
Statewide lockdowns caused many childcare centers to close, some permanently,
and as parents return to work they will face a capacity crunch due to both
these closures and other regulations restricting the capacity of operating
centers.
As many as 50 percent of childcare facilities
could permanently close as a result of the pandemic. Those facilities that were
able to stay open or are able to reopen are operating on very thin margins and
are at risk of going out of business.[14] In
addition to lost revenue that occurred during periods of lockdown, childcare
centers will almost certainly need to contend with future costs, including
increased sanitation measures and personal protective equipment. Furthermore,
many states are mandating that care centers and schools limit the number of
children present in a room to reduce the spread of the virus. This measure, while
important for public health, presents yet another challenge for childcare
providers who will earn less revenue when operating at reduced capacity.
Previous AAF analysis found that if not addressed
in some form, childcare could keep as many as 30.6 million people out of the
workforce and hamper economic recovery.
On the bright side, it appears the childcare
sector may be recovering, albeit slowly, and with a long way to go before
reaching pre-pandemic levels of available care. Between May and June of 2020,
the childcare sector saw an increase in payrolls of 80,000 bringing June
payrolls to 780,300 up from 700,300 in May; yet in June of 2019, there were
more than 230,000 childcare employees on payroll .[15] Fewer
employees means fewer operational childcare options and more childcare
“deserts.”[16] Childcare
deserts are far more likely in low-income communities and among communities of
color who make up a large share of childcare workers and already struggle with
access.
Universal Pre-K and Rising Childcare Costs
In order to support those communities and
working families, Biden is proposing universal pre-k. Providing universal pre-k
is not a new idea. Many Democrats have proposed similar plans before, including
former presidential candidate Elizabeth Warren whose universal childcare plan
was estimated to cost between $707 billion and $1.7 trillion over the next 10
years.[17] Biden
does not promise to cover the cost of all childcare but limits his proposal to
covering 3- and 4-year-olds, which could have to address care for around 9.2
million families who do not have access to formal care.[18] Just
using the average cost of center care ($215 a week), an upper-bound estimate of
providing universal pre-k under Biden’s plan would be $102 billion for the
first year alone, and this figure is almost certain to rise.
Other elements of supporting working families
would include providing tax credits to help families address rising costs.
Under Biden’s plan, low- and middle-income families could claim up to an $8,000
tax credit (or $16,000 for two or more children under 13). The benefit would allow
families who make under $125,000 to receive 50 percent of what they spend on
childcare, with the max being $8,000 per child. Families making up to $400,000
could receive some portion of the benefit, but not the full 50 percent.
For children up to 5 years old, Biden would
implement the Childcare for Working Families Act, which
would help low- and middle-income families with the cost of childcare and
ensure that they pay no more than 7 percent of their household income.
Last, Biden would bolster an existing program,
the Child Care and Development Block Grant, which drives childcare subsidies
around the country. Previous coronavirus legislation allocated $3.5 billion,
all of which has already been used to provide financial support for struggling
care providers. An open letter signed by several economists
called on the government to provide immediate financial support for struggling
childcare providers to the tune of at least $50 billion. Joe Biden has not
publicly stated the exact amount his plan would provide. The childcare sector
has already been seeing rapidly rising costs, and making families reliant on
government money to pay for childcare will only drive up long-term costs even
more and limit family choices when it comes to care by prioritizing one
specific kind of care.
Meeting Demand
Before the pandemic, many communities were
struggling to find childcare options, with 43 percent of parents reporting that
they had difficulty locating care.[19] New
analysis by the Center for American Progress has mapped out childcare
accessibility in the United States and found that Latino communities were more
likely to be in childcare deserts than White communities.[20]
Biden’s plan would build new centers through direct government investment and
incentivizing employers with 50 percent tax credits on childcare facility
construction.[21] Biden’s
plan would create a new childcare construction tax credit to encourage
businesses to build childcare facilities at places of work. This tax credit
would give employers 50 percent of the first $1 million in construction
costs. There is seemingly no limit on who or how many entities can take
advantage of this generous benefit, but the Biden team expects the construction
tax credit paired with direct investments “will lead to tens of thousands of
new childcare facilities across the country.”[22] Biden’s
plan also pays specific attention to military families, stating that it will
fully fund installation-based care and draw more attention to the existing
resources military families can access through the Department of Defense.
Benefits and Earnings of Childcare Workers
With new care centers and financial support for
parents, Biden would understandably want to increase the size of the childcare
workforce. To do this he plans to increase earnings to incentivize more
individuals to enter the occupation. Median annual pay for childcare workers currently
stands at $24,230.[23] His
plan would increase childcare-worker earnings to be equal to those of
elementary school teachers, assuming similar qualifications and experience. In
addition to increasing pay, Biden would give childcare workers (and early
childhood educators) with 12 weeks of federally funded paid family and medical
leave. If implemented at current employment and median wage ($11.65), the
policy could affect 780,000 childcare workers and cost $4.3 billion over a single
year. Raising the hourly wage to early childhood educators’ median wage
($14.70) would increase the cost to $5.5 billion over one year. Assuming that
the childcare workforce returns to pre-pandemic 2019 levels, this plan could
cost between $5.6 billion (at $11.65 median wage) and $7.1 billion ($14.70
median wage) over a single year. Over the next 10 years, over the next 10 years
this childcare plan could cost between $40.3 billion and $70.1 billion,
depending on wage changes and assuming the number of childcare workers remains
constant at the June 2020 level. The take-up rate for this program is unknown,
but given the rest of Biden’s childcare plan and goals, the size of the
childcare workforce is expected to increase.
In addition to paid leave and increased
earnings, Biden’s plan would provide states with funding to continue upskilling
the workforce and to hire coaches to aid early childhood educators in
“delivering high-quality learning experiences.”[24] It
is not clear what this program would entail or how much money Biden intends to
use for it.
Conclusion
Ensuring adequate and affordable
childcare and care for the elderly is a challenge in need of
serious solutions, and Biden’s latest proposal seeks to provide some.
Biden’s plan calls for hiring 1.5 million new health care workers, which is
close to estimated needs for long-term care providers over the next decade;
Biden’s plan to pay for that care may be more than $1 trillion short, however.
Biden also promises to increase the supply of childcare through a variety of
avenues, although the full cost of these programs is unclear, but injecting
more federal money into the childcare sector would likely drive up total
long-term costs. Biden’s proposal makes several promises to as many
demographic groups as possible, but in attempting to address all care needs for
all persons, as well as raise wages, benefits, and supply, he is unable to
deliver a well-targeted and cost-effective plan.
[1] https://www.aarp.org/content/dam/aarp/ppi/2019/08/long-term-services-and-supports.doi.10.26419-2Fppi.00079.001.pdf
[3] https://www.aarp.org/content/dam/aarp/ppi/2018/08/across-the-states-profiles-of-long-term-services-and-supports-full-report.pdf
[6] https://www.kff.org/report-section/key-state-policy-choices-about-medicaid-home-and-community-based-services-issue-brief/
[7] https://www.kff.org/report-section/medicaid-home-and-community-based-services-enrollment-and-spending-issue-brief/
[8] https://www.kff.org/medicaid/issue-brief/key-questions-about-medicaid-home-and-community-based-services-waiver-waiting-lists/
[11] https://www.kff.org/coronavirus-covid-19/issue-brief/covid-19-and-workers-at-risk-examining-the-long-term-care-workforce/
[12] The current hourly wage for home health
aides is $12.18, according to the Bureau of Labor Statistics, but this low wage
is cited as a primary driver of the insufficient supply of caregivers and high
rate of turnover. A higher wage is likely needed to retain workers.
[14] https://www.forbes.com/sites/tommybeer/2020/07/14/40-of-us-child-care-centers-say-theyll-close-permanently-without-public-assistance/#61168db6ad6f
[19] https://www.americanprogress.org/issues/early-childhood/reports/2019/03/28/467488/child-care-crisis-keeping-women-workforce/
[20] https://www.washingtonpost.com/nation/2020/06/22/middle-income-rural-families-disproportionately-grapple-with-child-care-deserts-new-analysis-shows/
[21] https://www.acf.hhs.gov/sites/default/files/occ/what_is_the_early_head_start_cc_partnership_final_4_508.pdf?nocache=1365689128
[22] https://medium.com/@JoeBiden/the-biden-plan-for-mobilizing-american-talent-and-heart-to-create-a-21st-century-caregiving-and-af5ba2a2dfeb
[24] https://medium.com/@JoeBiden/the-biden-plan-for-mobilizing-american-talent-and-heart-to-create-a-21st-century-caregiving-and-af5ba2a2dfeb
https://www.americanactionforum.org/research/assessing-bidens-caring-economy-proposal/#ixzz6UFzhjAej
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