Home Care Costs to Spike in 2014

by Karl on January 6, 2014[printfriendly]

Home Care Costs In California Spike In 2014

Several new laws that were passed by the California Legislature and signed by Governor Brown will make it more expensive to receive home care services in California beginning in 2014.

According to Kraig Nakano, co-owner of Care To Stay Home, a non-medical home care agency based in Orange County, consumers are likely to see initial price increases of 10-30% depending on the type of services that they receive.

The first people to be impacted will be those with Live-In caregivers or who receive over 9 hours of care per day. Up to now, Personal Attendants, or caregivers as they are more commonly referred to, were exempt from overtime requirements due to the unique nature of the services they provide. However, effective January 1, 2014, a new California law, AB 241, eliminates the longstanding overtime exemption for Personal Attendants. As a result, overtime wages at the rate of one and one half times an employee’s regular pay rate will now have to be paid after 9 hours in a workday, or 45 hours in a workweek.

In 2015, changes made by the US Department of Labor (DOL) to the Fair Labor Standards Act (FLSA) will further lower the 45 hours per week threshold to 40 hours per week.  While this does not change the requirement to pay overtime after 9 hours in a workday, if further limits the amount of hours one employee can work before overtime costs kick in.

Also contributing to these price hikes for consumers will be the increasing of the minimum wage July 1, 2014 from $8.00 to $9.00 per hour. The minimum wage once again rises January 1, 2016 to $10.00 per hour.

People with hourly service below the daily and weekly overtime thresholds will most likely not see an increase for now.  Families exceeding the overtime thresholds will be required to pay overtime, cut back work hours to stay below daily/weekly limits, or split their shifts between multiple caregivers to retain their care schedule and manage costs.

According to Nakano, the average daily rate of $200 per day for a Live-In caregiver in 2013 is projected to increase to $250 per day by the end in 2014, a 25% increase. On an annual basis, the cost goes from $73,000 per year in 2013, to a projected $91,250 in 2014 through 2015. In 2016, the annual cost for Live-In care will spike to over a $100,000.

Families Will Be Facing Difficult Home Care Choices To Manage Rising Costs

Families will be forced to make difficult choices in the face of rising home care costs. They could opt to maintain their current level of service for as long as the money lasts. Nursing home placement then becomes imminent.

Another option would be to reduce services from a Live-In caregiver to receiving services on an hourly basis. The slack then would have to be picked up by family members. This may or may not be the best option if everyone is working or has young children.

Nakano expects more people to utilize board and care facilities. A board and care facility is usually a 3 to 5 bedroom home with 6 residents staffed by one or two caregivers. Monthly cost in Los Angeles County is in the $2,500 – $4,500 range.

Nakano also forecasts that there will be an increase in nursing home admissions as more and more families will be unable to adequately care for their family member due to higher home care costs.

LTC Medi-Cal would be available to help pay for the monthly nursing home bill. Currently the option of last choice, nursing home admission may be considered at a much earlier stage.

Whether board and care, assisted living, or nursing home, there are only a limited number of beds available. Competition for these beds is expected to grow as home care costs escalate. Waiting lists may become the norm.

AB 1217, another law that was passed in 2013, will require caregivers to complete a minimum number of annual training hours and register with the State of California. It also creates an online registry of caregivers and a licensure structure for non-medical home care companies. This means additional regulatory fees to the employee and agency which may affect the cost of care for consumers in the future. The implementation of this law has been delayed until January 1, 2016 due to its anticipated impact on families receiving care at home and also to provide time for  the State’s Department of Social Services to develop regulatory language for the new law. 

Staying home as long as we can as we get older has always been the most attractive option. However, it appears that this is going to be economically more difficult in the future.

Therefore, it is going to be more important than ever that a financial plan include long-term care options as well as the proper estate planning. This will need to be done as early as possible.

It is human nature to deny and procrastinate. Unfortunately, a healthcare crisis can happen in a split second. Beginning in 2014, dealing with this crisis becomes more costly and burdensome. Being proactive rather than reactive can ease a lot of the worry.


Karl Kim - Retirement Crisis Planning - California's 1st  Retirement Crisis Planner & Your Medi-Cal SpecialistKarl Kim, CFP, CLTC is the President of Retirement Planning Advisors, Inc. and a Medi-Cal specialist. His office is located in La Mirada. He can be reached at 714-994-0599 or at www.RetirementCrisisPlanning.com.

Karl has submitted over 1,000 Medi-Cal applications over the past 20 years with a 99.9% success rate. His book “Don’t Go Broke Paying the Nursing Home” is available at Amazon.com.

This is meant to be an educational article. Do not make any decisions solely on the information in this article. Consult your tax advisor, financial advisor or attorney before taking any action. We are not responsible for any inaccuracies or misinformation. 

Protecting Your Home in a Healthcare Crisis

{ 2 comments… read them below or add one }

Reserve B&C Now January 8, 2014 at 8:18 am

My experience mirrors your analysis and looking into further I have to wonder what our legislators were thinking. As explained to me, we had live-in care 24×7 at $200 because live-in workers were making minimum wage but not claiming overtime. The prevailing wage was $130/day and with taxes, workers comp, liability insurance, business expenses, etc., the prevailing rate for clients was $200.

Personal attendants, as defined by the law, are “unskilled”. Feeding, bathing, dressing people is pretty common sense. It may require strength, but since the law specifically excludes those who provide medical services, I think we can agree that it is primarily unskilled.

Generally, only mid-middle class and up individuals could afford this care. Not many insurance policies cover live-in care but that threshold is going to go way up and as the article states, push people into board and care, which, seeing a flood of new applicants, will rush to increase rates while they expand the size of their facilities. Sending mom to a home is not something she or I are particularly interested in. Her quality of life is much better at home, not to mention the quality of life of the caregiver, who is an immigrant widow and would otherwise have to live with her son and his family, who have a one bedroom apartment in a not-so-great section of town.

At her old wage ($8/hr) she was making $46.5k/year for 24×7, which is more than double what her son who works at BestBuy makes.
Her new annual pay is $60.5k. Remember, that is not what the agency charges, this is the caregiver’s pay. In July that goes up to $65.5k and in December, when the federal law kicks in, it would go to $80k/year. And it will go up again to just under $90k when the min wage is $10 in less than two years.

$90k a year for an unskilled job that mainly requires her to be present, cook, wash dishes, and provide help with dressing while providing a very comfortable and attractive place for her to watch TV, surf the internet, text her family and friends, engage in conversation, etc? She’s like a family member and neither she or mom would want to alter the arrangement. But it’s necessary. It is just too costly. (Would you pay a family member $90k to stay at home to look over mom?) So she is being cut to 5 days a week and even with overtime that means her salary is going down ($40.5k) rather than up this year while a spot in a nice care home can be found.

This situation is apparently pretty typical.


Greg January 9, 2014 at 4:01 pm

Great article, thanks!


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