Private Pay Home Care: New Models of Access and Service Delivery

Over the last 25 years, growth and innovation in the long-term services and supports (LTSS) sector has generated new business ownership opportunities, as well as an expanding job market for direct care workers. The 1990s saw the emergence and rapid growth of assisted living as an alternative to nursing home care, but since the early 2000s, the leading edge of growth and innovation in LTSS has featured home care providers and internet-based information and referral services. The proliferation of LTSS services and supports other than nursing homes and Medicare/Medicaid certified home health agencies has accelerated further in the past five years. Entrepreneurs have emerged, both literally and figuratively, from Silicon Valley with venture capital funding for home care start-ups. The founders of these enterprises portray themselves—and are often labeled by business journalists—as “disrupters” pioneering new models for connecting care providers with potential customers and delivering on-demand home- and community-based services and supports. To date, however, these developments have not attracted attention and study from academic and government-based policy analysts and researchers, perhaps because so much of the recent growth and innovation in LTSS has been occurring among home care providers that target a predominantly private pay clientele. At the same time, some private sector innovators (e.g. CareFamily.com) readily acknowledge the influence of consumer-directed services in Medicaid home care programs (Broughton, 2016). The size and scope of the private pay market for home- and community-based LTSS is often underestimated. However, in the National Long-Term Care Survey, first conducted in 1982 and then repeated in 1984 and every five years through 2004, private payments were always the most commonly reported source of financing for home care, cited by 50–60% of those who received any paid help (Liu, Manton, & Liu, 1985; Liu, Manton, & Aragon, 2000; Spillman, 2016). The trends reviewed in this paper include growth of: Non-medical home care agencies—often referred to as private duty agencies—that employ personal care aides, homemaker/chore workers, and companions to serve private payers exclusively or predominantly. New variants on the home care agency service delivery model offering greater flexibility in scheduling workers and on demand services (that is, services that can be requested and delivered on short notice). Online referral services. Some referral services provide information only about certain categories of LTSS provider organizations, such as home care agencies, and/or nursing homes, assisted living facilities, and adult day care centers. This paper focuses on those category-specific services, often referred to as registries, that also or only provide a platform for individuals seeking work as personal care aides, homemaker/chore workers, or companions to advertise their availability and connect with individuals and families seeking to employ such workers directly. These innovations may have the potential to improve disabled older adults’ access to affordable home care, which would in turn increase their likelihood of continuing to reside at home rather than moving into residential eldercare settings (nursing homes and assisted living facilities). They could also improve pay, benefits, and working conditions for home care workers, thereby alleviating current concerns about worker shortages. It is striking how many home care entrepreneurs cite their own and their parents’ frustrations when seeking reliable, high-quality home care for grandparents and other relatives with disabilities as the motivation for starting their businesses. However, some observers are skeptical. One critic has mocked home care start-ups as the entrepreneurial equivalent of unicorns, which should be subject to less mythmaking and more peer-reviewed research to determine whether marketing hype is supported by evidence (Chase, 2016). According to private duty home care industry survey data (Home Care Pulse, 2015), there are now an estimated 25,000 non-medical home care agencies in the U.S. The reported growth rate is impressive: 53% between 2009 and 2014. Most private duty home care agencies are independent (i.e. either unaffiliated with a parent corporation and having only one location or individual branch locations of a corporation that owns and manages the chain). However, many private duty home care agencies (an estimated 7000, 28% of the total) are franchises. Similar to franchising in the fast food restaurant industry (e.g. McDonalds, Burger King, etc.) a parent company owns the brand name and the business model but does not directly own or operate the localities. Individuals purchase the right to own and manage one or more local businesses branded with the corporate name. According to the business press, home care franchises are more affordable to would-be business owners than fast food restaurant franchises (Tice, 2014). Home Instead, founded in 1994, is the largest home care agency franchiser. It is a multi-national corporation with over 1000 franchise locations in the U.S., several European countries, Canada, and Mexico. Other large franchisers founded between 1997 and 2004 include Comfort Keepers, Visiting Angels, Right at Home, Bright Star, and Care Minders. The great majority of private duty home care agencies provide unlicensed aide services (homemaker/chore, personal care, respite, companion care) only. However, some also offer atypical extra services. For example, Visiting Angels offers a “social care” service to reduce depression among older adults by teaching them how to use cellphones, e-mail, Skype, and Facetime, how to do an internet search, and how to interact with friends and family via Facebook. According to industry survey data (Home Care Pulse, 2015), private duty agencies obtain about 70% of their revenues from private payers who pay out-of-pocket. Between 9 and 10% of revenues come from private long-term care insurance and a similar 9–10% of revenues come from Medicaid (primarily Medicaid Home and Community-Based Services waiver programs). Despite catering to a predominantly private-pay clientele, private duty home care agencies operate much like home care agencies that provide personal care aide, homemaker/chore, and respite care exclusively or primarily to Medicaid beneficiaries. The main difference is that they charge private payers higher hourly rates than Medicaid typically pays and a higher share of the hourly rate goes toward costs other than direct labor. Despite the impressive growth of the private pay market for home care, direct care worker shortages have been and remain a serious problem. Agency executives identify worker shortages as the single biggest threat to their business (mentioned by 48% of survey respondents in the 2015 Home Care Pulse survey). They see aides who are directly hired by service users and their families (rather than other local agencies) as their most serious competition. This is especially the case for independent aides hired on the basis of word-of-mouth recommendations from family, friends, and neighbors. 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