RETIREMENT SECRETS: Home Care Costs to Spike in 2014

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karl kimBy KARL KIM

Several new laws that were passed by the California Legislature and signed by Gov. 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% to 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 nine 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 Jan. 1, 2014, a new California law, AB 241, eliminates the long-standing 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 nine hours in a workday, or 45 hours in a workweek.

In 2015, changes made by the U.S. 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 nine hours in a workday, if further limits the number 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 to $9 per hour. The minimum wage once again rises Jan. 1, 2016 to $10 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 $100,000.

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 three- to five-bedroom home with six 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 Jan. 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 health care 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, 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. He 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.

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