June 7, 2023

Industry Update: How Inflation Is Affecting Home Healthcare

By Cliff James, VP, Program Performance and Analytics

Inflation rates were up 6.4% for the 12 months ending in January 2023. As rates rise, Healthesystems is looking at how inflation affects different aspects of the workers’ comp ecosystem (see our blog, How Inflation is Affecting Transportation). Next, we’re examining the effect on home healthcare.

Home healthcare can be particularly important to recovery for injured workers. To achieve the best possible outcome, patients should seamlessly transition from hospital discharge to home. Home caregivers help patients with daily activities such as meals, bathing, dressing, and housekeeping. They may also perform clinical tasks such as medication administration, wound care, blood pressure readings, and range of motion exercises.

National health spending increased by 3.8% in 2022, according to Altarum, with pricing for home healthcare increasing 1.8%. Even with these higher prices, demand for home healthcare remains high – and it’s growing. According to the Bureau of Labor Statistics Occupational Outlook Handbook, home health and personal care aides are some of the fastest-growing occupations, with a projected growth of 34% from 2019 to 2029.

At the same time, the population is aging, creating even more demand. For instance, the number of people aged 60 and over in California alone will reach 10.8 million by 2030, according to AARP. That’s double what it was a dozen years ago. Many of these people require ongoing care due to chronic health conditions.

And largely because of the threat of COVID-19, families are avoiding facilities such as nursing homes and seeking home healthcare instead, with those who can afford it willing to pay privately for such services. In fact, the California Health Policy Survey reveals that 16% of Californians say they are providing living assistance to a family member or close friend, including bathing, cooking, housecleaning, and paying bills.

Unfortunately, home healthcare providers are in short supply. The Bureau of Labor Statistics projects there will be 7.8 million direct care job openings from 2016 to 2026. What’s more, 3.6 million workers will leave the labor force, 2.8 million workers will leave the field for other occupations, and 1.4 million new positions will be created due to rising demand. California is projecting a shortfall of 600,000 home care workers in the next 10 years, according to the California Future Health Workforce Commission.

Concurrently, there is increased competition for those direct care workers on the lower end of the earning spectrum. The State of the Direct Care Workforce Study reveals caregivers are seven times more likely to live in the poorest income category versus the average U.S. population, and 54% of them rely on public assistance. These sobering statistics make a few dollars more an hour or a sign-on bonus very attractive to this labor force, perhaps leading them away from home healthcare.

With demand so high and supply dwindling, what can be done to close the home healthcare gap? The California Future Health Workforce Commission has made recommendations to do so in California by 2030. These include supporting scholarships for qualified students who pursue priority health professions and serve in underserved communities; recruiting and training students from rural areas and other under resourced communities; and establishing and scaling a universal home care worker family of jobs with career ladders and associated training, among others.

Meanwhile, home care agencies are increasing their efforts to attract and retain caregivers by implementing comprehensive orientation, ongoing training, and professional support. At least one company, Windward Life Care, is seeing success, with a caregiver turnover rate 28% less than the national average. Workers’ compensation home health networks are also implementing solutions, which include but are not limited to network expansion and seeking alternate solutions such as working directly with family caregivers and using skilled nursing as a pathway to the home.

Finally, as more people are looking for gig-type work, technology is another way to attract caregivers to the field. FleetNurse is an on-demand healthcare staffing solution that connects health systems to quality healthcare providers. Healthcare professionals are allowed to work on a flexible schedule, while healthcare facilities can fill shifts at the last minute.

Another solution, CareLinx, connects families to a network of professional caregivers who enjoy flexible hours and better pay. All caregivers are background-checked and verified to provide high-quality in-home care, and an online platform allows customers to get real-time updates and visibility on their loved ones’ health. Healthesystems is working closely with our vendor partners to identify and promote these emerging solutions and ensure we are leveraging all available opportunities to close the growing home healthcare gap for our customers and the injured worker population.

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