Federal Minimum Wage Expansion and Home Care Utilization and Costs for Older Adults

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Abstract. Over 70 percent of older adults aged 65 or older require assistance from caregivers with basic functions at some point in their lifetime, and more than six million older adults in the US have Alzheimer’s disease and Alzheimer’s disease-related dementias (AD/ADRD) and require more extensive assistance than their counterparts without AD/ADRD. As the US population is aging and more people seek to age in their homes instead of moving to institutional care facilities such as nursing homes, there is a substantial need for in-home healthcare and supportive services. Home care services provided by home care workers therefore play an increasingly crucial role in the US health care system. Indeed, the home care workforce has become one of the fastest growing occupations in the nation. However, the Federal Fair Labor Standard Act (1938) excluded home care workers from the federal minimum wage and overtime protection under the “companionship exemption”, which contributed to the challenging labor market conditions for home care workers and could in turn have a negative impact on older adults who needed high-quality home care services. In 2013, the Department of Labor narrowed the “companionship exemption” and promulgated the “Home Care Rule” (HCR) by allowing certain types of home care services to be protected by federal minimum wage and overtime rules. The new HCR came into effect in January 2015. This new HCR affected states differently due to variations in pre-existing state regulations on minimum wage exemptions, rates and overtime pay, providing a natural experiment that we explore in this study to provide the first empirical evidence on the effects of the new HCR on older adults’ utilization of and spending on home (and other forms of) care. We will use difference-in-differences and event-study approaches along with large, nationally representative datasets to pursue the following two interrelated aims in this quasi-experimental study: Aim #1: We will test how the new HCR has changed older adults’ utilization of home care services, using self-reported individual-level measures of utilization from the Health and Retirement Study (HRS) data and county-level measures of utilization from the Geographic Variation Public Use File developed by the Center for Medicare and Medicaid Services. Aim #2: We will test how the new HCR has changed older adults’ spending on home care, using the same two datasets for Aim 1A. We will explore the heterogeneous effects of the new HCR on older adults’ utilization of and spending on home care along key dimensions including their AD/ADRD status using the HRS data. This study directly serves the overall purpose of NIH PAS-19-391, namely, “…to provide needed scientific insight to improve the prevention, diagnosis, treatment, and/or care for individuals with Alzheimer's disease and Alzheimer's disease-related dementias (AD/ADRD)” by “leveraging existing data”. Findings from this study will have significant policy implications, as the size and the life expectancy of the older adult population, especially the population with AD/ADRD, and the costs of health care continue to rise. 1