Effects of EITC on Formal Long-Term Care for Older Adults with and without AD/ADRD

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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. About one-third of older adults who require assistance receive help from formal providers at home or an institution. These formal long-term care (LTC) providers have low and stagnant wages with few benefits, which have resulted in a severe shortage of and a high turnover rate for formal care providers. The situation is particularly dire for low-income formal caregivers. The Earned Income Tax Credit (EITC) is a tax credit for low- and moderate-income working families and is one of the largest and most effective anti-poverty programs in the US. The EITC could impact care for older adults because it encourages work, supplements incomes, and improves physical and mental health and overall wellbeing for persons with low incomes. However, despite a vast literature on the EITC, little is known about its effects on formal care for older adults. We propose to fill this knowledge gap by leveraging a large number of plausibly exogeneous policy changes in the EITC at the federal and state levels in the past two decades and using difference-in-differences and event-study approaches and large, nationally representative data sets (Health and Retirement Study and Current Population Survey) to examine the effects of the EITC on formal care provision and utilization along several important dimensions including the care recipients’ AD/ADRD status. Specifically, we will pursue the following aims: Aim #1: We will test how the EITC has changed the supply of formal LTC for those most likely to be affected by the EITC—low-income individuals aged 18-64—using the Current Population Survey. Aim #2: We will test how the EITC has changed older adults’ utilization of and out-of-pocket expenditures on formal LTC, including home and institutional care, using the public and restricted data from the Health and Retirement Study (HRS). Aim #3 (exploratory): Depending on the findings from the first two aims, we will examine whether estimated changes in formal LTC lead to changes in the intensity and type of informal care utilized by older adults using the HRS data, given that formal and informal LTC could be substitutes or complements for older adults. This study directly addresses the goal of the National Institute on Aging to “Find significantly improved and cost-effective ways to reduce caregiver, family, and patient stress and improve older adults’ ability to cope with chronic disease”. 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, putting unprecedented pressure on the health care system. We will also provide valuable information to policymakers interested in designing effective population-level policies to support health care workers, especially the most vulnerable low-income health care workers. 1