HERC: Estimating Caregiver Time and Cost
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Estimating Caregiver Time and Cost

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VA patients frequently receive some form of care from unpaid caregivers, typically family members. These services have an economic value that should be measured when determining the total cost of care from the societal persepctive. Determining caregiver costs associated with an intervention requires the measurement of caregivers' time spent caring for a care recipient and assigning  value to this time.

The only way to learn about caregiver time is through direct measurement. Caregivers can be surveyed in person, by telephone, or by mail. If caregiving is likely to last over many weeks, it is advisable to supply caregivers with activity logs to fill out. The goal is to determine the total time spent on the patient due to the condition under study. This includes time spent providing care (for example, help with activities of daily living or administering medication), time spent on the person's behalf (for example, helping with chores around the home or managing finances), and time spent accompanying the patient to medical appointments. In some cases the condition of interest may not necessitate any extra time above and beyond what the patient would have received absent the condition. In that case there would be no extra (or incremental) cost due to this condition.

There are two commonly used methods to assign a value to caregivers' time. The "opportunity cost method" values time spent providing care as the economic value of opportuniues foregone as a result of care provision (Chari et al., 2015; Jacobs et al., 2019).  If the person is employed, a reasonable measure of this is his or her hourly wage. This information can be requested on a survey or in person. To find hourly earnings, divide the annual earnings by 2088 for full-time workers. For part-time workers, multiply the average hours per week times the number of weeks worked per year to determine the hours worked per year, and then divide total earnings by that amount. If the individual is not emplotyed, sometimes a reservation wage or an imputed wage is used instead (Chari et al., 2015; van den Berg et al., 2006).

An alternate approach is to use the "replacement cost" (or "proxy good") method.  The replacement cost method values time spent providing informal care using the market price of paid formal care substitutes (van den Berg et al., 2006). Much unpaid caregiving consists of household chores, light medical procedures, and accompanying patients to medical appointments, so one option is to assign the average cost of a home health aide. The U.S. Bureau of Labor Statistics (BLS) develops monthly statistics on average wages for hundreds of occupation classes. "Home health aides," job class 6216, had an average hourly pay rate of $22.10 per hour in January, 2021. (For data on other months, visit the BLS web site. Select CES Data, then choose Employment and Earnings Tables and select Table B-3a, "Average hourly and weekly earnings of all employees on private nonfarm payrolls by industry sector, seasonally adjusted"). Although local or regional wages would be more accurate for a specific locale, using a national average will increase the external validity of the result. In sum, to determine the value of unpaid caregivers' time, you will need to collect the following information:

  • Number of hours spent giving care beyond what would occur in the absence of the condition under study.
  • If applying the opportunity cost method, one of these: a) hourly earnings rate; b) for full-time workers, total annual earnings; c) for part-time workers, total hours worked per year (or month, or week) and total dollars earned for the same time period. If applying the replacement cost method, the market price of the type of paid formal care the best substitutes for the type of care provided.

As with any direct measurement procedure, it is good practice to carry out sensitivity analyses. Try changing the wage rate used, for example, and see how much your final result changes. When reporting results, include a statement about the sensitivity.

For a more in-depth discussion of the costs and benefits that could be considered when assessing the net societal benefit of informal care, as well as recent literature in this area, you can look at this recent chapter on the economics of informal care by Van Houtven et al. (2019).  

References

Chari AV, Engberg J, Ray KN, Mehrotra A. (2015), The opportunity costs of informal elder-care in the United States: new estimates from the American Time Use Survey. Health Serv Res, 50(3):871–82.

Jacobs JC, Van Houtven CH, Tanielian T, Ramchand R. (2019). Economic spillover effects of intensive unpaid caregiving. PharmacoEconomics, 37: 553-562.

van den Berg B, Brouwer W, van Exel J, Koopmanschap M, van den Bos GA, Rutten F. (2006). Economic valuation of informal care: lessons from the application of the opportunity costs and proxy good methods. Soc Sci Med. 62(4): 835-45.

Van Houtven CH, Carmichael F, Jacobs JC & Coyte PC. (2019). The economics of informal care in Oxford Research Encyclopedia of Economics and Finance. Oxford University Press.