The Relationship between Formal and Informal Care among Adult Medicaid Personal Care Services Recipients

Mounting political pressure in the 1980s and 1990s pushed state Medicaid programs to refine the focus of public long-term supports and services (LTSS) by including formal home and community-based care in public programs (Kitchener and Harrington 2004; Capitman et al. 2005). Community-based care programs were offered through a collection of policies known as Medicaid home and community-based services (HCBS). Personal care services (PCS) provided under these programs assisted poor older adults and individuals with disabilities in performing activities of daily living (ADLs) in their own homes (Capitman et al. 2005) and, in some cases, reduced overall Medicaid LTC spending (Kaye, LaPlante, and Harrington 2009). However, the expansion of HCBS programs and the growth of the population needing services resulted in an explosion of public HCBS spending, eventually outpacing increases in spending for institutional LTSS (Kaye et al. 2006). Home-health care services now constitute approximately one-third of all Medicaid long-term care expenditures (Houser, Fox-Grage, and Gibson 2009). Medicare and Medicaid paid approximately 80 percent of all home-health costs in 2008—amounting to an estimated $52 billion in costs to the public programs of $65 billion total home-health expenditures (Hartman et al. 2010). Faced with increased public spending for HCBS programs, policy makers feared that family members were declining to provide informal care because of the availability of publically funded formal care services, which could exacerbate the issue of increasing costs for these public programs (Caughlin et al. 1992). The availability of public PCS combined with demographic phenomena such as the growing elderly population (Goulding, Rogers, and Smith 2003), the decline in family size (Zedlewski and McBride 1992), and women entering the workforce (Matthews, Werkner, and Delaney 1989) led policy analysts to conclude that the availability of caregivers and their willingness to provide care was declining (Tennstedt, Crawford, and McKinlay 1993) as family members substituted public care for the informal care of their elderly and disabled kin. The fear that formal services might be reducing informal care was bolstered by research supporting a substitutive relationship between formal and informal care, which points to the exchangeability of the two forms of care (Greene 1983; Pezzin, Kemper, and Reschovsky 1996; Van Houtven and Norton 2004; Rogero-Garcia, Prieto-floreis, and Rosenberg 2008). According to the Hierarchical-Compensatory Model suggested by Cantor and others (Cantor 1979, 1991; Cantor, Brennan, and Sainz 1994), formal and informal care can substitute for one another along a hierarchy of ordered preferences with primary family members given priority and professionals viewed as the option of last resort. This is akin to the substitutive model posited by Greene (1983), which implies an inverse relationship between formal and informal care—that is, the increase in use of one form of care results in a decrease in use of the other form of care. Van Houtven and Norton (2004) conceptualized a substitutive model based on health care decisions made by the caregiver (in their model, the child) and care receiver (the parent). These decisions were presented as a balancing act between the child and parent, with the child providing informal care after taking into account the parent's formal care utilization and vice versa. Research supports the idea that informal care can substitute for Medicaid long-term care, home-health care, paid domestic help, and skilled nursing care (Kemper 1992; Van Houtven and Norton 2004, 2008; Bolin, Lindgren, and Lundborg 2008; Bonsang 2009). Other studies, however, suggest that care recipients need both forms of care simultaneously (Moscovice, Davidson, and McCaffrey 1988; Litwin and Attias-Donfut 2009), especially as levels of disability increase (Bonsang 2009). According to the Task-specific Theory championed by Litwak and others, formal and informal care has different structural characteristics and cannot function as substitutes (Litwak 1985; Litwak and Messeri 1989; Litwak, Messeri, and Silverstein 1990). These characteristics include proximity to caregivers, plus the caregivers' technical skill, commitment, and motivation. Individuals choose care providers based on a match between potential caregiver and the characteristics of the specific task with which assistance is needed. Accordingly, factors not related to the amount of formal care provided (such as proximity to an informal caregiver) are the best predictors of informal care utilization (Tennstedt, Crawford, and McKinlay 1993; Zhu et al. 2008). Within these models, formal and informal home care are complements. Each may enhance the other, but they cannot be treated as substitutes. Understanding whether formal and informal care act as substitutes or complements is important. Currently, PCS are believed necessary for 10.9 million residents across the United States (Kaye, Harrington, and LaPlante 2010), with the expectation that this population needing services will continue to grow. As the payment structure for PCS moves away from a fee-for-service structure toward a prospective case mix model, payment may be based on estimations of beneficiary need rather than care use (Phillips et al. 2008). State equations for allocation of formal care may then include the amount of informal care utilized to “adjust” the amount of formal care provided by public programs. If beneficiaries rely on formal and informal care simultaneously (and the two forms of care are complements), then adjusting formal care allocations based on the belief that informal services will increase to meet any shortfall may result in unmet needs. The lack of consistent findings concerning the nature of the relationship between informal and formal care necessitates further inquiries to assist policy makers in making informed decisions regarding formal care allocation. The following cross-sectional analysis addressed this issue by examining data on informal care utilization in light of formal care hours authorized through a publicly funded (Medicaid) PCS program in Texas. This research juxtaposes the two competing hypotheses and provides an empirical investigation that should add weight to the potential validity of the hypothesis which finds support in these data. This research addressed three specific questions: Is there any evidence of substitution of formal care for informal care? Is there any evidence of a complementary relationship between formal and informal care? What factors predict informal care utilization?