What is the Marginal Benefit of Family Care?

The current debate about how best to meet the growing demand for person-centered, high-quality long-term care in the least restrictive setting possible has centered almost solely on the direct and indirect costs of each type of care.  However, to date, there has been very little, if any, attention paid to the relative benefits of each. Assessing the relative gains is often difficult because they type of care one receives is a choice, raising endogeneity concerns. Second, individuals often receive paid and unpaid home care at the same time, leading to difficulty in teasing out the relative benefits of each.  Our study exploits a unique setting to address the endogeneity issue directly. Namely we exploit the randomization between treatment and control groups that were eligible for different types of home care as part of the Cash and Counselling demonstration project. We show that the randomization directly impacted the likelihood of relying solely on agency-provided home care versus having a combination of agency-provided care plus care provided by family members (hereafter family-care). Therefore, we use the randomization as an instrumental variable for the type of home care received. We then estimate the causal impact of using family care, in addition to agency care, on health utilization. We control for baseline disease history and health status to reduce omitted-variables bias and to enhance the overall precision of the results.  Because medical utilization has a mass point at zero and being randomized into the treatment group is binary, we use two-stage residual inclusion methods with two-part models.

We find that that combining both agency care and family care significantly increases Medicaid inpatient costs, by $1000 on average, compared to receiving agency care alone.  We find no increase in the number of hospital days across groups.   Given that we find cost of inpatient care is higher for those receiving family-care, that further examination of the benefits of care is warranted before further policy pushes towards informal care are made.