How Inflation and the Economy Are Driving Up Home Health Care Costs

Home health care costs are soaring, and a big reason is the pressure of inflation and a strained economy. The Consumer Price Index for home health recently jumped by 14.2%, the largest recorded increase since the Bureau of Labor Statistics began tracking the sector, and that jump is far ahead of general inflation. (HomeCare Magazine)

Part of the problem boils down to labor. Home care agencies are struggling to hire and retain workers, especially direct care aides, because wages are rising in response to demand — but not fast enough or consistently. (McKinsey & Company) McKinsey forecasts that labor costs in healthcare will continue to grow faster than inflation, driven by both clinical and non-clinical staffing shortages. (McKinsey & Company) The direct care workforce has more than doubled over the last decade, but even with that growth, median wages remain relatively low — around $17.36/hour in 2024 — and many workers depend on public assistance. (PHI)

Inflation isn’t just hitting paychecks. Home health agencies are facing rising costs across the board: medical supplies, transportation, administrative overhead, and other non-labor expenses are all more expensive thanks to supply-chain disruptions and higher input costs. (McKinsey & Company)

At the same time, demand for home care is exploding. With the aging baby boomer population and more people preferring to receive care at home, agencies are under enormous strain. Forbes analysis suggests home health costs will continue climbing, projecting annual growth rates well above medical inflation trends. (Forbes)

For families, this means real strain. Many seniors rely on fixed incomes like Social Security, and when home health costs spike, they face an impossible choice: reduce care, rely more on family caregivers, or dip into savings. (AARP)

On the policy side, the risk is growing that more people will “spend down” assets to qualify for Medicaid, putting pressure on public programs. (Penn Wharton Budget Model) Experts argue that addressing the direct care workforce crisis — boosting wages, improving job quality, investing in training — is one of the only ways to stabilize costs in the long run. (PHI)

Without intervention, rising inflation and economic headwinds could make home health care less affordable just when more people depend on it.

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