Caregivers Deplete Their Savings and Many Have Stopped Trying to Save. Should They Get Paid?

Being a caregiver is a big responsibility -emotionally, physically and financially

Taking on the role of financial caregiver can be expensive, but "self-directed" programs could help.

Being a family caregiver isn't just exhausting. It can be financially devastating, as well.

There are 63 million Americans caring for a family member, according to the National Alliance for Caregiving and AARP, and they are often doing so at great personal and financial sacrifice. Caregivers "report depleting savings, taking on debt, paying bills late, even downsizing their homes in order to afford the cost of care," said George Kueppers, senior research manager at the NAC. "One-third of caregivers have stopped saving money. A quarter have used up short-term savings."

At the same time, AARP calculates that it would cost $1 trillion to replace family caregivers with paid care workers. But because neither those funds nor the paid care workers are available to take the place of family members, the system will continue to rely on families. Meanwhile, the financial burden on caregivers is continuing to rise along with higher costs for healthcare, groceries and seemingly everything else. While most family members say they would take on the role no matter the cost, that doesn't obviate the question of whether they should be paid, both to limit their sacrifice and to enable more family members to provide needed care.

Historically, family caregivers have not been paid. It's just one of those things that family members did for one another.

Today, most families depend on two incomes, fewer people are married and families have fewer children to share the caregiving responsibilities. One result is the great financial sacrifice exacted on family members who do take on caregiving roles, not only while they fill this role but thereafter, as well. Caregiving responsibilities can undermine the future retirement security of caregivers if they are unable to save for retirement or add to their Social Security credits because they've stepped away from the workforce.

Reduced employment can also lead to loss of health-insurance coverage. Caregivers can purchase coverage through the Affordable Care Act marketplace if they can afford it, or they might rely on Medicaid if they qualify. The new Medicaid work requirements passed as part of the 2025 GOP tax law known as the One Big Beautiful Bill Act - requirements that must be implemented by state Medicaid agencies by Jan. 1 of next year - include an exception for caregivers of disabled individuals. The proposed regulations have interpreted this relatively broadly, but advocates are concerned that many overwhelmed caregivers will lose their coverage because they will not be able to satisfy the requirement that they recertify their eligibility every six months.

Some communities have strong cultural traditions dictating who should fill the caretaker role - in many cases, that's the eldest daughter. Rajiv Nagaich, a Seattle elder-law attorney, said at a recent conference of the National Academy of Elder Law Attorneys that in his home country of India, the eldest son traditionally takes on the responsibility of caring for aging parents.

In an effort to keep more people in their own homes and avoid the expense of a nursing home, Medicaid programs across the nation have been expanding their coverage of home care. Recognizing the vital importance of family caregivers and their need for financial support, most state Medicaid programs and the Veterans Administration now allow payment to family members to provide assistance with activities of daily living, such as bathing, dressing, eating, meal preparation and medication management. Most payments are hourly, as they would be for nonfamily caregivers, but 13 states also have programs that pay family caregivers a small stipend of $40 to $50 a day not tied to hourly work.

Antoinette Gingerelli, the director of policy and advocacy at the NAC, said 11.2 million Americans receive some sort of payment for family caregiving from Medicaid or the VA Aid and Attendance Program of Comprehensive Assistance for Family Caregivers.

But it's complicated. In considering whether and how to expand home health programs to allow employment of family members, Medicaid agencies have a number of conflicting goals, which include caring for beneficiaries in their homes, reducing costs, providing better care and monitoring how the care is provided and the money allocated. Each state has crafted its own solution. Some permit employment of family members but not spouses or anyone acting as conservator or guardian for the patient, reasoning that those are the individuals who should be monitoring the caregiver, and it doesn't make sense for them to monitor themselves.

An increasing number of Medicaid programs permit the beneficiary or their representative to hire caregivers themselves under so-called self-direction programs. As explained to me by Josh Koch, a former software engineer in Pennsylvania who has an autoimmune disease that has ravaged his body, the concept behind self-direction programs is that the individual receiving care or their family can better coordinate their caregivers and determine the best fit if they hire them themselves.

"The state is allowing you to be an employer, which gives you a lot more flexibility in terms of medication management" and other things, he said, which "might not be allowed if caregivers were hired though agencies that have to have certain licensing requirements."

But every state's program is different. "If you've seen one self-direction program, you've seen one self-direction program," said Mary Morris, co-founder of the Self-Direction Center.

All these programs may face cuts as states react to the trillion-dollar reduction in federal Medicaid funding under the new GOP tax law. They're also facing pushback due to their great expansion in recent years. The Justice Department in June filed a lawsuit against the state of New York and its contracted fiscal intermediary for its self-directed care program, alleging that the contractor was hired through a sham bidding process and "unlawfully siphoned millions of dollars of Medicaid" funds into its own coffers.

Testifying before the U.S. Congress Joint Economic Committee, Bill Hammond, a senior fellow at the Empire Center for Public Policy, based in Albany, N.Y., said the program's budget had increased from $1 billion in 2016 to more than $11 billion in 2024. He acknowledged that the program "plays an invaluable role in the lives of many disabled New Yorkers" but agreed with the Justice Department that "it has also fallen prey to widespread waste, abuse and fraud."

Yet advocates say that self-directed programs should be expanded, arguing that unless families can be supported financially, they will be unable to continue to provide as much care, which will exacerbate the existing shortage of paid care workers.

To mitigate some of the long-term financial repercussions of caring for a family member, one proposal has been to grant Social Security work credits to family caregivers even if they are not contributing financially to the Social Security system. It's unclear how that would affect the stability of the system, which is already on course to run out of reserves in 2032.

Finding the right balance between supporting family caregivers and keeping costs under control will be a continuing struggle as the U.S. grapples with the need for care for aging baby boomers. It is a problem that will only get worse if not handled soon.

Read more about caregiving:

Fighting, bitterness and estrangement: How eldercare is ripping siblings apart

As baby boomers turn 80, caregiving is the unexpected job more Americans face

American workplaces are hostile to workers caring for aging family members. These companies are doing things differently.

-Harry Margolis