The Effect of a National Paid Family Leave Program on Formal Long-Term Care Spending in the U.S.
Open Access
- Author:
- Richardsen, Lucas
- Area of Honors:
- Actuarial Science
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Amanda W Hammell, Thesis Supervisor
Amanda W Hammell, Thesis Honors Advisor
Zhongyi Yuan, Faculty Reader - Keywords:
- paid family leave
long-term care
actuarial science
modeling
public policy - Abstract:
- This paper considers the effects of a national paid family leave program on formal long-term care spending in the U.S. Paid family leave is a benefit under which workers receive a portion of their weekly wage during a leave of absence. While paid family leave can apply in a range of situations, including child bonding and care for a seriously ill family member, we specifically focus on paid family leave to care for an ill family member aged 65+. A small number of states currently run paid family leave programs, but there is currently no national program. While much discussion of paid family leave focuses on worker and labor market outcomes, the largely unexplored impact of paid family leave on reducing formal long-term care service spending (that is, spending on services like nursing homes and in-home nurses) may be quite large and make a more compelling case for the implementation of a benefit which the majority of workers support. The basic premise of this paper is that under a national paid family care leave benefit for care recipients aged 65+, (1) if the provision of the paid family leave benefit increases the rate of leave-taking to care for people aged 65+, and (2) if when workers take leaves to care for people aged 65+, the (informal) care they provide acts as a substitute for formal care (like nursing homes, or in-home nursing), then (3) when the cost of the paid benefit for a leave is less than the cost of the formal care it acts as a substitute for, there will be a net reduction in total spending both from direct (spending on the long-term care services themselves) and indirect (spending on the paid leave benefit) sources. We estimate that the implementation of a national paid family leave program will result in an annual savings of $400 million on formal long-term care services, and we expect that the majority of this savings is due to a reduction in Medicare spending.