If you’re searching for a caregiver, chances are you will hear a few companies quote rates that are approximately five dollars per hour lower than their competition. In this post, I explain why some firms charge lower hourly rates and why cheaper is not always better.
There are five main factors that affect the hourly rate charged to a family: location, qualifications of the worker, number of hours, profitability of the firm, and the business model.
1. The hourly rate can increase if the family lives in an expensive part of the country or the caregiver lives far away from the family. All things equal, a firm that employs a caregiver that lives closer to the family will be able to charge a lower rate than a firm that employs a caregiver who lives farther away from the family.
2. The more qualifications the caregiver has, the higher the hourly rate a firm will charge. For example in Washington D.C., a registered nurse (“RN”) may cost $40 per hour while a certified nursing assistant (“CNA”) may cost $25 per hour.
3. In most cases, the hours per day and the hours per week that a family needs a caregiver will affect the hourly rate—the more hours that a family needs a caregiver, the cheaper the rate.
4. Firms may charge more money just to be more profitable—while some firms may pay their caregivers higher wages, and therefore can justify their higher rate, more likely than not most firms of the same business model with above average prices are attempting to run a more profitable business by charging more for the same services.
5. There are two types of business models in the home care industry, registry and agency. The registry model is generally cheaper than the agency model. The rest of this post defines the registry model and explains why it is generally cheaper than the agency model.
A firm that employs the registry model does not hire its caregivers. Instead, the caregivers are independent contractors referred by the firm. Generally, a family will pay a billing company, which then pays the caregiver and the firm. The firm charges a referral fee as a portion of the hourly rate charged to the family for the caregiver’s services. The caregiver gets paid for the number of hours the family uses his or her services. Caregivers who work under the registry model are cheaper than the caregivers who work under the agency model because they typically do not get health insurance, retirement options, and other common employee benefits that come with working for a firm full-time. For this reason, families should ask themselves if they are comfortable employing someone who does not receive these benefits yet may work over 36 hours per week.
Many firms that use the agency model will say that the registry model is bad because the caregivers are not CNAs, they are not reimbursable by long-term care insurance, the families are responsible for scheduling other caregivers if their main one is absent, the families are liable for anything that the caregivers steal, and the families are liable for any injury to the caregivers.
The truth is that these are generalizations and cannot be extrapolated to all registry firms. Some registry firms only contract with CNAs, charge fees that are reimbursable by long-term care insurance, will schedule another caregiver if the main one is absent, will reimburse the family for the value of stolen goods, and cover the liability of the caregiver if he or she is injured on the job. There are registry firms that operate this way in Maryland and Washington D.C.
Of the five main factors that affect a caregiver’s hourly rate, factors (1) and (4) families can control by shopping around to different firms, (2) and (3) will be determined by how much care their loved one needs, and (5) depends on the family’s feeling toward the ethics of hiring a contractor who may not receive employee benefits for doing the same work that an agency-caregiver would do and who receives employee benefits. From what I can tell through my research, (5) affects the hourly rate by approximately $5.50.
If you contact a senior advisor, he or she can refer a firm that employs the business model that you prefer, help you get the care that you need, confirm that you are protected, negotiate to lower your cost of care, and ensure that you are paying a reasonable rate. If you want to learn more, here is a link to contact us.