Jandos Rothstein
Universal Family Care includes several distinct areas of support over the life course. What child care, paid family and medical leave, and long-term care for the elderly and people with disabilities have in common is that they are underfunded, the policies are a patchwork, and pay is so dismal that care workers are subsidizing the system with their low wages.
There are a variety of proposals for upgrading current family supports. What are the costs and options for doing it right, including upgrading the pay and professionalism of care workers? What is the best strategy for financing them? Each of these options comes with policy variables and trade-offs.
Several progressive states already have a start on such programs, which can become national models. But what about state governments, especially in the South, with large numbers of poor people and long-standing antipathy to social programs? Should we build on the existing mix of state and federal programs, or fold them into a new, comprehensive national program?
In the case of early-childhood education, it would be less costly to build on today’s substantially private system, but it would be better to extend public pre-kindergarten, as a few cities and states have done. For long-term care and home care, we might expand Medicaid, which pays most of the current costs (but only for the medically indigent). It would be preferable to develop a new comprehensive system that reaches everyone, perhaps with fees on a sliding scale.
For financing, we also face choices. For the most part, social insurance in the U.S. is financed by payroll taxes, on the model of Social Security and Medicare. This is familiar and easy to administer, but tends to be regressive, in that lower-income people are taxed at higher rates. Should we instead finance new programs partly with general revenues, or dedicated taxes on the rich? These are the inevitable trade-offs with which advocates and policymakers must wrestle. In thinking and dreaming big, it makes sense to begin with the first best policy, rather than compromising before we start.
Early-Childhood Education
Head Start, dating to the Johnson-era anti-poverty program, is federally funded, and pays teachers as professionals. The program currently costs about $10 billion a year and reaches only about 40 percent of eligible kids. If it were expanded to be available to all children who qualify based on income, it would cost more than $25 billion. However, Head Start is a means-tested program that serves only the poor. It’s intended as added enrichment for kids from deprived backgrounds.
A more expansive approach is universal public pre-kindergarten for three- and four-year-olds. Washington, D.C., has such a system. It has enrolled 85 percent of four-year-olds and 75 percent of three-year-olds, at a cost of $18,580 per student. Multiply this by the number of three- and four-year-olds nationally, and you get an annual cost of over $150 billion. However, the per-pupil cost of D.C. far exceeds the national average. A more realistic figure is on the order of $10,000. States and cities already spend an average of about $3,600 per child on pre-K. But only about 22 percent of three- and four-year-olds nationally are in pre-K at all, and only about 15 percent in public schools. So, assuming that existing funds could be rolled into a new, comprehensive program, the incremental cost of universal, school-based pre-kindergarten would be on the order of $80 billion a year. It’s necessary to have school-based pre-K if we want to maintain quality and pay teachers and teacher aides as professionals. Expanding our current patchwork system would cost a lot less, but would produce lower quality.
About half of all public-school funding comes from property taxes. These are regressive, since the communities most in need tend to have the lowest per capita property wealth and have to tax themselves at higher rates to produce adequate revenues. Universal pre-K financed by property tax add-ons is a political and fiscal nonstarter. Expanded universal pre-K is a good candidate for either federal general-revenue funding, or financing based on specific new taxes targeted at the wealthy, as Joe Biden has proposed in his plan.
Child Care
Child care, as distinct from early-childhood education, serves working parents of school-age children and toddlers. The current system is a patchwork. A good example of a national commitment to child care, done right, is the plan proposed by Sen. Elizabeth Warren (D-MA). Her plan envisions that the federal government would rely on a mix of centers and family child care homes. The local sponsors could be cities, school districts, states, counties, tribal organizations, or other nonprofit community entities, but all would be subject to certification for high standards, and pay staff at rates comparable to public-school teacher salaries.
According to a comprehensive study by the Center for American Progress, nearly 40 percent of child care teachers are forced to rely on public assistance at some point in their careers. CAP reports that the average kindergarten teacher salary is $55,000, compared to just $33,000 for child care teachers; and of course a lot of child care workers are not considered teachers and earn far less.
However we finance this new category of social insurance, we need to conceive of it as a comprehensive whole, providing needed care for all Americans over the entire life cycle, and decently compensating caregivers.
Good child care tends to be most costly for infants and toddlers, because of the higher staffing ratios needed, and less expensive for older children, who can have larger class sizes. For very young children, even custodial child care costs over $1,000 a month, while development-oriented care costs more than double that. Given the very limited federal funding to subsidize child care, only affluent families can afford very high-quality care. It is another way in which economic privileges are passed along from generation to generation in the absence of universal social supports.
Meanwhile, poor and working-class parents spend larger percentages of their incomes to get less. Warren reports that low-income parents of children under six currently pay as much as 36 percent of their meager incomes for child care. Unlike existing federal and state programs, which do not fully reach their target populations, Warren’s program would be universal and not just aimed at the poor. It would be free to families making under 200 percent of the poverty line, and other families would pay on a sliding scale. Nobody would pay more than 7 percent of their income.
The total annual cost, as confirmed by an independent analysis by Mark Zandi of Moody’s, would be about $70 billion a year. Warren’s plan, like Biden’s, would be financed by taxes on the wealthy, such as through her proposed “ultra-millionaire tax.”
The Military Model
Another good model is found in the military. Since the World War II–era Lanham Act, the Pentagon has subsidized child care costs for its personnel. As more women have enlisted in the all-volunteer military, these needs have increased. Today, the armed services have the nation’s most comprehensive, high-quality program, combining both kindergarten-quality pre-K and child care for infants and toddlers, as well as after-school day care for older kids.
According to the Congressional Research Service, the military provides pre-kindergarten and day care to some 210,000 children of active-duty personnel, at an annual budgetary cost of about $1.2 billion, supplemented by fees paid on a sliding scale based on income. A family pays as little as $51 per week per child or as much as $210, reflecting the military’s relatively compressed pay structure. These slots are widely available but not guaranteed, and there are waiting lists. All meet the highest level of quality certification.
The average cost of the child care component ranges from $3,000 to $8,400 per child, depending on age and whether the care is in a Child Development Center or contracted-out family day care. These costs slightly understate the true cost, since the Pentagon’s program operates in existing military facilities, where a new national program would also have to bear the cost of creating new ones.
Paid Family and Medical Leave
At present, the only federal policy provides for unpaid family and medical leave, to allow people who have spells of illness or who need to care for family members to take a leave and keep their jobs. Various exclusions mean that only 60 percent of the workforce is eligible for even this unpaid benefit under the Family and Medical Leave Act. (Federal disability benefits under Social Security are limited to people who are permanently unable to work.)
Thanks to a quirk of American history, we do have some experimentation with paid leave at the state level, which gives a good sense of what a national program might cost. In the mid-1940s, after the full-employment experience during World War II, state unemployment programs found themselves with large surpluses. The Department of Labor began suggesting to states that they spend some of that money on what was then called Temporary Disability Insurance, and today is called paid medical leave. Before the political window closed as post-Roosevelt politics turned more conservative, four states created such benefits. These continue today, and have served as models for other states.
The four pioneer states were New York, New Jersey, Rhode Island, and California, and they pursued the social-insurance model of a “contributory” benefit—you had to be working and pay in to qualify—financed by payroll taxes. Of these, California’s program is the most expansive. It covers up to 52 weeks of paid leave, for family caregivers as well as people dealing with their own medical conditions, and pays benefits of 60 to 70 percent of actual wages, with a cap of about $1,300 a week. The program is financed by a payroll tax of 1.0 percent.
Since the 1940s, a total of 14 states have adopted similar programs, many with less generous coverage and lower costs. Since this approach was pioneered by the states, it may make sense to continue expanding them at the state level, though a national program would be more comprehensive.
At the federal level, the proposed FAMILY Act, co-sponsored by Rep. Rosa DeLauro (D-CT) and Sen. Kirsten Gillibrand (D-NY), would provide 12 weeks of paid family and medical leave, including for new and adoptive parents. It would provide 66 percent wage replacement, of up to $4,000 a month. The cost would be financed by a payroll tax of 0.4 percent to be divided evenly between employer and worker.
Extrapolating from the California program and the DeLauro-Gillibrand bill, a comprehensive national program that provides 100 percent of wages with a cap at something like median income for a full year (most people would need it for a full year) would cost between $40 billion and $70 billion a year. If financed by a payroll tax alone, it would require a tax in the range of 1 percent of payroll.
Care for the Elderly
The most costly single category of a comprehensive family care program is care for the elderly. The government’s largest single caregiving program for seniors is Medicaid, which was originally intended by Congress in 1965 as a general health insurance program for the very poor and the working poor, but soon became the insurer of last resort for nursing home care. To qualify for Medicaid, an older person must be medically indigent. For middle-class people, this means “spending down” assets to the point where no more than $2,000 in assets are left and the person becomes a ward of the state.
Currently, Medicaid pays about $100 billion a year for institutional nursing home care, which is more than half of total national spending on long-term facility care. The low reimbursement rates coupled with the profiteering of for-profit nursing home chains (about 70 percent of all facilities) leads to both low-quality care and very low pay rates for certified nursing assistants (CNAs), who make up the vast majority of the hands-on caregiving workforce at nursing homes. Medicaid also spends about $100 billion a year on in-home care, which is subsidized by other federal and state programs as well. Some 80 percent of the nation’s home health providers are for-profits as well.
With the exception of Medicare, which covers time-limited skilled nursing care (nursing homes) and a limited amount of home care (such as hospice nurses), virtually all other federally subsidized home care as well as facility care is means-tested and limited to the very poor. Thus there is a huge gap for the population that is not poor enough for Medicaid and other means-tested assistance, but cannot possibly afford to pay out of pocket for needed home care or assisted living.
With only a small fraction of Americans able to afford private long-term care insurance, the cost of caring is put on family members. According to a study by AARP, in 2013 about 40 million family caregivers provided 37 billion hours of care worth an estimated $470 billion to their parents, spouses, partners, and other adult loved ones. With increased costs, general inflation, and population increases, the figure today is over $600 billion. And this doesn’t count the labor of ordinary child-rearing. Only a small fraction of this would be defrayed by an expanded family and medical leave program, which covers relatively short-term periods of care while a great many elderly people and people with disabilities need care for years and even decades.
Ideally, we need a comprehensive program that includes more generous Medicaid terms for nursing homes, as well as a dramatic expansion of home care subsidies. This would reach well into the middle class, presumably on a sliding scale; it would help to keep lots of people who would rather be at home out of nursing homes. Such a program would also dramatically raise the pay of caregivers, both in nursing care facilities and in home care. These are currently among the lowest-paid people in the caregiving workforce.
Estimates of the total annual cost vary, depending on how expansive the program. But if we subsidized a sliding scale for nursing homes, so that people who entered them would not have to become medical paupers, and increased wages for caregivers and home care eligibility, the cost would run into the low hundreds of billions annually. Unlike Medicare, Medicaid is a joint federal-state program, and the federal share is not financed by payroll taxes but by general revenue. Thus, a much-expanded comprehensive program for both home care and institutional care for seniors would almost surely be funded mostly through general revenue, perhaps combined with surtaxes on the very wealthy. (The more progressive the tax code, the less “general revenue” taxes fall on working families.)
The Issue of Earnings for Caregivers
The largest hidden subsidy in the entire caregiving infrastructure is the dismally low pay for caregivers. According to the Bureau of Labor Statistics, the median wage of the nation’s 1.5 million CNAs is just $13.72 an hour, and 25 percent of CNAs make just $11.22 an hour or less. Most of these workers are immigrants. A great many would like to ascend the career ladder and become licensed practical nurses (LPNs), who earn an average of $22.62 an hour, and an annual income of a middle-class $47,000. But even though it takes only a year of additional education to become certified as an LPN, the working and family conditions of CNAs are such that only a tiny fraction make this jump, even though in practice their hands-on experience gives them most of the skills of LPNs.
Seemingly, there is a brutal trade-off between expanding services and expanding pay. But in creating a comprehensive new category of social insurance, raising pay has to be a goal on a par with expanding services. Better-paid, -trained, and professionalized workers are in the interest of people who receive services as much as those who give them.
One very challenging question is how to compensate family members who provide free care, out of love, duty, or necessity, and who are not compensated at all. The preponderance of people who contribute unpaid family care are women, which also reinforces gender inequities. Some relief will be provided if we have expanded programs of paid caregiving for both the old and the young, as well as paid family leave. But in the case of elderly, disabled, or special-needs family members, the need is often long term. How do we begin to provide equity for those who choose to care for loved ones, and deny themselves the income and the respite of working outside the home? Why does it make sense to compensate a home care worker who is sent by an agency, but not one who is a daughter, sister, or husband? While a budget category of $600 billion to provide full compensation for all family caregivers is a fiscal nonstarter, some partial compensation could make ethical and equitable sense, especially in cases where a family member is eligible for paid social services and receives family caregiving instead.
Putting It All Together
It would be ideal to package all of these categories of caregiving and receiving as a single master program of Universal Family Care, with a single source of funding. There are certainly efficiencies to be had in combining these elements into one program, for the care consumer as well as for the government. But the total cost done properly adds up to several hundreds of billions of dollars a year.
It’s probably not good policy to put all of this on the regressive payroll tax, even one with a less-regressive base such as the Medicare tax base, which unlike Social Security has no cap on taxed income. The best candidate for payroll tax funding seems to be family and medical leave, which is a close cousin to unemployment compensation and federal disability insurance, both funded by payroll taxes. Mandating some level of family and medical leave on employers, with subsidies above that floor, would limit that cost. The benefit of lower turnover and higher productivity could make that palatable.
It’s also the case that we are not starting from scratch, as the care economy contains a mix of federal, state, and local programs, some exemplary and others deplorable. Thus, the practical result will likely be a blend of programs, financed by a mix of different revenue sources. Even Social Security and Medicare, the two core social-insurance programs, are only partly financed by payroll taxes, and supplemented by general revenues.
However we finance this new category of social insurance, we need to conceive of it as a comprehensive whole, providing needed care for all Americans over the entire life cycle, and decently compensating caregivers.
