These are services, she suggests, that America’s families need and would support.

Folbre refers to two recent studies that support greater investment in home care services as a strategy improving the economy.

One of the papers, a policy brief by economists at the Levi Economics Institute of Bard College, argues that a federal investment of $50 billion into home and child care services would especially benefit low-income familieshurt by the recession.

The other paper is by the New America Foundation, a Washington D.C.-based think tank. They propose the introduction of a nationwide voucher system to help elderly consumers secure home care. By using their vouchers, elders would create more demand for home care services, and would enjoy the benefits of consumer direction.

Dr. Candace Howes

PHI, along with the Institute for Women and Policy Research (IWPR), released a report this week by Dr. Candace Howes, examining why California’s proposal to cut 444,000 elders and people with disabilities from the In-Home Supportive Services progam is short-sighted and fiscally irresponsible.

Below, Dr. Howes discusses her research.

I have spent several years studying California’s In-Home Supportive Services (IHSS) program, the state’s Medicaid long-term care program that provides in-home personal care services to 444,000 elderly persons and persons with disabilities.

My work has mainly looked at whether wage and benefit increases for many of the 360,000 IHSS workers have helped expand and stabilize the workforce.

Lately, I have been looking at how California’s program compares to other states. By pairing IHSS with nursing home services, California has taken its place among the top five states in terms of coverage, balance between nursing home and home- and community-based care, and cost effectiveness.

Severe Budget Cuts Proposed

Yet Governor Arnold Schwarzenegger, in his proposed Budget for 2010-2011, has recommended cutting the IHSS program for 444,000 people, leaving IHSS recipients with two options: to rely on unpaid family care or to enter a nursing facility.

The California Legislative Analyst’s Office (LAO) gave the Governor’s proposal a boost when, in a January 2010 report, it argued that IHSS is just barely cost-effective to the state (by keeping people out of more expensive nursing homes). The LAO suggested that the state replace IHSS with a program that provided personal care services only to the most impaired, while the other two-thirds of current IHSS consumers would get fewer services — or lose them altogether.

I thought, how can nursing home care compete on costs with home care, let alone on quality of life? I also, worried about the signal California’s action might send to other budget-challenged states.

Study Sharply Underestimates Fiscal Impact

Delving deeper, I found that once the LAO assumed, remarkably, that a nursing home stay really costs only slightly more than getting in-home care, and that, if the program were cancelled, no more than about 32 percent of current IHSS recipients would move to nursing homes. From there, it was a short step to finding that the IHSS program was costing the state more than it needed to spend on its long-term care.

Using more realistic assumptions, I found that instead of saving state taxpayers money if the state shut down the IHSS program, California taxpayers could end up spending $2.9 billion more each year. Even the scaled-down program proposed by the LAO would not save as much money as the LAO estimated.

If instead, California simply moved the people who were suitable candidates for home care services out of nursing homes, it could save taxpayers almost $300 million per year and improve the quality of life for seniors and persons with disabilities.

Candace Howes, Ph.D.
Hogate-Ferrin ‘43 Professor of Economics, Connecticut College

In Budget Solutions and Jobs, University of California-Berkeley researchers find that “the effects of cuts in social service programs would go well beyond the impact on jobs.”

Out of all the social service programs on the chopping block, the California economy can expect to suffer the greatest economic loss from the proposed cuts to the state’s In-Home Supportive Services (IHSS) program.

Under IHSS, about 360,000 personal care aides provide assistance with self-care and everyday tasks to approximately 400,000 people with disabilities living in their own homes.

The researchers conclude that $1 billion in cuts to the IHSS program would mean the loss of about 216,000 jobs over the course of one year.

Multiplier Effect

The estimated job loss is made up of 184,500 direct full-time equivalent IHSS jobs and 31,400 jobs lost to the “multiplier effect” — that is, the secondary ripple effects of reduced spending. Economic multipliers tell us how much an “economic shock” — such as spending cuts or tax increases — will affect the state’s economy.

For example, since low-income residents spend a greater share of their earnings, and spend more locally than do higher income residents, multipliers for the IHSS program are particularly high. Most of the funds go to low-income families.

In addition, the IHSS program brings in significant federal matching dollars, which serve to further stimulate the California economy. And in the IHSS programs, the cuts have a large employment impact because 85 percent of the program’s funding pays the wages for roughly 360,000 IHSS workers, whose average wage is $10 per hour.

Finally, the IHSS cut will have a direct impact on state and local tax revenue: an investment of $1 billion in IHSS brings back an estimated $360 million in state and local tax revenue. In comparison, a tax cut of $1 billion for upper-income households would result in only $70 million in additional tax revenue for the state.

A High Cost to Local Communities

Home and personal care programs have some of the highest effectiveness per dollar spent of all social welfare programs. As a result, reductions in state spending in these programs come at a very high cost in terms of the economic impact on local communities.

In the March 2010 brief, Ken Jacobs, T. William Lester, and Laurel Tan of the University of California-Berkeley’s Center for Labor Research and Education conclude that “with an unemployment rate of 12.5 percent and nearly 2.3 million Californians out of work, the Governor and State Legislature should take care to minimize the negative impact of the budget measures on employment.”

– by Dorie Seavey, Director of Policy Research

CA Governor Arnold Schwarzenegger

California Governor Arnold Schwarzenegger has proposed severe budget cuts to the state’s In-Home Supportive Services (IHSS) program, which would eliminate 87 percent of its services in July.

IHSS currently employs 370,000 home care workers who provide services and supports to 400,000 low-income people aged 65 and up, and Californians who are blind or living with a disability, including children.

The proposed cuts would “force many elders and people with disabilities, who are currently able to live in their own homes with a cost-effective system of support, into nursing homes at about five times the cost to the taxpayer,” said Chris Otero, chair of the governing board for the Personal Assistance Services Council of Los Angeles County.

Should the governor’s budget pass, only consumers that need the highest level of care will be eligible to receive IHSS services. A score of 4 or above on the state’s functional index scale would be required to receive home care services and supports.

The governor also proposes to cut the state’s wage contribution to $8 per hour, plus 60 cents per hour for health benefits. In some California counties, wages are $12.35 per hour.

IHSS Cuts to Face Legal Challenge

Advocates say that the courts could rescue the IHSS program, if the governor’s revised May budget does not. Numerous lawsuits that are based on similar attempts last year to eliminate individuals from the IHSS program are already in progress.

“We are hoping that the current court injunctions, will be upheld by the courts and it will be determined once and for all that these cuts violate federal law,” Otero said.

“The Olmstead Act passed by the Supreme Court in 1999, stating that people have the right to live in the least restrictive environment, affects not only those currently in institutions but also people who are at risk of institutionalization,” she said.

More Losses Possible

California’s adult day health care program — which provides health, therapeutic and social services to 45,000 people at risk of nursing home placement — would be completely abolished under the budget plan.

The suggested $950 million IHSS budget cuts are part of a $4 billion cut to the state’s Health and Human Service Agency proposed by Schwarzenegger to address the Golden State’s nearly $20 billion budget shortfall through June 2011.

Deeper cuts could be made to the agency if the state does not receive an additional nearly $7 billion it anticipates getting from the federal government.

– by Deane Beebe