Introduction
Population aging is substantially increasing the number of individuals requiring home and community care (HCC) in many countries, including Canada. For example, in Ontario, approximately 1.2 million people will need HCC by 2031 – an increase of 53 per cent from 2019 (Deloitte, 2021; Zagrodney, King, Simon, Nichol, & McKay, Reference Zagrodney, King, Simon, Nichol and McKay2023 [in press]). Currently, the HCC sector does not have the capacity to meet existing demand (Statistics Canada, Reference Daily2022), and continuation of the status quo will be grossly inadequate to meet future needs. It is therefore necessary to re-examine resource allocation to find fiscally responsible solutions to align care with population needs.
Investment in the health system capacity is required to meet the needs of the aging population. Through its policies and funding allocations, the government can influence where this capacity is created. Increasing capacity within HCC will result in lower costs for the health care system compared to institutionalized long-term care (ILTC) and is consistent with the priorities of older adults (Sinha & Nolan, Reference Sinha and Nolan2020). Most older adults would prefer to age at home (Sinha & Nolan, Reference Sinha and Nolan2020), and the majority experience better physical and cognitive outcomes when they can do so while also preserving independence and quality of life (Gitlin, Reference Gitlin2003; Lee et al., Reference Lee, Cho, Yim, Lee, Ko and Kim2015; Marek et al., Reference Marek, Popejoy, Petroski, Mehr, Rantz and Lin2005). For those who do remain at home, improved HCC access reduces burden for the family caregivers who provide most of the home care (McCusker et al., Reference McCusker, Yaffe, Lambert, Cole, de Raad and Belzile2020). The availability of HCC thus impacts quality of life for older adults in need of care and for the 1.5 million people in Ontario who care for an older family member (The Change Foundation, 2019).
Without additional HCC capacity, many individuals will need to receive care in the more expensive and less preferred ILTC or hospital settings (Sinha & Nolan, Reference Sinha and Nolan2020; Statistics Canada, Reference Daily2022), which are also facing substantial capacity strain (Financial Accountability Office of Ontario [FAO], 2019). The availability of Personal Support Workers (PSWs), who provide 70–80 per cent of paid HCC (Home Care Sector Study Corporation, 2003), drives HCC capacity. While staffing also affects capacity in other sectors, HCC is unique in that it does not require additional physical infrastructure to increase capacity, permitting rapid growth in this sector’s ability to provide care.
How Do Low Wages Influence Capacity in the Home and Community Care Sector?
Historical underfunding of HCC in Canada contributes to difficulties retaining HCC PSWs. Even prior to the pandemic, half of PSWs left health care within 5 years, and the rate of turnover was increasing (Ministry of Long-Term Care, 2020), with wages identified as a key driver of turnover (Denton, Zeytinoglu, Davies, & Hunter, Reference Denton, Zeytinoglu, Davies and Hunter2006). The coronavirus disease (COVID-19) pandemic accelerated turnover, and unfilled PSW positions the HCC sector in Ontario tripled from 2021 to 2022 (Ontario Community Support Association [OCSA], 2022). Addressing PSW turnover is key to HCC capacity and improving quality of care (Castle & Engberg, Reference Castle and Engberg2005). The magnitude of PSW turnover means that even modest increases in retention, coupled with maintaining current rates of recruitment, offer the opportunity for rapid improvements to HCC capacity.
Low wages play a particularly important role in undermining the stability of the HCC PSW workforce, where PSWs are paid 26 per cent less than PSWs in ILTC, with an even greater gap compared to hospital-based PSWs (Home Care Ontario [HCO] & Ontario Community Support Association [OCSA], 2019; Zagrodney et al., Reference Zagrodney, King, Simon, Nichol and McKay2023 [in press]). HCC PSWs are more likely to leave their jobs than PSWs in ILTC or hospitals (Smith & Baughman, Reference Smith and Baughman2007; Zagrodney, Reference Zagrodney2022) – either leaving health care entirely (Denton et al., Reference Denton, Zeytinoglu, Davies and Hunter2006) or moving to better-paid PSW positions in other sectors (Casey, Reference Casey2021). Working as a PSW is a difficult job, and several factors contribute to low job satisfaction and high turnover in the HCC sector, including poor scheduling, travel time, safety, lack of respect, and high workload (Kemper et al., Reference Kemper, Heier, Barry, Brannon, Angelelli and Vasey2008; Panagiotoglou, Fancey, Keefe, & Martin-Matthews, Reference Panagiotoglou, Fancey, Keefe and Martin-Matthews2017). However, one of the most cited reasons for HCC PSWs leaving their jobs is the substantially lower wages offered to PSWs in the HCC sector compared to those in ILTC (Banijamali, Jacoby, & Hagopian, Reference Banijamali, Jacoby and Hagopian2014; Keefe, Knight, Martin-Matthews, & Legare, Reference Keefe, Knight, Martin-Matthews and Legare2011; Kemper et al., Reference Kemper, Heier, Barry, Brannon, Angelelli and Vasey2008). The lack of wage parity between HCC and ILTC PSWs has been explicitly highlighted as a key issue for HCC human resource planning in Canada by multiple past studies (Home Care Sector Study Corporation, 2003; Keefe et al., Reference Keefe, Knight, Martin-Matthews and Legare2011; Lilly, Reference Lilly2008; Panagiotoglou et al., Reference Panagiotoglou, Fancey, Keefe and Martin-Matthews2017). When asked for the single most important thing that would improve their jobs, the most common response from HCC PSWs was increased compensation (Kemper et al., Reference Kemper, Heier, Barry, Brannon, Angelelli and Vasey2008).
Past research has indicated that wage increases are effective at reducing PSW turnover (Dawson, Reference Dawson2007; Howes, Reference Howes2005; Office of the Governor of Wyoming, 2005; Powers & Powers, Reference Powers and Powers2010; Smith & Baughman, Reference Smith and Baughman2007). Increased investment in HCC PSW wages has the potential to help stabilize the HCC workforce and enable the growth of HCC capacity (Jabola-Carolus, Luce, & Milkman, Reference Jabola-Carolus, Luce and Milkman2021). As health care system capacity must expand to meet growing demands for care – either proactively in HCC and ILTC or reactively in hospitals – overall health system expenditures could be reduced, in part, through prioritizing expansion of the least expensive HCC sector.
Can Wage Increases Shift the Balance of Care Toward HCC?
Using Ontario as a case study, we analyse whether investment in wage parity with ILTC (paying PSWs in HCC the same as those in ILTC) is expected to result in government cost-savings and a favourable return-on-investment (ROI). This relies on leveraging higher wages to increase HCC capacity to meet a proportion of the growing demand for care in HCC rather than more expensive settings for HCC patients with the highest needs and greatest risk of accessing ILTC prematurely in the absence of sufficient HCC. To estimate investment, we calculate the cost of applying wage parity to all PSWs currently providing care for HCC patients in Ontario, and PSWs caring for patients newly accommodated by an expanded HCC sector. Savings are calculated based on avoiding the creation and utilization of ILTC for some patients who, according to Canadian Institute for Health Information data, do not require this level of care and could remain at home with proper support (Canadian Institute for Health Information [CIHI], 2020). This analysis assumes that the government will meet the care needs for the growing population of older adults in either HCC or ILTC sectors. Increasing the proportion of patients in HCC would lower government spending, deliver more care in the desired HCC sector, and reduce strain on the ILTC sector. In this paper, we assess the potential impact of PSW wage parity as one of a range of policy options that will be required to meet the projected 53 per cent increase in demand for HCC by 2031 (Deloitte, 2021; Zagrodney et al., Reference Zagrodney, King, Simon, Nichol and McKay2023).
How Would Wage Parity Change Sector Differences in Wages and Cost of Care?
As of 2017, average wages for HCC PSWs ($19.10/hr) were 26 per cent lower than the average for PSWs in ILTC ($24.08/hr). Wage parity could be achieved by increasing funding for HCC PSWs by $6.23/hr (the $4.98 wage gap plus a 25% benefit allowance) (Home Care Ontario [HCO] & Ontario Community Support Organization [OCSA], 2019; Zagrodney et al., Reference Zagrodney, King, Simon, Nichol and McKay2023 [in press]).
Even with wage parity, HCC continues to be the least expensive option. Based on pre-pandemic (2019) operational data from a large home care agency that provides personal support services to over 10,000 patients per year, patients received an average 0.41 daily hours of publicly funded service (2.9 hr/wk). At this service level, wage parity would cost, on average, an additional $2.55/day/patient, raising the average cost of HCC care from $103/day (Sinha & Nolan, Reference Sinha and Nolan2020) to approximately $106/day. Compared to per patient costs in hospital Alternate Level of Care (ALC) of $730/day or ILTC at $201/day, HCC would remain by far the least expensive care setting – even with wage parity.
What Is the Estimated Impact of Wage Parity on Retention?
Wage parity is expected to help stabilize the PSW workforce and increase capacity. Multiple studies have quantified the impact of real-world wage increases on PSW retention. To estimate the impact of wage parity for Ontario HCC PSWs, retention rates from these real-world studies can be scaled to the 26 per cent ($4.98/hr) increase in wages required to reach wage parity (Dawson, Reference Dawson2007; Howes, Reference Howes2005; Office of the Governor of Wyoming, 2005; Powers & Powers, Reference Powers and Powers2010; Smith & Baughman, Reference Smith and Baughman2007). For this 26 per cent wage increase, predicted gains in retention are between 5 per cent (Smith & Baughman, Reference Smith and Baughman2007) and 33 per cent (Powers & Powers, Reference Powers and Powers2010), with an average retention rate of 21 per cent across five studies (Dawson, Reference Dawson2007; Howes, Reference Howes2005; Office of the Governor of Wyoming, 2005; Powers & Powers, Reference Powers and Powers2010; Smith & Baughman, Reference Smith and Baughman2007).
This predicted gain in retention with wage is likely conservative, as the increase required to achieve wage parity is substantially greater than the wage increases in the referenced studies because the 26 per cent increase would make HCC PSW work more financially attractive than work in non-health-care sectors (like retail), which are common destinations for individuals trained as PSWs (Denton et al., Reference Denton, Zeytinoglu, Davies and Hunter2006).
If wage parity were implemented and improved retention by 21 per cent, it would create approximately 23.9 million additional care hours per year (approximately 65,000 care hours per day) in Ontario’s HCC sector (Appendix, Equation 1), thus contributing to meeting some of the rising HCC demand.
What Cost Savings Are Expected from Capacity Increases Driven by Wage Parity?
If the additional care hours created through wage parity investment kept more Ontarians at home instead of in institutions, this would substantially reduce total health care expenditures. The magnitude of savings depends both on degree of retention and how these additional hours are allocated.
In our base model (Table 1), we project cost savings and ROI based on the estimation from the literature that wage parity will improve retention of HCC PSWs by 21 per cent (Dawson, Reference Dawson2007; Howes, Reference Howes2005; Office of the Governor of Wyoming, 2005; Powers & Powers, Reference Powers and Powers2010; Smith & Baughman, Reference Smith and Baughman2007) and that newly created care hours will be allocated according to current practices (average 0.41 hr/day). To test the sensitivity of the model, we also present two alternative scenarios: one in which we use the low end of literature-based estimates for HCC PSW retention, 5 per cent (Smith & Baughman, Reference Smith and Baughman2007), and a second, which assumes that much higher levels of care (2 hr/day, representative of 1 hr of morning care and 1 hr of evening care) will be required to divert patients from ILTC. Graphs are provided within the table to illustrate the effects of varying each of these alternative scenarios on ROI.
Table 1. Projected base model and sensitivity analyses
Notes: This table presents key parameters and findings to model the impact of wage parity on home care capacity and ROI. The first column presents our “Base Model,” which assumes an average retention rate as predicted by previous studies of the impact of wage increases on retention of PSWs and the continuation of current levels of care allocation. In the second and third columns, we present the sensitivity of the model to variations in retention and care allocation assumptions. While the sensitivity analyses present particular scenarios of interest, the final row contains graphs illustrating the effects of varying each parameter to allow readers to explore a greater range of potential scenarios.
All models use the following parameter values:
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• Current average per patient cost of care in HCC: $103/day (Ontario Home and Community Care Branch, 2018)
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• Hourly cost for HCC wage parity: $6.23/hr (Home Care Ontario [HCO] & Ontario Community Support Organization [OCSA], 2019; Zagrodney et al., Reference Zagrodney, King, Simon, Nichol and McKay2023 [in press])
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• Average per patient cost of care in ILTC: $201/day (Sinha & Nolan, Reference Sinha and Nolan2020)
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• Amortized per patient cost of ILTC bed creation: $20.53/day (Financial Accountability Office of Ontario [FAO], 2019; Sinha & Nolan, Reference Sinha and Nolan2020)
We estimate investment by calculating the cost of wage parity for all PSWs currently providing care for Ontario HCC patients plus costs for expected increases in care hours through improved retention. Savings are calculated based on avoidance of unnecessary ILTC placement for some individuals who, as identified by CIHI (2020), do not require this level of care.
Base Model
With the average estimated 21 per cent increase in HCC capacity with wage parity, and considering the likely scenario that newly accommodated HCC patients would receive the current average of 0.41 care hr/day, the additional capacity created would accommodate approximately 159,600 additional patients at home. Although our model shows how wage parity resulting in a 21 per cent increase in HCC capacity would address a large proportion of the expected 53 per cent increase in HCC demand by 2031, other strategies would also be required to fully address the growing needs of the aging population.
This would require an annual investment of approximately $7 billion per year in HCC (Appendix, Equation 2), to allow the avoidance of the $13 billion/yr that would otherwise be required to create places for and provide care to these individuals in ILTC settings (Appendix, Equation 3). Therefore, if wage parity improves retention and thus HCC capacity by 21 per cent, as expected based on the impacts of past PSW wage increases (Dawson, Reference Dawson2007; Howes, Reference Howes2005; Office of the Governor of Wyoming, 2005; Powers & Powers, Reference Powers and Powers2010; Smith & Baughman, Reference Smith and Baughman2007), and if newly accommodated patients receive the current average of 0.41 hr/day of care, this investment would yield annual health system savings of approximately $6 billion per year and an 88 per cent ROI compared to reliance on ILTC.
Below, we evaluate the impact of our two key inputs on ROI – namely, the degree of impact of the wage increases on retention and hours of care received by newly accommodated HCC patients.
How sensitive is the model to retention rate?
The base model used the average predicted retention of 21 per cent, based on previous studies of the observed impact of real-world wage increases on PSW retention (Dawson, Reference Dawson2007; Howes, Reference Howes2005; Office of the Governor of Wyoming, 2005; Powers & Powers, Reference Powers and Powers2010; Smith & Baughman, Reference Smith and Baughman2007). If instead of the average we apply the lowest retention rate found in the literature, equivalent to a 5 per cent increase in retention for a 26 per cent increase in wages (Smith & Baughman, Reference Smith and Baughman2007), then the increase in HCC capacity would accommodate 38,000 new patients at current care levels, generating savings of $901 million/yr and yielding an ROI of 41 per cent. In the retention rate sensitivity graph (see Table 1), we see that retention increases can be less than half of the lowest PSW retention rate found in prior studies, as low as 2.2 per cent, and still yield cost savings and a positive ROI.
How sensitive is the model to care allocation variance?
Each of the above models assumes that care continues to be allocated according to the current average of 0.41 hr/day/patient for all new HCC patients. While there is no reason to expect allocations for current HCC patients to change, it is possible that diverting higher needs patients from ILTC to HCC may require a greater intensity of care. In the “high care needs” scenario explored in Table 1, we find that even if the daily care needs of newly accommodated HCC patients averaged 2 hr/day, the cost of HCC for these patients would still only be approximately $115/day, and total cost savings would be an estimated $559 million/yr, yielding an ROI of 27 per cent. Exploring the impacts of varying care allocation (see Table 1, bottom row), we see that the ROI would continue to be positive as long as the average care requirements of newly accommodated HCC patients remained below 3.3 hr/day ( eight times the current average).
While exact savings and ROI are highly dependent on estimations related to retention and care allocation, it is clear that there is a substantial range of retention rates and hours of care delivered that would still result in a strongly positive ROI from investing in HCC PSW wages.
What Change Would Be Necessary to Reach Wage Parity for HCC PSWs?
Building on the finding that wage parity would be an effective and cost-efficient strategy for increasing health system capacity, further policy-focused work can address how best to achieve this. The most direct option would be to set a minimum wage for publicly funded HCC PSWs, as has been done in the past by the Ontario Government (Ontario Ministry of Health and Long-term Care [MOHLTC], 2015); other less direct policies such as increased funding envelopes for HCC services may also be worthy of exploration.
Conclusion
Updating wage structures to reduce turnover and enable growth in the HCC sector will permit cost-efficient expansion of health system capacity, one of many viable options that can be used to help Ontario meet its growing health care needs by providing care in the sector most appropriate to each individual. With proper HCC access, many ILTC patients can continue to age at home (Canadian Institute for Health Information [CIHI], 2020), where they experience greater social and health benefits (Lee et al., Reference Lee, Cho, Yim, Lee, Ko and Kim2015) and where most older adults prefer to stay (Sinha & Nolan, Reference Sinha and Nolan2020). Although specific cost-saving estimates demonstrated in this paper were based on Ontario data, strong economic benefits of increased home care worker wages have also been found in other jurisdictions in studies that have highlighted that broader societal-level impacts (e.g., tax revenues, economic spillover effects, reductions in hospitalizations) can be expected (Jabola-Carolus et al., Reference Jabola-Carolus, Luce and Milkman2021). In addition to expanding patient access to the least expensive and most preferred sector, growth in HCC will provide much needed relief across the ILTC and hospital sectors by improving the flow of patients whose needs can be met at home (Williams et al., Reference Williams, Lum, Morton-Chang, Kuluski, Peckham, Warrick and Ying2016). There is alignment in the need for improved HCC access across multiple stakeholders, including patients, caregivers, stakeholders from other sectors, and individuals interested in government fiscal responsibility.
In this paper, we showed how investing in wage parity between PSWs in HCC and ILTC will have a minimal impact on the daily cost of care in HCC. Based on previous wage increases and resulting retention improvements for PSWs, an average retention rate of 21 per cent is expected from wage parity, resulting in estimated provincial health care system savings of approximately $6 billion per year and an ROI of 88 per cent from avoiding unnecessary ILTC placements. Increasing capacity and realizing these cost savings require an investment in stabilizing and growing the HCC workforce. Our analysis finds that wage parity is one cost-effective option for increasing HCC supply to help address the growing care needs of the aging population while limiting costs by providing this care in the lowest cost sector (Deloitte, 2021; Zagrodney et al., Reference Zagrodney, King, Simon, Nichol and McKay2023).
Supplementary material
The supplementary material for this article can be found at http://doi.org/10.1017/S0714980823000557.
Funding
This project was supported by the Ontario Community Support Association (OCSA).
Open access
