The impact of informal caregiving on U.S. Veterans Health Administration utilization and expenditures

Few studies have examined the effect of informal care receipt on health care utilization and expenditures while accounting for the potentially endogenous relationship between informal and formal care, and none have examined these relationships for U.S. Veterans. With rapidly increasing investments in caregiver supports over the past decade, including stipends for caregivers, the U.S. Department of Veterans Affairs (VA) needs to better understand the costs and benefits of informal care provision. Using a unique data linkage between the 1998–2010 Health and Retirement Study and VA administrative data (n = 2083 Veterans with 9511 person-wave observations), we applied instrumental variable techniques to understand the effect of care from an adult child on Veterans' two-year VA utilization and expenditures. We found that informal care decreased overall utilization by 53 percentage points (p < 0.001) and expenditures by $19,977 (p < 0.01). These reductions can be explained by informal care decreasing the probability of inpatient utilization by 17 percentage points (p < 0.001), outpatient utilization by 57 percentage points (p < 0.001), and institutional long-term care by 3 percentage points (p < 0.05). There were no changes in the probability of non-institutional long-term care use, though these expenditures decreased by $882 (p < 0.05). Expenditure decreases were greatest amongst medically complex patients. Our results indicate relative alignment between VA's stipend payments, which are based on replacement cost methods, and the monetary benefits derived through VA cost avoidances due to informal care. For health systems considering similar caregiver stipend payments, our findings suggest that the cost of these programs may be offset by informal care substituting for formal care, particularly for higher need patients.