The care economy represents one of the largest consumer spends annually as a percentage of the U.S. GDP. How much? $648 billion. Annually. One of the more interesting aspects underneath this significant number is who is doing the spending. When it comes to care, the range and types of payors are wildly dynamic–presenting both a challenge and a series of opportunities for businesses working in the care space.

At the heart of this dynamic is simply the fact that many families cannot afford the care that they deserve-whether it’s for a young child, aging parent, person with a disability, or someone with a long-term illness.

According to the U.S. Department of Health and Human Services (HHS), child care is considered affordable if it costs families no more than 7% of their income. However, across nearly every category—whether it be education level, race, age, or income—families paying for child care spend, on average, about 40% more than what is considered affordable. Elder care is similarly out of bounds for most families. According to research done by the Urban Institute and HHS, findings show that many older adults with severe long-term services and support (LTSS) needs could not afford 2 years of paid home care without financial assistance. To support their aging parents, 30% of adults with at least one parent aged 65 or older provide support in finances and more than half of them gave $1,000 or more for ongoing necessities like groceries, or medical bills. For families with dependents with disabilities, 69% of families expressed concern about being able to provide lifetime care for their dependents, and 1 in 3 adults with disabilities (18-44 years) have an unmet health care need because of cost in the past year.

40%

Families paying for child care spend, on average, more than 40% of what is considered affordable

30%

30% of adults with at least one parent aged 65 or older provide support in finances

1 Note: While we understand that not all parents identify as men or women, the sample size of this survey prevented us from gathering meaningful information about gender non-binary parents.

2 See SIDEBAR: A $280B+ male care consumer market.

For America’s families, the math simply doesn’t add up.

That’s where a variety of other payors come into play, including:

Employers

Employers pay to offer care products and services to their employees as benefits. Partnerships with employers can help care companies access a large pool of targeted users and take advantage of a growing market.

Medicare

Medicare is a federal health insurance program for individuals age 65 or older and certain individuals with disabilities. It covers hospital and medical expenses, with four parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage plans) and Part D (drug coverage). Medicare Advantage has seen increasing popularity over the past years and their plans typically receive the same benefits as traditional Medicare, but often with additional benefits such as coverage for vision, hearing, and dental care.

medicaid

Medicaid is a government-funded assistance program that primarily serves lower income or chronic care beneficiaries. It is a federal run program with partnership eligibility criteria. Processes can vary widely across states.

Other government programs/payors

Other government programs/payors are significant players when it comes to childcare. For example, Temporary Assistance for Needy Families (TANF) supports financially vulnerable families with cash assistance, child care subsidies, and work support, and Head Start supports low-income children ages 3 to 5 to attend full-day/ full-year child care.

Care Organizations

Care Organizations, such as assisted living facilities, retirement communities, skilled nursing facilities, child care facilities, care platforms, and senior communities, are also payors for care products and services. They can either be payors directly (e.g., purchasing supplies for a home retrofitting service or back-end processing) or through an affiliate model (e.g., providing a referral fee or percentage of revenue for care customers introduced).

Working with multiple payors

As an entrepreneur building in the care economy, taking stock of which payor to start building a business model around is an important task. Some care companies are better designed to be direct to consumers only, while others will decide to pursue a B2B (business to business) offering or B2B2C (business to business to consumer) offering.

While working with multiple payors isn’t unique to the care economy, what is unique is how early this consideration comes into play and how much it can affect the path to acquisition while overcoming some of the barriers to adoption in care.

Some payors, like employers, can provide significant and quick access to large pools of potential care users. For others, like care providers, it can be a volume game; sales cycles are quick with low risk collaborations. Institutional payors can also differ by the length of the sales cycle and the burden of proof that care companies have to meet to get approved. Employers, Medicare, Medicaid all fall into the bucket of longer sales and payment cycles (often in the 6 - 12 month time frame) but with the upside of scale.

Examples of innovative care companies that adopt a multi-payor model

Build social proof.

Scaling referrals from friends and neighbors can quickly establish trust, while reinforcing that ‘people like me’ utilize these products or services.

papa

Papa, a curated platform of companionship and support for older adults, families, and other vulnerable populations, had an initial business model through health plans. Papa started with Medicare Advantage, expanded into Medicaid, and in March 2022, announced a new offering for employers. Andrew Parker, founder and CEO of Papa, shared that "for employees, the impossible balancing act between one's work and family roles impacts them, their dependents, and ultimately, their employer. Papa has shown success with Medicare Advantage and Medicaid members in terms of reduced loneliness and improved health, and we believe there is tremendous opportunity to extend our model to flexible family care, for help when, where, and how it's most needed."

concerto care

Concerto Care is a tech-enabled, value-based provider of at-home, comprehensive care for adults with unmet medical, behavioral, and social needs. ConcertoCare’s interdisciplinary teams include doctors, pharmacists, nurses, social workers, behavioral health clinicians, and health coaches. These teams can partner with patients’ current primary care providers (PCPs) or serve as the provider of record, and they are supported by Patient3D®, ConcertoCare’s proprietary population health and point-of-care insights platform. ConcertoCare works with patients aligned to a wide variety of payer and provider organizations – including Medicare Advantage plans, Special Needs Plans (including D-SNPs), Medicare-Medicaid Plans, and risk-bearing provider groups such as ACOs.

cleo

‍Cleo is the only global family and caregiver employee benefit platform that provides direct support from family planning and pregnancy through taking care of newborns and young children through teens and adults. Their core business model is selling to employers and health plans. Cleo has 145 clients such as Salesforce, Pepsi, Cooley, Redbull, and Pinterest as well as members in 60 different countries.

By working with multiple payors, care companies not only establish a strong competitive advantage but can also achieve greater financial stability.

A well thought-out strategy of how to sequentially, or in parallel, pursue a variety of payors will mitigate the customer acquisition challenges in care and benefit from unlocking diverse sources of revenue.

Source: A national survey with n=2485 respondents to understand household willingness to pay for products and services that reduce the time spent on household management tasks. Conducted in April 2021 by McKinsey & Co.