Is private hire cheaper than agency home care?

The private-hire vs. agency comparison is the most-searched cost question after "does Medicare pay?". The sticker gap looks large — often $8–$15/hr — but the real gap is smaller once the family accounts for what the agency rate includes and private hire does not.

When a caregiver is hired directly, the family becomes a household employer under IRS rules. That means withholding and remitting FICA, filing Schedule H, issuing a W-2, and often paying state unemployment insurance. Workers compensation is typically required (varies by state — Michigan enforces it for household workers under specific conditions). Liability insurance for injury to or by the caregiver falls on the homeowner. When the caregiver calls in sick or takes vacation, the family covers the shift.

The agency rate absorbs all of that — payroll tax, workers comp, liability, supervision, background/reference vetting, training, Registered Nurse oversight of the care plan, and a vetted backup roster. The economic gap between "$22/hr private" and "$32/hr agency" is real, but it is closer to $2–$4/hr after the costs are included, and it can invert entirely when a backup or lawsuit is triggered.

Private hire can still make sense in narrow cases: low-acuity companion-only need, a trusted long-term caregiver, and a family willing to take on employer responsibilities. For hands-on Personal Care, dementia care, or post-discharge complexity, most Southeast Michigan families end up switching to an agency after an incident forces the issue.

For the full breakdown, see the cornerstone: Home Health vs. Home Care guide.