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Summary Module 15: Organization & financing of long-term care
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Lecture 15ALong term care (LTC) is a range of services needed for persons who are dependent on help
with basic ADL, frequently in combination with help with basic medical services.
● Includes informal care, home health care, assisted living facilities, and nursing homes
● Largest share of LTC → eldery care
Major challenges for sustainable LTC:
● Population ageing
● Increasing prevalence of chronic diseases
● Changing preferences & expectations
● Availability of formal & informal care
● Limited productivity growth (Baumol’s cost disease)
● Constrained public resources
We are getting older but is this driving the increasing demand for LTC? This
depends on how you get older → how many disability free live years?
The disability free life expectancy is increasing in some countries.
Factors affecting total future LTC demand:
● Demography → population size, ageing
● Looking at uptake per demographic group, the demand is likely to decrease.
○ Due to a higher level of education and a lower number of disabilities.
● Namely the number of people that are getting older is the problem.
LTC-expenses strongly increase after 80.
Projected growth of age-related spending by 2059 within OECD:
● Spending on old-age pension/early retirement programmes → 40 %
● Health care spending → 50 % at least
● LTC spending → double (200 %) at least
● In the context of constrained public resources this will lead to growing fiscal
pressures to mitigate growth of public LTC expenditure.
Baumal’s cost disease → particularly relevant for LTC:
● Average labor productivity growth in LTC is substantially less than in the entire
economy.
○ The quality is determined by the amount of time a caregiver is investing.
○ Average annual productivity growth in the Netherlands 1972-2010
→ 1.8 % in economy vs 0.2 % in LTC.
● Average wage growth in LTC is similar to average wage growth in the economy.
● LTC is becoming relatively more expensive.
● Demand LTC does not decrease due to a quite inelastic demand (partly as a result of
public LTC insurance or payment)
● Result → an increasing share of GDP spent on LTC
Ageing and LTC is not only a problem of growing expenses → increasing tension
between labor market participation and informal care provision.
, Still informal care is the backbone of LTC provision. But informal care cannot accommodate
the expected increase in demand for LTC. And reliance on informal care has important
drawbacks:
● Lower employment → a 1 % increase in hours of care is associated with a
10 % reduction in employment rate.
● Reduced working hours → especially intensive and co-residential caring
● Forgone tax revenues from reduced labor market participation
● Caregivers have more mental health problems (especially intensive caring)
Lecture 15B
How comprehensive are LTC systems? Three dimensions of universal access to LTC:
1. Who is entitled to publicly financed LTC?
2. What is covered by publicly financed LTC?
3. What share is paid by public financed LTC?
The more comprehensive → the bigger the box.
Large differences in LTC financing and organization:
● Universalistic (Netherlands, Nordic countries)
○ Provision of LTC is public responsibility
○ Public coverage for all
○ Comprehensive benefits
○ Limited cost-sharing (income-related)
○ Emphasis on formal care
● Individualistic/targeted (germany, spain, italy, UK, US)
○ Provision of LTC is private responsibility (family)
○ Public coverage targeted at people with high need & low income/wealth
(means tested)
○ High cost-sharing
○ Emphasis on informal care
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