How Will We Provide and Pay for Long-Term Care?
| Author | Bernard H Casey |
| DOI | 10.1177/138826270300500105 |
| Published date | 01 March 2003 |
| Date | 01 March 2003 |
| Subject Matter | Invited Article |
HOW WILL WE PROVIDE AND PAY FOR
LONG-TERM CARE?*
Bernard H Casey**
Abstract
Ageing produces not only financial dependency but also physical dependency. The
projected fiscal costs of increased long-term care provision can be higher than those
of increased pension provision. Cost projections can be questioned for failing to take
account of increased demands for formal care as female labour force participation
rises and as social constrains and household structures supportive of informal
caring disappear. New ways are needed to pay for care, and conventional methods
have not proved successful. Voluntary saving is unlikely to suffice, equity release
schemes are inefficient, and mandatory care insurance schemes add burdens to
wage costs in the same way as mandatory pension schemes do. The paper proposes
the recouping of care costs from bequests as a way of increasing economic efficiency,
of increasing choice and provision, and of reinforcing traditional intra-familial
responsibilities. However, some redistribution to the less well-off elderly is inevitable.
Evidence and examples of care technologies, of care costs, and of care financing
systems are drawn from across the OECD area.
1.
INTRODUCTION
Much of the debate about societal ageing has been phrased in terms of
‘dependency’. Although this dependency has usually been discussed in
terms of financial dependency and the cost of pension provision, physical
dependency is just as important. Coping with such dependency might
involve costs that are at least as substantial as those involved in meeting
financial dependency. However, our understanding of the future costs of
*
Some of the ideas and material contained in this paper were assembled whilst the author was
a senior economist at OECD. The ideas expressed should not, however, be taken to represent
those of the organisation or any other body or person. Thanks for suggestions and data are
due to Atsuhiro Yamada, Junichi Izumi, Marc Kirscher, Lionel Took, David Webb, Patrick
Garvey, Catriona Lorimer, Adelina Comas-Herrera, Jose´ Fernandez, participants at the CEPS/
ENEPRI conference on ‘Ageing and Welfare Systems: what have we learned?’ (Jan. 2003) and
at an LSE Health and Social Care Seminar.
**
Senior Research Fellow, Department of Industrial Relations, London School of Economics,
Houghton Street, London WC2A 2AE. e-mail: b.casey@lse.ac.uk
European Journal of Social Security, Volume 5 (2003), No. 1
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Bernard H Casey
long-term care provision is much less adequate than our understanding of
the future costs of pension provision.
As part of the exercise by which international organisations sought to
quantify the fiscal costs of societal ageing, the European Commission (2001)
and the OECD (2001) made projections of the costs to the public purse that
will result from the provision of long-term care in the half century to 2050.
The results of this exercise are shown in Figure 1. Panel A simply shows the
long-term costs. Panel B compares the projected increase in care costs with
the projected increase in old-age pension costs. In five of the twelve
countries for which data is available, the latter are greater, underlining the
importance of giving at least as much attention to long-term care as to
pensions. However, in many of the debates about ageing, long-term care is
an issue that is scarcely or, at best, only briefly, mentioned.
Figure 1: Public Expenditure on Long-Term Care
68
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How Will We Provide and Pay for Long-term Care?
Source: LTC expenditure from European Commission, 2001 for EU countries and OECD, 2001 for remaining countries;
pensions expenditure from OECD, 2001; UN population data; own calculations
2.
MEASURING FISCAL COSTS
In the same way that the future pension costs have been projected on the
basis of the ratio of older people compared to those of working age, or, with
greater sophistication, those with benefit entitlements compared to those
contributing, the numerator is usually taken to be the ‘very old’. The latter
are equated with those aged eighty and above, and the presumption is that
they are, proportionately, less likely to be able to look after themselves on
their own and more likely to require the assistance of others. Since this
assistance could involve ‘institutionalisation’, either in a home for the
elderly or in sheltered accommodation, or the provision of services within
the person’s own home, it is presumed to bring with it costs to the public
purse. However, as the EC-OECD study recognised, relative to its projections
on pension costs, its projections in this area are much less robust. Some
countries were not able to submit projections (only nine out of the 15 EU
members did so, and the OECD was able to add data for only four others),1
the basis for the projections they did make was not always clear. A general
problem encountered by those compiling the projections was the difficulty
1
The OECD report also included the Czech Republic, but this is not shown here. The
Commission report included Ireland, but not on a comparable basis, and the OECD report
excluded it.
European Journal of Social Security, Volume 5 (2003), No. 1
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Bernard H Casey
of distinguishing the cost of social care costs from the cost of health care,
and this was not helped by unclear distinctions between the number of beds
in long-stay hospitals and places in different types of homes.
Over and above this, however, the projections were very much ‘demography
driven’. This meant, first, that they made no assumptions about improve-
ments in health status over time. In this respect, they took no account of the
‘compression of morbidity’ thesis, which suggests that poor health, and
associated with that, reduced ability to cope, might be a feature not of age
but rather of closeness to death. In this respect, the projections can be
criticised as overstating future demands for care. It meant, secondly, that
they took no account of changes in the relative level of sectoral wages that
might result from higher demands for labour by the care (and health)
sectors. Equally, if not more importantly, they took no account of possible
increases in the demand for labour in the formal health care sector as a
consequence of a decline in the supply of informal care. This outcome is not
unlikely, since the projections assumed that labour force participation
amongst women – and particularly amongst late middle aged women, who
are the primary providers of informal long-term care – would rise.
Last, and related to this, it meant that no account was taken of changes in
the ‘technology of care’. As Panel A of Figure 1 makes clear, although the
relative importance of the very old in current populations varies only
slightly, the level of public expenditure on long-term care varies
dramatically. This suggests that the level of public provision is determined
by nationally specific factors, but these cannot necessarily be expected to
remain constant over the next half century.
3.
THE NATURE OF LONG-TERM CARE PROVISION
The ‘technology of care’ varies remarkably between countries. Some
indication can be seen in the cross-national comparison that shows the
extent of the older population in nursing homes, old-age people’s homes
and in receipt of home-help services. This is the subject of Table 1.
While Table 1 shows the provision of ‘formal’ care; Table 2 provides some
indication of the incidence of ‘informal’ care.
The differences between some of the northern European countries and
those of southern Europe are dramatic.2 On the assumption that older
people in different countries need approximately the same degree of care,
the presumption can only be that a greater proportion of that care is provide
2
An attempt to build a typology of ‘formal’ social care providers can be found in ANTTONEN
and SIPALA¨(1996).
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How Will We Provide and Pay for Long-term Care?
‘informally’. That people in the southern countries are more prepared to
offer such care is illustrated in Figure 2.
Table 1: Comparisons of social service provision for the elderly (provision per 1000)
Residents in institutions
Recipients of domiciliary care
nursing
old age
service
total
home
home
total
homes
people’s
flats or
help
nursing
homes
semi-
services
sheltered
accom-
modation
Northern
Norway
51
14
46
66 -111
157-170
up to 26
170
Europe
Sweden
18
29
40
88
82-112
low
82-112
Denmark
53
11
32
70-90-98
203 -246
some
246
Finland
21
32
20
68 -73
107-140
27
134-167
Continen-
Germany
13
11
32
56 -68
80-96
80-96
tal
N-lands
26
64
23
88-123
120-200
60
180-260
Europe
Austria
25
21
10
49-56
100-240
some
100-240
France
16
45
12
65 -73
60-61
15
75
Belgium
64
45 -50
50
100
‘Anglo-
UK
18
31
50
51-99
55 -80
60
115 -140
Saxon’
Ireland
22
25
50-53
35
34
70
area
Australia
68
117
117
Canada
62-75
170
170
USA
42-46
57
35
35
Southern
Portugal
> 16
low
low
low
Europe
Spain
32
low
33
18
18
Italy
up to 20
17
3
39
28
28
Greece
3 -5
low
Low
low
low
Other
Japan
30-39
20
low
60
11-22-50
12
23 -62
Sources: Berger-Schmidt, 2003 (BMFSJ); Garber, 1996; Johnson and Lo Sasso, 2000; NAP for Employment, 2002
(Spain); NOSOSCO, 2002; OECD, 2002; Ogawa, 2002; Pacolet et al,1998; Schulz et al, 2001 (receiving care benefits).
Table 2: The extent of informal care giving (based on women aged 45-59), per cent
Proportion caring
Proportion caring
Proportion of
Employment rate
> 14 hours per
carers employed
week
Denmark
10
1
71
76
Belgium
15
6
40
52
France
9
3
43
57
Germany
14
8
50
50
Netherlands
15
5
39
51
UK
16
10
62
71
Ireland
17
12
24
32
Italy
22
16
33
41
Greece
17
12
48
41...
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