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Forecasts predict that those in need of long-term care in Europe will double in the next 50 years. This book offers a full understanding of the institutional responses and mechanisms in place to finance old age and provides analysis of demand and supply factors underpinning the development of financial instruments to cover long-term care in Europe.





1. Financing Long-Term Care: New and Unresolved Questions

Europe is confronted with an ageing population. The surge of the baby-boom generation and further gain in longevity, combined with continued below-replacement fertility rates, led to a significant increase in the number of people age 65 and over in Europe. While an ageing population is undeniably a great achievement for societies with an obvious economic value (Breyer et al., 2010), it is at the same time an unprecedented challenge for societies, governments and private markets. Today’s European populations are expected to live longer than previous generations, but part of these populations will live these extra years of life with some level of dependency requiring the use of long-term care (LTC). LTC is a set of services provided on a daily basis, formally or informally, at home or in institutions, to people suffering from a loss of mobility and autonomy in their activity of daily living. Although loss of autonomy may occur at any age, its frequency rises with age.
Joan Costa-Font, Christophe Courbage

Institutions and Markets


2. Typology of Public Coverage for Long-Term Care in OECD Countries

The importance of long-term care (LTC) — that is, care for people dependent on help for daily living activities1 — as measured by cost and utilization is growing in all high-income countries. This is a direct consequence of population ageing and, in particular, the growing number of very old people in the population. The share of the population aged over 80 years old, currently at around 4 per cent on average according to the Organization for Economic Cooperation and Development (OECD), is expected to triple to 11–12 per cent by 2050 (Figure 2.1). The sheer number of elderly that need assistance in carrying out activities of daily living is growing as a result.
Francesca Colombo

3. Long-Term Care Insurance Puzzle

In most Organization for Economic Cooperation and Development (OECD) countries, the era of long-term care (LTC) has arrived. More than two out of five people aged sixty-five or older report having some type of functional limitation (sensory, physical, mental, self-care disability or difficulty leaving home), and, as such, are not autonomous, and require adequate care.1 A few years from now, the ageing trend will accelerate, fuelled by the large ‘baby-boomer’ generation, and the relative importance of people aged 65 or older will more than double by 2050, according to the forecasts of the European Union (2009). On the other hand, with the drastic change in family values, the increasing number of childless households and the mobility of children, the number of dependant elderly who cannot rely on the assistance of anyone is increasing.2 Those two parallel evolutions — demographic and societal — explain why there is a mounting demand on governments and the market to provide alternatives to the family, which has been, across epochs, the largest provider of LTC services (even though those services, by being informal, remain hard to measure). One may hope that both private and social LTC insurance will grow substantially in the coming decades. But there are a number of problems that both the State and the market have to solve before they can replace family solidarity. The problems of private LTC can be coined by the concept of the LTC insurance puzzle.
Pierre Pestieau, Gregory Ponthière

4. Long-Term Care Insurance: Building a Successful Development

Ageing creates growing long-term care needs (OECD, 2006). The financial services industry proposes financing solutions, such as savings or reverse mortgages, and more specifically insurers or reinsurers have designed ad hoc insurance solutions, tailored to long-term care (LTC) situations and needs.
Pierre-Yves Le Corre

5. Housing Wealth as Self-insurance for Long-Term Care

Long-term care (LTC) insurance is about providing resources for care and services, should they be needed because of a disability, usually in very old age. A premium is paid, that is, money is put aside from current consumption, to face the risk of the expenses linked to the future need of assistance in activities of daily living. Housing wealth, by comparison, is linked to daily living in a place, consuming housing services, performing daily activities, in a particular surrounding called ‘home’. If the home is owned, housing also is a form of saving. It can be used in case of need, for instance, for LTC. Due to the dual nature of housing, both consumption and investment good, and due to its indivisibility and illiquidity, the issue is how to extract housing equity to finance LTC. Financial devices, such as vente en viager, the sale of a home for a life annuity have existed for centuries; various forms of ‘reverse mortgages’ are more recent. This chapter assesses the role of homeownership in providing self-insurance for LTC. Self-insurance seems a contradiction in terms, as insurance is pooling a risk over a large population, and self-insurance does not seem adapted for a high-cost risk such as LTC. However, a more careful analysis of the risks faced in old age, and of the unique characteristics of housing as consumption good, as a place where care can be provided and as a saving vehicle may justify the oxymoron in the title of this chapter.
Anne Laferrère

6. Long-Term Care Insurance: Partnership or Crowding Out?

The design of long-term care1 (LTC) financing schemes is slowing down the transformation of protection and insurance structures that address the problems of old-age care. Most of these are not new, but highly entrenched in the organization of modern society and in State intervention in the area of welfare. However, to date there are good reasons to believe that demand triggers are markedly exacerbated by the rapid ageing of the European populations together with the transformation of family structures, and its associated norms that impinge effects on caregiving duties. The latter encompasses the redefinition of traditional intergenerational contracts in place to provide ‘support for care’. However, the expansion of public insurance alone, the solution that was prevalent in the times of the so-called ‘golden age of the welfare State’, is not viable any more today. Indeed, public schemes face significant constraints to the expansion of welfare services that are not always perceived as welfare-improving. Similarly, current pressures to cut down excessive public expenditure do nothing but exacerbate the already tight constraints to the expansion of public insurance. On the other hand, the solution of pre-welfare State times, based on family caregiving, is not a satisfactory arrangement given the constraints of modern life unless it is complemented by State and market alternatives.
Joan Costa-Font, Christophe Courbage



7. Long-Term Care Insurance in the Netherlands

The Netherlands was the first country to introduce a universal mandatory social health insurance scheme (AWBZ) for covering a broad range of long-term care (LTC) services provided in a variety of care settings. Compared with most other Organization for Economic Cooperation and Development (OECD) countries, coverage of LTC services is relatively comprehensive. This comprehensive coverage might explain why, in comparison with most other OECD countries, both total and public expenditure on LTC in the Netherlands are high, particularly since the percentage of elderly is similar to the OECD average (OECD, 2005). This can at least partly be explained by the relatively generous social health insurance scheme.
Frederik T. Schut, Bernard van den Berg

8. Financing Long-Term Care in France

Like most industrialized countries, France is facing an ageing of its population which creates long-term care (LTC) needs and questions the financial coverage of LTC risks. In France, the public coverage of LTC derives from a long tradition of intervention concerning the Sécurité sociale (Social Security) and from a great diversity of stakeholders and sources of financing. At the national level, the public health insurance scheme deals with LTC expenses due to health care. In addition, the public pension scheme finances a significant part of living expenses. At the local level, local governments manage the Allocation Personnalisée d’Autonomie (APA). The APA is a public benefit allocated to people aged 60 or more, who are no longer able to care for themselves, regardless of their financial situation and place of residence. This allowance is jointly funded by central and local governments. APA can be seen as the first step towards recognition of dependency as a new risk of life, even if public coverage remains low in comparison with the financial expenses incurred by dependency.1 The French government, confronted by the complexity of financing LTC, is planning to reform the current system. A draft law is scheduled for discussion by the parliament during the second half of 2011.
Christophe Courbage, Manuel Plisson

9. From Commission to Commission: Financing Long-Term Care in England

The financing of long-term care (LTC) has been among the most debated social policy issues in England since at least the mid-1990s (Royal Commission on Long Term Care, 1999; Brooks et al., 2002; JRF, 2006; Wanless et al., 2006, HM Government, 2010a). Underlying the debate are concerns about both the future affordability of LTC and the fairness of the current funding system. The key issue in the financing debate is how far people should fund their own care and how far they should be publicly funded, in particular whether public funds for LTC should benefit only those who cannot afford to pay for themselves (a residual model) or whether free LTC should be a universal entitlement. The debate started from before the establishment of the Royal Commission on Long Term Care (1999) and has continued, more or less unabated, since then.
Adelina Comas-Herrera, Raphael Wittenberg, Linda Pickard

10. Financing Long-Term Care in Southwest Europe: Italy, Portugal and Spain

The progressive ageing of the European population and the transformation of family care giving arrangements bring to the fore the question of how best to Finance long-term care (LTC). Particularly important is the specific financial organization of LTC systems when both social and demographic constraints compete with economic motivations to rationalize public insurance schemes. LTC provides support for old age dependants that need some health care, but primarily social care. However, Southern European countries are facing the paradox of health care being a top policy priority as in almost all European countries, whilst social care is nearly privatized or has been heavily decentralized to local authorities, and subject to means- as well as needs-testing (Costa-Font and Font-Vilalta, 2006; Gil, 2009; CostaFont, 2010a; Santana, 2010). Private financing is primarily dominated by intra-household interactions and self Financing. The role of private financing alternatives is developing in some countries such as Spain, but is still far from taking off.
Joan Costa-Font, Cristiano Gori, Silvina Santana

11. Long-Term Care Financing in Austria

With a universal long-term care (LTC) allowance programme, subsidized LTC services for dependent persons and a new programme coping with migrant care work in private households, Austria today is one of the European Union (EU) countries addressing the issue of LTC in a substantial manner. In 2006, Austria spent slightly less than 1 per cent of its GDP on care for elderly people alone, ranking the country fourth in the EU-25, behind Sweden (2.4 per cent), Denmark (1.7 per cent) and Norway (1.6 per cent) (Eurostat, 2010).
Birgit Trukeschitz, Ulrike Schneider

12. Financing Long-Term Care in Germany

In 1995, after many years of public discussion dating back to the 1970s, mandatory social long-term care insurance (SLTCI) was implemented in Germany as the fifth pillar of the social security system. Prior to the introduction of mandatory SLTCI, acute care was covered by the mandatory health insurance programme while expenditures for long-term care (LTC) coverage were covered by the private income or private savings of the LTC-dependent individual or the individual’s family. If these were exhausted, individuals in need of care could then apply for public welfare. These payments, however, were provided only for those identified as ‘needy’ by a community-based means-tested programme (Hilfe zur Pflege) under the aegis of Germany’s social assistance programmes.
Andy Zuchandke, Sebastian Reddemann, Simone Krummaker

13. Long-Term Care Financing in Central Eastern Europe

The Central Eastern European (CEE) region is no exception to the major challenges European countries are facing in the field of long-term care (LTC). Ageing societies and growing LTC needs, changes in the socio-economic context and their consequences for traditional modes of caregiving will further increase the pressure for ensuring sustainable funding for more comprehensive LTC systems. In the past two decades, LTC has become increasingly recognized as a social risk that will need substantial investment in publicly (co-)funded infrastructure and service provision. And many European countries have seen important reform steps in this respect. But tight budgets and forecasted large increases in public LTC expenditure have often limited the magnitude of reforms or have hindered the development and implementation of appropriate policies. CEE countries share the aforementioned challenges, but the status quo of the LTC systems is quite different in this region. Current levels of social protection beyond family or other informal networks and beyond social assistance are far less developed than in other parts of Europe.
August Österle

14. Scandinavian Long-Term Care Financing

The Scandinavian countries — Denmark, Norway and Sweden — share a common history and common political traditions, which has led to very similar systems for social care being introduced in the three countries. This applies to the division of roles and responsibilities between different public bodies, as well as for the national policy objectives that have been laid down in various pieces of legislation. Thus, all three countries pursue the general goal of providing local care services free of charge to everyone in need, independently of their financial circumstances.
Martin Karlsson, Tor Iversen, Henning Øien

15. Long-Term Care Financing in Switzerland

Switzerland is a federal State with three levels of government: federal, 26 cantons and about 2600 municipalities. It counts nearly 8 million inhabitants (Table 15.1). In 1996, health insurance was made compulsory for all residents. The goal of this social health insurance is to enable universal coverage while providing freedom of choice in regard to insurance company and, to some extent, health care providers. The basket of covered services is determined at the federal level and cantons are in charge of ensuring a sufficient supply of health care services, including long-term care (LTC). The scope of services covered by social health insurance is large for acute and post-acute care, while it is partial for LTC.
France Weaver

16. Long-Term Care Financing in Belgium

Long-term care (LTC) in Belgium consists of a wide range of benefits in cash and in kind, organized at the federal, regional and municipal levels, and is related to health and social service provision.1 The bulk of LTC services are provided as part of the federal public compulsory health insurance system, which is financed by social security contributions and general taxes. The main actors in the management of the system are the federal parliament (issuing the main laws governing the system), the Ministries of Health and Social Affairs, the National Institute for Health and Disability Insurance (NIHDI) and the sickness funds, which serve as intermediaries between the administration, the providers and the patients. Since public health insurance covers practically the whole population, LTC coverage is also nearly universal. However, since LTC services provided through the health insurance system cover only nursing care (as well as paramedical and rehabilitation care) and part of personal care to dependent persons, a whole range of services is organized and provided at the regional and local level. Indeed, while there is no specific LTC legislation at the federal level, the regional governments have issued decrees that regulate a wide range of issues related to LTC services: certification of facilities such as nursing homes and day care centres, integration and coordination of services at the local level, quality monitoring systems and so on.
Peter Willemé, Joanna Geerts, Bea Cantillon, Ninke Mussche


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