Home and Community Care Digest
Methods: Using mathematical models using British age-specific disability rates and long-term care volumes, the authors explored and compared the effects of long-term care financing approaches of Japan, Sweden, and Germany to the UK. For this study, the authors assumed that the current rates of illness will remain constant. The authors compared the present versus future value of services and also investigated any changes to the distribution of services based on income, gender, and age.
Findings: After any one time costs for establishing a new system and despite differences in the types of services and coverage offered, all of the financing approaches will require roughly the same increase in public contributions, roughly 30% over the next 40 years from today's expenditures
All of the systems involved some form of wealth redistribution, with women benefiting the most (all age groups and at all income levels). Since they are the main consumers of long-term care services, the elderly differentially benefit from these financing schemes. In more "comprehensive" long-term care systems (where the entire income-earning population contributes to financing services), young people pay a considerable share of the costs, while their anticipated benefits, still in the distant future, are of relatively little present value. The authors note that as long-term care systems become more "comprehensive", the benefits become more progressive (i.e., benefit lower income individuals), due to the progressive nature of most public taxation and insurance schemes.
The "middle of the road" approach taken by Germany seemed to provide the fewest benefits. Highincome earners do not seem to receive benefits from the system, whereas lower income groups face disproportionately high social insurance contributions.
Conclusions: When compared to no public financing, all of the different approaches to long-term care financing result in some form of wealth redistribution, notably from men to women, and from the young to the old. With more comprehensive systems like Sweden's or Japan's, this redistribution can be more than twice as much as less comprehensive systems like the UK's. The challenges for governments will be to balance the provision of comprehensive services with controlling costs. Even though they are less sensitive to changes in the age structure of the population, less comprehensive systems provide fewer benefits to the most needy.
If the UK wishes to adopt a more comprehensive funding system, a one time cost will be incurred. This study suggests, however, that the cost of funding long-term care will rise at a similar rate over a forty year period regardless of the approach used. Because the number of elderly individuals is growing, asking elderly individuals to pay for more of their services (as is the case in Japan) is one possible method to keep public cost increases down.
Reference: Karlsson M, Mayhew L, Rickayzen B. "Long term care financing in four OECD countries: Fiscal burden and distributive effects." Health Policy. 2006;80:107-134.
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