Abstract

The extraordinary improvement in life expectancy and health conditions experienced in the last century in many developed countries has profoundly changed the demographic structure of Western societies. As result, the rate of care-dependent older people in need of Long Term Care (LTC) is estimated to rise, while the expected increase in the LTC workforce is rather modest. In this context, the economic relevance of formal LTC has been growing. Recently adopted policies in major developed countries identified new forms of community- and domiciliary-care as sustainable approaches that could prevent institutionalization, while easing the burden of care on family members, preventing the generation of ‘care gaps’, under binding public budget constraints (Gori & Fernandez, 2015).

In this paper we investigate the sustainability of public LTC systems in several European countries in the forthcoming decades, using the European Union Future Elderly Model (EU-FEM), a dynamic microsimulation model which project the health and socio-economic characteristics of the European population 50+, augmented with information on the eligibility rules and costs of major current home-care systems.

In particular, we first analyze and compare the inclusiveness levels of current major national and regional European programs of home elderly-care, both in-cash and in-kind, by focusing on eligibility and assessment rules. Indeed, even if most programs evaluate ‘objective vulnerability’ on a set of functional (mostly ADL and IADL tasks) and cognitive limitations, almost no regulation includes them homogeneously in the assessment process. This leads to important differences on programs’ inclusiveness levels, which have not yet been comprehensively covered in the literature. By combining the micro-data dimension with a set of institutional-level information on LTC regulations, we are able to build, for each individual, a simplified socio-medical profile comparable with the requirements of the LTC programs. Finally, we use this information as input in the microsimulation model to construct ‘what if’ scenarios that will shed light on the long-term sustainability of the LTC systems.

The empirical analysis is based on micro-data on elderly individuals from SHARE, thus accounting also for the existing heterogeneity in morbidity rates across limitations and across countries. The use of individual level data allows to have a better understanding of the trends in the demand for LTC differentiated by age groups, gender, and other demographic and social characteristics in order to better assess the distributional effects. This is particularly important because, although on average we live longer and in better health, several studies have identified large degrees of health inequality among socio-economic groups (e.g., Case & Deaton (2015)). Furthermore, this novel approach allows also to better understand the effectiveness of such simulation models for LTC, a feature that the economic literature has often highlighted as extremely important when conducting empirical analyses.

As a result, we estimate the future potential coverage (or gap of coverage) of each national/regional public home-care system, and then disentangle the differences between countries in a population and a regulation effects. Our analysis offers new insights on how would the demand and the public/private expenditure for LTC evolve over time, what would the distributional effects of different LTC policies be if no action is taken, and what could be potential impact of alternative care policies or innovations.

References

Case, A., & Deaton, A. (2015). Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century. Proceedings of the National Academy of Sciences, 112(49).

Gori, C., & Fernandez, J.-L. (2015). Long-term Care Reforms in OECD Countries. Policy Press,Bristol