Organizing and Financing Long-Term Care (LTC) Services for Older
Population: What can we learn from the Global Literature?
Sarbani Chakraborty, World BankLong-term Care Workshop
Sofia, BulgariaDecember 9, 2010
The Context – “From Red to Gray” Eastern Europe is aging rapidly• The proportion of people aged 65+ will increase significantly
over the next 20 years
Presentation Outline
Present a Framework for Financing and Organizing LTC services based on academic literature and country experience (Chakraborty)
Highlight features of OECD LTC systems and lessons learned (Koettl)
Why do we need a Framework?
Largely descriptive materials to date;
Insufficient attention on guiding Governments on public policy for LTC, especially role of public and private sectors;
Barrier to sound policy dialogue and identifying gaps and future policy options.
Questions Posed
Should the State finance LTC for all citizens, or is a safety net system that only protects those unable to pay for LTC adequate?
What are the equity and efficiency tradeoffs of different models of financing LTC?
Does a system of public and private contributions provide the best model for fair financing?
What is the optimal public/private provision mix in LTC services?
Long-Term CareIssues to Consider
Demand side The changing age structure will lead to higher demand; Ongoing medical and technical progress can lengthen time spent in disability;
Supply side Transforming institutional care into ambulatory or home-care settings can lead
to changes in the skill mix required with implications on public/private mix; Workforce shortages exacerbated by the increased participation of women in
the formal labor force, are likely to stimulate further inflows/outflows of LTC workers;
Stewardship and governance Finally, long-term care delivery will have to be more patient-centred and
adequately coordinated across care and social settings. Fragmented financing results in nonaligned incentives and “schizophrenic”
buying agent for LTC
Household Behavior and Public Policy Action
Type of HH Loss HH Strategy Government Strategy
Rare, impoverishing Pooling, Prevention Mandate pooling. Implement prevention
Rare, large Pooling, some saving Promote and regulate mandatory and voluntary insurance
Rare, medium Some saving Facilitate saving
Rare, small Do nothing Do nothing
Frequent, impoverishing
Saving, prevention Mandate savings, prevention, direct subsidies
Frequent, large Savings, prevention Facilitate and regulate saving
Frequent, medium Saving, prevention Facilitate saving
Frequent, medium and small
Some saving Facilitate saving
Public goods and private goods with externalities
n.a. Provide full public financing of interventions
Baeza and Packard, 2007
“Uncertainty and the Welfare Economics of Medical Care”
Uncertainty regarding disease and medical efficacy creates inefficient allocation and market failures; Does this apply to LTC? Is disability predictable?
Health sector prone to principal-agent problems; Would seem clearly applicable to LTC sector
The need for state intervention/non-market institutions. Would seem applicable to LTC sector
Main Findings - Financing
Spending on LTC substantial (next slide)
Severe failures in private LTC insurance (moral hazard and adverse selection)
High transaction costs of regulation
Rationale for Risk Pooling?
• The average costs in the United States for LTC (in 2008) are:
• $187/day for a semi-private room in a nursing home
• $209/day for a private room in a nursing home • $3,008/month for care in an Assisted Living
Facility (for a one-bedroom unit) • $29/hour for a Home Health Aide • $18/hour for a Homemaker services • $59/day for care in an Adult Day Health Care
Center
LTC Costs can be Impoverishing
Main Findings: Provision/Organization of LTC services
LTC “in its own right” is an emerging policy area Many OECD countries have embarked on developing
policies but “best-practice” models are lacking Major challenge is to develop financing models given
the institutional context and expected trends in disability and in the availability of informal care
Most countries rely on taxation for public financing of LTC, except i.e. GER; JAP; NED
Financial sustainability is under scrutiny due to upward pressures on workforce needs/quality/wages
Quality and responsiveness is poorly understood and measured
Taxpayers Patients/
Providers Providers
Government Insurance
Money flows
Service flows
Contributions, taxes
Payments to providers
Subsidies to households
Patient reimbursement
In developing LTC policies market and government failures must be jointly considered
A possible classification for LTC services and interventions
capacity of producers to freely enter markets (sunk costs, monopoly power, economies of scale and scope etc.)
capacity of buyers to obtain information on products (information asymmetry, data availability, quality etc.)
Classifying LTC services
Make or buy?Is regulating and contracting enough?
Is shifting the grid feasible and desireable for LTC services?
But once LTC becomes truly “generic” core functions and performance measures apply
Financing
collection pooling purchasing
Other Inputs knowledge labour pharmaceuticals capital consumables equipment Se
rvic
e de
liver
y
Org
anis
atio
n an
d m
anag
emen
t
Prod
uctio
n pr
oces
s
Outcome level and distribution
Financial protection level and distribution
Quality and Satisfaction level and distribution
State
Stewardship
Demand and Markets
Population
Source: HDR, WB 2000
ConclusionQuestions Posed: Answers?
• Should the State finance LTC for all citizens, or is a safety net system that only protects those unable to pay for LTC adequate? Better to think of universal entitlements based on large risk pools
• What are the equity and efficiency tradeoffs of different models of financing LTC?
Larger and consolidated risk pools are more equitable and efficient• Does a system of public and private contributions provide the
best model for fair financing?
It may be the most fiscally sustainable way to go• What is the optimal public/private provision mix in LTC
services?
There is no one size fits all model. But very low private sector participation may be sending a signal as well
THANK YOU
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