Tuesday, August 9, 2011

Long-Term Care in International Perspective

As societies age, the cost of long-term care is going to rise. A May 2011 OECD report-- Help Wanted: Providing and Paying for Long-Term Care--lays out many of the issues.

Long-term care is a broader category that what we usually think of as health care. The OECD report defines the term this way: "Long-term care is the care for people needing support in many facets of living over a prolonged period of time. Typically, this refers to help with so-called activities of daily living (ADL), such as bathing, dressing, and getting in and out of bed, which are often performed by family, friends and lower-skilled caregivers or nurses."

While the United States spend much more per capita on health care than other high-income countries, the share of Americans receiving long-term care is quite low compared to many other countries. OECD projections also suggest that U.S. spending on long-term care as a share of GDP will stay below the OECD average in coming decades. 

Because the number of Americans receiving long-term care is so low, U.S. spending on long-term care--whether per capita or as a share of GDP--is well below that of other OECD countries. For example, U.S. spending per capita on long-term care was $455 in 2008, while the OECD average was $543 per capita, and per capita spending on long-term care is upwards of $1200 in Norway, Sweden, and Netherlands. Over time, according to the OECD: "In 2008, public LTC expenditure accounted for 1.2% of GDP, while private LTC expenditure for another 0.3%, on average across the OECD. Public LTC expenditure is expected to at least double and possibly triple by 2050."

As I look over the OECD projections, however, what strikes me is that the countries that already have the much higher levels of spending on long-term care also have large shares of the population already receiving such care, and receiving it in an institutional setting. For example, while 0.5% of Americans are receiving long-term care, about 4% or more of the population is already using long-term care in Netherlands, Norway, Switzerland Sweden and Austria. In addition, about three-quarters of the long-term care users in several of those countries are receiving their long-term care in institutions, which are far more expensive than long-term care provided at home.

Moreover, in a number of countries, including Norway, Netherlands and Sweden, almost all of the spending on long-term care is from public programs, not private insurance or out of pocket.

These patterns suggest to me that societies make a choice about long-term care. It's often not a choice that's made all at once, or made by a single piece of legislation, but rather a choice that arises out of a series of other decisions. It's a choice about how large a share of the extreme elderly are going to live in institutions paid for by a publicly financed program, and how large a share of the elderly are going to get support for continuing to live at home, while relying on their own personal and financial resources or on private insurance. Leaning toward the second option is clearly preferable. But there an inevitable need for public support for long-term care for some of the elderly--provided in the U.S. by Medicaid. Once that public back-up system exists, getting people to rely on their own resources becomes harder. Every country, including the U.S., needs to think urgently about how to strike this balance. At least in the case of long-term care, the U.S. has a health care situation where it is not starting off with problems of costs that are already extraordinarily sky-high.