EASPD CONFERENCE 2006 FINANCING STRATEGIES AND THEIR EFFECTS ON EQUITY, CHOICE, EFFECTIVENESS AND SUSTAINABILITY RAPHAEL WITTENBERG 8 JUNE 2006, GRAZ.

EASPD CONFERENCE 2006EASPD CONFERENCE 2006

FINANCING STRATEGIES AND THEIR EFFECTS ON EQUITY, CHOICE,

EFFECTIVENESS AND SUSTAINABILITY

RAPHAEL WITTENBERG

8 JUNE 2006, GRAZ

ACKNOWEDGEMENTS

• STUDY FOR DEPARTMENT OF HEALTH– ADELINA COMAS-HERRERA– DEREK KING– JULIETTE MALLEY– LINDA PICKARD

• STUDY FOR JOSEPH ROWNTREE FOUNDATION– BLEDDYN DAVIES– CAROLINE GLENDINNING– ADELINA COMAS-HERRERA– LINDA PICKARD

LONG-TERM CARE

• INFORMAL (FAMILY) CARE AND FORMAL SERVICES

• SOCIAL CARE, HEALTH, HOUSING AND OTHER SERVICES

• HOME-BASED AND RESIDENTIAL CARE SERVICES

• CASH AS ALTERNATIVE TO CARE

FINANCING STRATEGIES COVER:

• THE WAY RESOURCES ARE RAISED– GENERAL TAXATION, – INSURANCE CONTRIBUTIONS, – USER PAYMENTS;

• THE WAYS RESOURCES ARE SPENT– ELIGIBILITY CRITERIA, – CASH PAYMENTS OR SERVICES.

KEY POINTS

• DIFFERENT COUNTRIES HAVE ADOPTED DIFFERENT APPROACHES TO FUNDING LONG-TERM CARE

• A KEY ISSUE IS THE BALANCE BETWEEN PRIVATE FUNDING AND PUBLIC FUNDING FROM TAXES OR SOCIAL INSURANCE.

• FINANCING ARRANGEMENTS CAN BE ASSESSED IN RESPECT OF THEIR LIKELY IMPACT ON EQUITY, CHOICE, EFFICIENCY AND SUSTAINABILITY.

RISING DEMAND: EXTERNAL DRIVERS OF DEMAND

• DEMOGRAPHY: RISING NUMBERS OF OLDER PEOPLE

• DISABILITY: UNCERTAIN TRENDS

• AVAILABILITY OF INFORMAL CARE: CONCERN ABOUT POSSIBLE DECLINE

• REAL UNIT COSTS OF CARE: RISING

OTHER DRIVERS OF DEMAND

• EXPECTATIONS OF FUTURE COHORTS OF OLDER AND YOUNGER DISABLED PEOPLE

• FUTURE PATTERNS OF CARE

• FUTURE FUNDING ARRANGEMENTS

PROJECTIONS OF LONG-TERM CARE FOR OLDER PEOPLE, UK

YEAR %GDP2002 1.5%2012 1.6%2022 1.9%2031 2.3%2041 2.7%2051 3.1%ON BASE CASE ASSUMPTIONS ABOUT TRENDS

IN DRIVERS OF DEMAND

AIMS OF THE WELFARE STATE

• INSURANCE AGAINST RISKS• REDISTRIBUTION TOWARD THOSE WITH

GREATER NEEDS• SMOOTHING RESOURCES OVER THE

LIFE CYCLE• STEPPING IN WHERE THE FAMILY FAILS

Source: Hills et al, 1997

ROLE OF INFORMAL CARE

• MOST CARE IS PROVIDED BY UNPAID FAMILY CARERS

• SOME COUNTRIES STRESS PRIMARY RESPONSIBILITY OF FAMILES

• OTHER COUNTRIES STRESS SOCIETAL RESPONSIBILITY

DIFFERENT COUNTRIES HAVE DIFFERENT FUNDING SYSTEMS

• SOCIAL INSURANCE –– GERMANY, NETHERLANDS

• TAXATION AND MEANS-TESTED CHARGES– USA, ENGLAND

• TAXATION– AUSTRIA, DENMARK, SCOTLAND

• TAXATION AND SOCIAL INSURANCE – JAPAN

BALANCE OF FUNDING

A KEY ISSUE IS THE BALANCE BETWEEN – PRIVATE FUNDING, FROM PEOPLE’S OWN

RESOURCES OR PRIVATE INSURANCE, AND– PUBLIC FUNDING, FROM TAXES OR SOCIAL

INSURANCE.

MODELS OF FINANCING

• PRIVATE SAVINGS

• PRIVATE INSURANCE

• PRIVATE INSURANCE WITH PUBLIC SECTOR SUPPORT

• TAX-BASED PUBLIC SECTOR SCHEME

• SOCIAL INSURANCE

CRITERIA FOR EVALUATION

• EQUITY

• EFFICIENCY AND EFFECTIVENESS

• INDEPENDENCE, DIGNITY, CHOICE

• AFFORDABILITY, SUSTAINABILITY

PRIVATE SAVINGS

• NO REDISTRIBUTION

• NO RISK POOLING

• NOT MAIN METHOD OF FINANCE

PRIVATE INSURANCE

• ADVERSE SELECTION

• RISK UNCERTAIN

• EXPENSE

• INADEQUATE INFORMATION

• LOW UPTAKE IN MOST COUNTRIES

PUBLIC SUPPORT FOR PRIVATE INSURANCE

• TAX CONCESSIONS

• PARTNERSHIP ARRANGEMENTS

• COMPULSION

TAX-BASED PUBLIC FUNDING SYSTEM

• PROGRESSIVE, DEPENDING ON TAX SYSTEM

• WIDE RISK POOLING, DEPENDING ON MEANS TEST FOR USER CHARGES

• HYPOTHECATION UNLIKELY

SOCIAL INSURANCE

• HYPOTHECATION

• LESS MEANS TESTING, IF ANY

• NATIONAL ELIGIBILITY CRITERIA

NATIONAL ELIGIBILITY CRITERIA OR INDIVIDUAL NEEDS ASSESSMENTS

• NATIONAL ELIGIBILITY CRITERIA– CONFER ENTITLEMENT TO CARE– MAY CREATE DIAGNOSTIC INEQUALITIES– MAY DISADVANTAGE THOSE ON THE MARGINS

• INDIVIDUAL NEEDS ASSESSMENTS– MAY NOT CONFER ENTITLEMENT TO CARE– MAY LEAD TO LOCAL VARIATIONS IN ACCESS– MAY BE MORE FLEXIBLE IN MATCHING

RESOURCES TO NEEDS

CASH OR SERVICES: CONSUMER DIRECTED CARE

• CASH BENEFITS– OFFER MORE USER CHOICE IF SUPPLY AND

INFORMATION AVAILABLE

– MAY CONTAIN EXPENDITURE

• SERVICES IN KIND– MAY REDUCE PRESSURES ON INFORMAL CARERS

• INDIVIDUAL BUDGETS– INTERMEDIATE APPROACH – ENGLISH PILOTS

INFORMAL CARE

• MOST CARE IS PROVIDED BY UNPAID FAMILY CARERS

• CASH BENEFITS PROVIDE AN INCENTIVE TOWARD INFORMAL CARE

• IMPORTANCE OF SUPPORT FOR CARERS• TENSION BETWEEN PROMOTING

INFORMAL CARE AND PROMOTING LABOUR MARKET PARTICIPATION

USER CHARGES

• USER CHARGES MAY CONTAIN DEMAND OR RAISE REVENUE

• DIFFERENT RULES TEND TO BE APPLIED FOR DIFFERENT SERVICES

• CHARGES MAY TAKE VARIOUS FORMS:– WEALTH TEST - CAPITAL LIMIT– DISPOSABLE INCOME CONTRIBUTED– COPAYMENTS– TOPPING UP OF PUBLIC FUNDING

WANLESS SOCIAL CARE REVIEW

WANLESS REVIEW EXAMINE THREE APPROACHES IN DETAIL:

• MEANS-TESTED SYSTEM (POSSIBLY WITH LIMITED LIABILITY)

• FREE PERSONAL CARE• PARTNERSHIP, UNDER WHICH USERS

MAKE 50% COPAYMENTS FOR SERVICES ABOVE A FREE MINIMUM

FREE PERSONAL CARE

• WIDER POOLING OF RISKS THAN MEANS-TESTED SYSTEM

• PROMOTES DIGNITY• POTENTIALLY COSTLY, DEPENDING ON

IMPACT ON DEMAND• BENEFITS WEALTHIER PEOPLE AND

THEIR HEIRS RELATIVE TO MEANS-TESTED SYSTEM

PARTNERSHIP

• WIDER POOLING OF RISKS THAN MEANS-TESTED SYSTEM

• PROMOTES CHOICE• LESS COSTLY THAN FREE PERSONAL

CARE, POTENTIALLY MORE AFFORDABLE

• BENEFITS WEALTHIER PEOPLE BUT LESS THAN FREE PERSONAL CARE

• WHAT BALANCE TO SEEK BETWEEN DIFFERENT OBJECTIVES – EQUITY, CHOICE, SUSTAINABILITY?

• SHOULD PUBLIC FUNDING AIM TO ENCOURAGE FAMILY CARE OR FORMAL SERVICE PROVISION?

• DIFFERENT COUNTRIES HAVE CHOSEN A DIFFERENT BALANCE

CONCLUSIONS