Are other countries showing the way?

Nursing Homes, Oct, 2005 by Michael J. Stoil

In April, representatives from public and private stakeholder groups met to compile a 12-page report on long-term care for submission to the 2005 White House Conference on Aging, to be held in December. Entitled Establishing a Comprehensive National Long-Term Care Policy, the report offers recommendations on the broad categories of long-term care financing, supportive services, and health and independence (see "Warning Signs for the White House," p. 26).

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In the eyes of some, the April "mini-conference" was hardly a breeding ground for well-informed, thoughtful solutions. Conference attendees had fewer than two days to consider solutions to all of long-term care's problems, with little immediate access to substantive, unbiased data. But they did the best they could, offering knowledge and experience from a diverse group of occupations. They were almost universal in agreeing that American long-term care is in crisis.

Not much discussed was the fact that other countries are facing similar crises. For example, while the United States found in its most recent census that roughly 3.3% of the total population is over 80 years old--the "target demographic" for long-term care services--Italy passed the 3.3% mark for octogenarians nearly 15 years ago, and now expects that 30% of its population in 2020 will be over 65 years old. Moreover, nearly 4% of all German citizens are over age 80.

Faced with these kinds of numbers--and economies less robust than some other nations'--several European nations have commissioned comprehensive studies of how their various long-term care financing mechanisms are working. They're looking at "best practices" for funding healthcare for the chronically ill elderly in developed, industrialized countries, including models that might be instructive for our own policy makers.

Some Americans argue that the prevalence of national "socialized medicine" makes foreign healthcare systems so different from the United States that no useful lessons can be learned. A quick survey of long-term care financing mechanisms in developed countries identifies the major hole in this argument: Most countries generally do not pay for long-term care with funds from the general healthcare financing system. In fact, the United States finances an unusually high percentage of nursing home and other long-term care services from national tax revenue. Most developed countries use some combination of local taxes, dedicated insurance, and copayments for this purpose. Even in Denmark--one of the few countries where tax revenue provides free hospital and clinic care for all residents--consumers pay for nursing home stays and prescription drugs, with government subsidies available only to low-income residents.

Sweden divides responsibility for healthcare among three levels of government. The principal responsibility of Sweden's National Board of Health and Welfare (Socialstyrelsen) is to evaluate healthcare service delivery to ensure that it corresponds with goals of the central government and follows specific guidelines for good medical practice. The actual management of healthcare delivery, however, is vested in 21 councils governing counties varying in population between 60,000 and 2 million people. But long-term care is a responsibility of local municipalities rather than the county councils, with residents private paying usually to a "spend down," with the municipalities picking up the balance. The tax rates to finance this are at a 30% minimum.

Japan's current long-term care financing system was established in 2000 and combines taxation, mandatory insurance, and copayments. The mandatory insurance is provided by local governments known as prefectures; half of the costs for the insurance are paid by mandatory premiums levied on all residents over 40 years old, while half are paid from tax revenue. This insurance pays for 90% of the cost of long-term care, regardless of whether the level of service provided is housework assistance, home visit outpatient care, or residential care. The remaining 10% of the cost of care is provided through a copayment--a built-in incentive for families to opt for relatively less expensive in-home care. Of the total cost of long-term care, 45% is spread among all Japanese between the ages of 40 and 70.

The long-term care financing system of Germany also depends on mandatory universal long-term care insurance, enacted in 1994.* In the German system, employees and their employers each contribute an amount equal to 0.85% of the employee's salary to the LTC insurance program. Government pays contributions for the unemployed; retirees contribute half of their premiums out of pocket, while their pension system pays the other half. In cases in which an employee's family members have either no income or earnings below a defined income threshold, they are covered by the head of household's LTC insurance; LTC coverage for a family with a single wage earner costs the same as coverage for a single worker with similar earnings.