Long-Term Care Policy: Lessons From Overseas

As the world's population ages, policymakers in the United States are examining other industrialized nations' efforts to reform long-term care financing. In the past 12 years, France, Germany, and Japan have restructured their long-term care programs, and the United Kingdom has conducted studies that point to change. In the June 2007 brief “Financing Long-Term Care: Lessons From Abroad,” (https://www.bc.edu/center/crr/issues/ib_7-8.pdf) published by the Center for Retirement Research at Boston College, Howard Gleckman compared these countries' programs. As Gleckman noted, “these four countries face more severe demographic pressures from long-term care than the United States,” and the United States can look to these countries for examples of reform. Gleckman is a visiting fellow at the Center for Retirement Research at Boston College and a senior research associate at the Urban Institute. He recently elaborated on his findings with Nursing Homes/Long Term Care Management.

Why, other than the aging of the world's population, have Germany, France, and Japan all restructured their long-term care financing programs in the past decade?

Howard Gleckman: In Europe, the countries had strong social insurance for everything except long-term care. The Germans, for example, have had a social insurance system since the 19th century, and long-term care was the missing piece. As their populations aged, these countries realized that leaving long-term care insurance as a welfare program just wasn't working. It didn't make sense that they had national health insurance for acute care but didn't have anything comparable for long-term care. In the '90s, a number of European countries decided to look for ways to include long-term care as part of their social insurance systems.

Japan was a little different. Because it had a good healthcare system and no long-term care financing program, elderly Japanese were spending huge amounts of time in the hospital. People who didn't need acute medical care in a hospital went there anyway because that care was paid for. Hospital beds were filled with patients whose costs were much higher than they needed to be and who were in a healthcare setting that wasn't appropriate for them. The Japanese created a long-term care program to care for patients either at home or in nursing homes, which were much more appropriate settings for these patients.

Why has the United Kingdom decided to issue studies pointing the way to change instead of restructuring its program?

Gleckman: I think it's simply a matter of politics. The Blair government had a lot of other things on its plate and never could develop a consensus around this issue. There have been a number of highly influential studies published in the United Kingdom, and I suspect that the United Kingdom is going to move on this. Interestingly, Scotland adopted much more radical reforms and has set up a long-term care social insurance program similar to what has been done on the continent. But the rest of the United Kingdom just wasn't ready yet.

What are the comparative advantages and disadvantages of the programs administered by each of the countries?

Gleckman: The advantage is that people can get long-term care insurance coverage and, therefore, the care they need without having to impoverish themselves. The weakness of the American system is that the only way people can get paid long-term care is either by paying out of their own pockets; relying on private long-term care insurance, which is out of the financial reach of most people; or through Medicaid. Most policy people who I've spoken to—both on the left and the right—agree that a system like Medicaid, a system in which people need to completely impoverish themselves to be eligible for assistance, doesn't make a lot of sense. There's no agreement on what to do, but the consensus is that the system we have doesn't work.

The disadvantage, and I think the Germans and the Japanese are discovering this, is that their programs cost more than they expected. They're getting a lot more nursing home demand, particularly in Germany, than anticipated. They're a little surprised that that more care is not being provided at home. The Germans now are looking at what they can do to restrain costs. Their other option, of course, is to raise the payroll tax yet again, and they very much don't want to do that.

What can the United States take away from studying these four countries' financing programs?

Gleckman: The lesson here is that the industrialized world—except for the United States and the United Kingdom—has concluded that long-term care as a welfare program is not going to work. We can look at the experiments that have been tried in other countries, and we can learn that there is a better way. Interestingly enough, in Germany, even though it has a social insurance program (with mandatory long-term care insurance), people can buy private insurance. Germans don't have to buy the government insurance if they don't want to, and about 10% have chosen to buy more generous but more expensive private coverage. Presumably, the United States could do something like this, too. It could have a mandatory long-term care program but give people the flexibility to buy private insurance.

Which foreign financing model would the United States benefit most from adapting? What would be the key features to success?

Gleckman: Any economist will say that the key to any long-term care insurance program—the key to any insurance program—is to have a big risk pool. The problem with the American system is that ours is very small. Relatively few Americans have long-term care insurance, and those who do tend to drive the price up. If you can get a lot of people to buy long-term care insurance who may not need it, the risk pool will expand and, at least in theory, premiums will fall. One way to do this is to require mandatory purchase in the United States. Whether this is done through a government program or by allowing people to buy private policies is an ideological choice.

As the United States considers developing its own system, what does it need to keep in mind?

Gleckman: Most of the industrialized world also has national health insurance, and it's a lot easier for those countries to mesh their acute care systems with long-term care. The challenge for the United States is to take our acute care system—which is a disorganized mess of private insurance, government insurance, and uninsured—and tie that to long-term care. What happens to those people whose care could be defined as either long-term or post-acute? Where do you draw the line and how do you decide who pays? In a country like Germany, where social insurance is paying for all care, it doesn't matter as much as it would in the United States, where a private health insurer might try to shift post-acute costs to the government long-term care program. Working in that gray area is going to be complicated in the United States until we do something about broader health system reform.

Working in that gray area is going to be complicated in the United States until we do something about broader health system reform

The other problem is that imposing a tax to finance a long-term care insurance system would generate tremendous opposition in the United States. The Germans consider their payments to be a premium or a contribution to a long-term care insurance policy rather than a tax. But it is a tax; it's a 2% payroll add-on. In the United States, it would be difficult to enact any sort of legislation that would increase payroll taxes by another 2%.

The politics of the United States is obviously different from that of Europe and Japan. The idea of paying higher taxes for a social insurance system is much more acceptable in most of the world than it is here.

For more information, e-mail hgleckman@ui.urban.org. To send your comments to the editors, e-mail peltier1007@nursinghomesmagazine.com.

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