While the United States struggles to figure out how it is going to pay for long-term care, it is important for policymakers, care providers, and those of us caring for our parents to see how other countries do it. The Commonwealth Fund has just published my new paper, LongTerm Care Financing Reform: Lessons from the U.S. and Abroad that looks at where the U.S. is in its efforts, and how the rest of the world already finances this critical assistance.
What I found is interesting, challenging, and, in the end, encouraging. If the rest of the dveloped world can do this, so can the U.S.
Two decades ago, most developed nations realized that their systems for paying for long-term care services were headed for failure. They paid unlimited care costs, but only for the very poor–and they sharply restricted what services the frail elderly and younger people with disabilities could receive. While most countries had long since established national insurance programs for medical care, nearly all excluded long-term care. This model, which copied welfare-like Medicaid in the U.S., failed in two ways: It was financially unsustainable and provided unsatisfactory care.
At that point, the world split. The U.S. tried to fix things by encouraging the middle-class to buy private long-term care insurance. Both the states and the federal government provided new tax subsidies for private insurance. The government offered long-term care insurance to federal workers and created a new marketing campaign to teach the public about their long-term care needs. And the Partnership Program tried to better meld private insurance with Medicaid.
Despite all these efforts, private long-term care insurance remains only a niche product. Only about 7 million Americans have policies. As a result, many middle-class people who need long-term care have little choice but to spend all of their financial assets on care and, when they run out of money, end up on Medicaid.
Japan and most of Europe took another tack. Building on their national health systems, they created social insurance programs for long-term care as well. Each country did this in a somewhat different way, but most now have universal government long-term care insurance, at least for the elderly.
In Germany, all workers pay a payroll tax of about 2 percent and, in return. all who need assistance with daily living get benefits–either in cash or in services.
In Japan, the program is funded a bit like Medicare, through a combination of taxes and premiums, and covers about 90 percent of the long-term care costs of the elderly.
In France, long-term care is funded through higher taxes and everyone over 60 gets some cash benefits, although higher-income people get less than the poor. Interestingly,one of result of the French reforms is growing interest in private long-term care insurance to supplement government benefits.
A few countries, such as the United Kingdom, have retained their Medicaid-like systems. But nearly everyone else has headed in a very different direction. The big question is what will the U.S. do now? Will it adopt the CLASS Act, which is a unique voluntary national long-term care insurance program? Will it try some other reforms? Or will it do nothing?
Take a look at the paper and let me know what you think. If you”d like to learn even more, check out my book, Caring for Our Parents (St. Martin’s 2009)