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The Economics of Long-Term Care: Key Concepts and Major Financing and Delivery Models
Abstract
This chapter presents key concepts of economics relevant to the financing and delivery of long term care services. It first examines the magnitude of population aging in developed economies, and the associated implications for long term care. Key economic concepts relating to the demand, supply and financing of long term care services are then discussed. Policies, practices and major models of financing of long term care are further explored followed by a presentation of the conceptual framework for reform. It concludes that in view of the magnitude of the problem, incremental changes in the existing systems are unlikely to be adequate. A clear understanding of the economic concepts to underpin major transformation of existing systems and policies that do not align with populations trends is urgently needed.
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This article assesses Hong Kong's readiness to tackle the problems associated with the financing of health care and long-term care brought about by rapid population ageing. The article examines the speed of the ageing process in Hong Kong, the pattern of care delivery, the organizational structure in the Hong Kong Special Administrative Region Government responsible for the provision of health care and long-term care, the financing arrangements, and Government's responses to this impending phenomenon. The article concludes that Hong Kong is poorly prepared for the rapidly ageing process that it will face in the next twenty odd years, and recommends immediate public consultation on the establishment of a government medical savings fund and long-term care insurance.
With the number of older persons in Hong Kong and the need for improved standards of care and aged care policy increasing, gerontologists will continue to play a significant role in providing gerontological education on an international level. Over the next 2 decades, the older population in Hong Kong is projected to increase significantly. Individuals 65 years and over are anticipated to number about 1,067,300 by 2016. This article describes a unique collaboration between the University of New England, School of Health (Armidale, New South Wales, Australia), and Chinese University of Hong Kong, School of Continuing Studies, in which the Graduate Diploma and Master of Health Science (gerontology) programs are presented through mixed-mode and on-line education using the World Wide Web. The curriculum was developed with consideration of the Hong Kong health care system and cultural context. The curriculum is multidisciplinary in nature, and students represent a wide range of professions. This article discusses the methodology used to develop this collaborative project and to ensure that the course is relevant for students in Hong Kong.
Patient falls are a serious problem, contributing to the morbidity and mortality of the elderly patient. This study reports on the development of the Morse Fall Scale. The scale consists of six scored items and discriminant analysis correctly classifies 80.5% of the patients. Validation of the scale by computer modeling was conducted. Data were randomly split and that analysis procedure repeated. Variables were obtained and weighted using half of these data, and these weights were tested on the remaining data. Similar results were obtained. Sensitivity of the scale was 78% and the positive predictive value, 10.3%. Conversely, specificity was 83% and the negative predictive value, 99.3%. Interrater reliability scores were r=.96. A prospective study in three clinical areas showed that the scale is sensitive to different patient conditions and to length of stay. Thus, the scale permits identification of the patient at risk of falling so that prevention strategies may be targeted to those individuals.
Hong Kong's rapidly ageing population, characterised by one of the longest life expectancies and the lowest fertility rate in the world, is likely to drive long-term care (LTC) expenditure higher. This study aims to identify key cost drivers and derive quantitative estimates of Hong Kong's LTC expenditure to 2036.
We parameterised a macro actuarial simulation with data from official demographic projections, Thematic Household Survey 2004, Hong Kong's Domestic Health Accounts and other routine data from relevant government departments, Hospital Authority and other LTC service providers. Base case results were tested against a wide range of sensitivity assumptions.
Total projected LTC expenditure as a proportion of GDP reflected secular trends in the elderly dependency ratio, showing a shallow dip between 2004 and 2011, but thereafter yielding a monotonic rise to reach 3.0% by 2036. Demographic changes would have a larger impact than changes in unit costs on overall spending. Different sensitivity scenarios resulted in a wide range of spending estimates from 2.2% to 4.9% of GDP. The availability of informal care and the setting of formal care as well as associated unit costs were important drivers of expenditure.
The "demographic window" between the present and 2011 is critical in developing policies to cope with the anticipated burgeoning LTC burden, in concert with the related issues of health care financing and retirement planning.
This study assessed the validity of the Balance Scale by examining: how Scale scores related to clinical judgements and self-perceptions of balance, laboratory measures of postural sway and external criteria reflecting balancing ability; if scores could predict falls in the elderly; and how they related to motor and functional performance in stroke patients. Elderly residents (N = 113) were assessed for functional performance and balance regularly over a nine-month period. Occurrence of falls was monitored for a year. Acute stroke patients (N = 70) were periodically rated for functional independence, motor performance and balance for over three months. Thirty-one elderly subjects were assessed by clinical and laboratory indicators reflecting balancing ability. The Scale correlated moderately with caregiver ratings, self-ratings and laboratory measures of sway. Differences in mean Scale scores were consistent with the use of mobility aids by elderly residents and differentiated stroke patients by location of follow-up. Balance scores predicted the occurrence of multiple falls among elderly residents and were strongly correlated with functional and motor performance in stroke patients.
Reproduced with permission of the Canadian Public Health Association.
The effects of home visitation programs to prevent functional decline in elderly persons have been inconsistent, and the value of these programs is controversial.
To evaluate the effect of preventive home visits on functional status, nursing home admission, and mortality.
Studies published in English, French, German, Italian, or Spanish reporting randomized trials of the effects of preventive in-home visits in older people (mean age >70 years) living in the community were identified through searches of MEDLINE, PSYCHINFO, and EMBASE (January 1985--November 2001). We also searched the Cochrane Controlled Trials Register, checked reference lists of earlier reviews and book chapters, searched conference proceedings and specialty journals, and contacted experts.
We screened 1349 abstracts and excluded those that did not test in-home interventions or in which the mean age of the study population was younger than 70 years. After further exclusions, 17 articles describing 18 trials were analyzed.
Two reviewers independently screened abstracts. Discrepancies were resolved by consensus with a third reviewer. For each included trial, we extracted data on the study population and the characteristics of the intervention. Two of us extracted information on 3 end points: nursing home admissions, mortality, and functional status. One of us assessed trial quality, including an examination of the method of randomization, blinding of caregivers and research staff ascertaining outcomes, and proportion of patients included in analyses of the 3 end points.
The 18 trials included 13 447 individuals aged 65 years and older. The effect on nursing home admissions depended on the number of visits performed during follow-up. The pooled relative risk (RR) was 0.66 (95% confidence interval [CI], 0.48-0.92) for trials in the upper tertile (>9 visits) but was 1.05 (95% CI, 0.85-1.30) in the lower tertile (0-4 visits). Functional decline was reduced in trials that used multidimensional assessment with follow-up (RR, 0.76; 95% CI, 0.64-0.91) but not in other trials (RR, 1.01; 95% CI, 0.92-1.11). Functional decline was reduced (RR, 0.78; 95% CI, 0.64-0.95) in trials with a control group mortality rate in the lower tertile (3.4%-5.8%) but not (RR, 0.98; 95% CI, 0.84-1.13) in those with a control-group mortality rate in the upper tertile (8.3%-10.7%). A beneficial effect on mortality was evident in younger study populations (RR, 0.76; 95% CI, 0.65-0.88 for ages 72.7-77.5 years) but not in older study populations (RR, 1.09; 95% CI, 0.92-1.28 for ages 80.2-81.6 years).
Preventive home visitation programs appear to be effective, provided the interventions are based on multidimensional geriatric assessment and include multiple follow-up home visits and target persons at lower risk for death. Benefits on survival were seen in young-old rather than old-old populations.
This paper reports on Canadian research that examined the cost effectiveness of home care for seniors as a substitute for long-term institutional services.
Two Canadian cities were included in the research: Victoria, British Columbia, and Winnipeg, Manitoba. The research computes the costs of formal care and informal care in both settings and ensures comparable groups of clients in both settings by comparing individuals at the same level of care.
The results reveal that costs were significantly lower for community clients than for facility clients, regardless of whether costs only to the government were taken into account or whether both formal and informal costs were taken into account. When informal caregiver time is valued at either minimum wage or replacement wage, there was a substantial jump in the average annual costs for both community and facility clients relative to when informal caregiver time was valued at zero.
Nevertheless, the results reveal that home care is significantly less costly than residential care even when informal caregiver time is valued at replacement wage.
Singapore, like many developed countries, is facing the challenge of a rapidly ageing population and the increasing need to provide long-term care (LTC) services for elderly in the community. The Singapore Government's philosophy on care for the elderly is that the family should be the first line of support, and has relied on voluntary welfare organizations (VWOs) or charities for the bulk of LTC service provision. For LTC financing, it has emphasized the principles of co-payment and targeting of state support to the low-income through means-tested government subsidies. It has also instituted ElderShield, a national severe disability insurance scheme. This paper discusses some of the challenges facing LTC policy in Singapore, particularly the presence of perverse financial incentives for hospitalization, the pitfalls of over-reliance on VWOs, and the challenges facing informal family caregivers. It discusses the role of private LTC insurance in LTC financing, bearing in mind demand- and supply-side failures that have plagued the private LTC insurance market. It suggests the need for more standardized needs assessment and portable LTC benefits, with reference to the Japanese Long-Term Care Insurance programme, and also discusses the need to provide more support to informal family caregivers.
In 2004, 0.82 million people in Hong Kong were aged 65 years and over, which represents 11.7% of the population. The proportion of elderly people in Hong Kong is likely to increase to 24% in 2031, which will create enormous demand for long-term care and health care services for the elderly. This demographic change is related to a decrease in birth in Hong Kong (Census and Statistic Department, 2002; Hospital Authority, 2003). The elderly dependency ratio will increase from 382 in 2001 to 562 in 2031. The average life expectancy at birth in Hong Kong in 2001 was 78.2 years for men and 84.1 years for women. Closely related to the health care needs of the elderly is the life expectancy at and above 60 years old. In 2001, the average life expectancy at 60 was 21.4 years for men and 26.0 years for women, and at 80 was 8.1 years for men and 10.6 years for women (Census and Statistic Department, 2002). The increased life expectancy results from an improvement in public health and nutrition, but is also related to improved medical care for very elderly patients (Hospital Authority, 2003). However, improved survival may not mean normal health without disability or functional improvement. Elderly people have multiple chronic diseases, functional impairments and need regular medical services (Chu et al., 1998; Woo et al., 1997).
The Lawton Instrumental Activities of Daily Living (IADL) scale is the assessment tool most commonly used by occupational therapists in Hong Kong. However, there has been no cross-cultural validation study of the Lawton IADL-Chinese Version (IADL-CV) scale as applied to Hong Kong's older adults. This was the first study of content validity, construct validity, and reliability of the Lawton IADL-CV. A total of 155 institutionalized older adults were recruited from three different hostels and one care-and-attention home by using a convenience sampling method. Expert panel review and pilot testing on the subjects established the linguistic and content validity of the Hong Kong Chinese version. The content of the scale, the scoring criteria, translation, and level of rating scale were examined. It was shown that all nine IADL items apart from "handyman work" were culturally relevant (more than 78% agreement). Nine items altogether had good representation in assessing the IADL ability of Hong Kong older adults (73% agreement). The scoring criteria were refined with reference to the local culture. Both panel review and the related psychometric properties supported the change of the level of rating scale from a three-point to a four-point scale. The inter-rater and test-retest reliability estimated by intraclass correlation coefficient (ICC) gave a value of 0.99 and 0.90, respectively. The Cronbach's alpha estimating the internal consistency was 0.86. In the study of the construct validity, the factor analysis and known-groups methods were used. The construct validity was examined by factor analysis of the Lawton IADL scores of 111 hostel subjects. The result showed that one factor was extracted from the nine items of the Lawton IADL-CV scale. The known-groups method was performed using the Lawton IADL-CV to separate 146 institutionalized subjects into their corresponding living institutions: hostel or care-and-attention home. An overall prediction ability of 78% was achieved so as to correctly discriminate between residents in the hostel and care-and-attention home. In conclusion, the Lawton IADL-CV scale is a valid and reliable instrument to assess the older adults' IADL ability to live independently in the community.
This study documents the widespread belief among the public, “pundits,“ and policymakers that health care inflation in the United States is heavily influenced by longevity. It demonstrates the error of that belief. It points out that health care experts recognize that, although health care costs for the elderly are high, the aging of the population is an insignificant factor in health care cost inflation. Nevertheless, existing literature tends to ignore important influences on cost, such as poverty, lack of access, lifestyle issues, and matters of social justice. It also ignores the differences among numerous subgroups of patients. Ignoring these factors and concentrating on an aging society as a major cause of health care inflation distracts policymakers' attention from the true causes and leads to unjustified calls for benefit reductions in Medicare. As part of this study, the author includes analyses of hospital discharge data that have not been published previously.
Japan has started the long-term care insurance system from April 2000. The idea of using social insurance system in the field of long-term care has been quite controversial. There are many who still believe that long-term care is mainly a family matter and the state intervention should be minimized. At the same time there are quite a few who believe that the state or local government, and not the insurer, should provide services to people in need of care using tax revenue. The actual long-term care insurance is the reflection of these different opinions among people as well as of interest groups.
One major priority for health care professionals is to minimize the risk of fall in the elderly population. While the quality of life of an individual is affected by fall accidents, management of post-fall disability in the elderly could be a huge economic burden to the society. Visually impaired elderly are at a higher risk of fall, because “vision”, an important component contributing to balance, is disturbed. The aim of this study was to examine the effects of an exercise programme, which focused on improvement of the functional balance of visually impaired elderly. Visually impaired elderly residents were randomly assigned to either the exercise training or control group. A multidimensional, individually tailored exercise programme was introduced by physiotherapists to the exercise group for 12 weeks. Functional balance status reflected by the Berg Balance Scale, chair stand test, and timed up-and-go test assessed before and after the 12-week training programme was compared between the two groups. Results demonstrated a significant improvement in balance outcomes in the exercise group (p
In a study of 50 family caregivers of elderly Chinese patients with dementia in Singapore, 28 (56%) scored five points or more on the 28-item General Health Questionnaire (GHQ). The GHQ scores correlated significantly with duration of care; presence of delusion, hallucination, depression, insomnia, incontinence and agitation; and the total score of the Behavioural Pathology in Alzheimer's Disease Rating Scale. On multiple regression analysis the only variables to achieve a significant relationship with the GHQ scores were duration of care, depression and the total behavioural score. © 1997 by John Wiley & Sons, Ltd.
As with other developed nations where rapid population aging has led to increasing health care and social care burdens, Singapore has searched for ways of paying for and providing long-term care for its increasing numbers of elders. The Singapore state, faced with the prospect of one-fifth of the population aged 65 or older by 2030, has reinforced its basic principle of rendering the family the "primary caregiving unit" and home-based care as the highly preferred option for eldercare. Our paper demonstrates why, despite the range of alternative care arrangements available or emerging on Singapore's eldercare landscape, the employment of live-in foreign domestic workers as care workers for the elderly has become one of the more common de facto modes of providing care for the elderly. In this context, we discuss the politics of eldercare in the privatized sphere of homespace and conclude with policy implications relating to the employment of foreign domestic workers as caregivers for the elderly.
Case-mix-based reimbursement could provide long term care facilities with a financial incentive to accept the more acutely ill patients who are being discharged from hospitals under Medicare's prospective payment system. But a financial incentive to maintain a complex case mix could also encourse nursing homes to provide substandard care. New York's Medicaid program has coupled a reimbursement method based on Resourse Utilizationm Groups (RUGs II) with regulatory efforts to ensure quality in a model that may be be adopted by Medicare and by Medicaid programs in other states. This article describes New York's system and discusses a number of management and quality assurance strategies that may be useful to nursing homes under RUGs II.
Nursing home care is growing in importance as the population ages and as Medicare's prospective payment system encourages earlier discharges from acute care settings to nursing homes. Nursing home reimbursement policy is primarily a Medicaid issue, since Medicaid pays for about half the nation's nursing home care. The research reviewed in this article suggests a strong association between case mix and cost, and a weaker but still positive association between quality and cost. The research also implies that traditional nursing home reimbursement methodologies may impede access and may lower quality for Medicaid (and Medicare) recipients. To offset these problems, several states have recently begun to incorporate case mix directly into the reimbursement process. These systems deserve careful policy consideration.
The Barthel Index is a valid measure of disability. In this study we investigated the reliability of four different methods of obtaining the score in 25 patients: self-report, asking a trained nurse who had worked with the patient for at least one shift, and separate testing by two skilled observers within 72 hours of admission. Analysis of total (summed) scores revealed a close correlation between all four methods: a difference of 4/20 points was likely to reflect a genuine difference. In individual items, most disagreement was minor and involved the definition of middle grades. Asking an informed nurse or relative was as reliable as testing, and is quicker.
A companion article describes the development of a patient classification system for long-term care patients, Resource Utilization Groups (RUGs). Three potential limitations of this system and its development are addressed here: the use of a subjectively determined dependent variable, geographic limitation of the data to Connecticut skilled nursing facilities, and limited assessment of the quality of the facilities studied. Additional systems of Resource Utilization Groups were derived, using the same clustering technique but employing two separate data sets from the Battelle Human Affairs Research Center. These data bases provided an objective dependent variable, wide geographic distribution of both skilled nursing facilities and intermediate care facilities, and homes specifically selected on the basis of quality. The RUGs derived from the two sets of Battelle data and the initial RUG system showed remarkable similarity in their patient groupings and in the case-mix indexes developed for nursing homes. The concurrence of the results obtained for these three systems greatly strengthens the basis for the use of this classification system as a case mix measure for long-term care.
A new Geriatric Depression Scale (GDS) designed specifically for rating depression in the elderly was tested for reliability and validity and compared with the Hamilton Rating Scale for Depression (HRS-D) and the Zung Self-Rating Depression Scale (SDS). In constructing the GDS a 100-item questionnaire was administered to normal and severely depressed subjects. The 30 questions most highly correlated with the total scores were then selected and readministered to new groups of elderly subjects. These subjects were classified as normal, mildly depressed or severely depressed on the basis of Research Diagnostic Criteria (RDC) for depression. The GDS, HRS-D and SDS were all found to be internally consistent measures, and each of the scales was correlated with the subject's number of RDC symptoms. However, the GDS and the HRS-D were significantly better correlated with RDC symptoms than was the SDS. The authors suggest that the GDS represents a reliable and valid self-rating depression screening scale for elderly populations.
A case-mix classification system for nursing home residents is developed, based on a sample of 7,658 residents in seven states. Data included a broad assessment of resident characteristics, corresponding to items of the Minimum Data Set, and detailed measurement of nursing staff care time over a 24-hour period and therapy staff time over a 1-week period. The Resource Utilization Groups, Version III (RUG-III) system, with 44 distinct groups, achieves 55.5% variance explanation of total (nursing and therapy) per diem cost and meets goals of clinical validity and payment incentives. The mean resource use (case-mix index) of groups spans a nine-fold range. The RUG-III system improves on an earlier version not only by increasing the variance explanation (from 43%), but, more importantly, by identifying residents with "high tech" procedures (e.g., ventilators, respirators, and parenteral feeding) and those with cognitive impairments; by using better multiple activities of daily living; and by providing explicit qualifications for the Medicare nursing home benefit. RUG-III is being implemented for nursing home payment in 11 states (six as part of a federal multistate demonstration) and can be used in management, staffing level determination, and quality assurance.
This article critically examines the family-oriented social policies of the Singapore government aimed at supporting families caring for older members. The sectors focused on are financial security, health, and housing. Singaporeans have been reminded that the family should be the first line of defense for aging families, followed by the community - the state would step in as the last resort. Drawing from recent research and examination of the state policies, the author argues that more should be done to help family caregivers looking after elder relatives. Recommendations for innovative ways to recognize and reward family carers conclude the paper.
Elderly care services in Hong Kong began in the mid-1970s, with health and social services modelled on the UK experience. A major difference is the lack of a well-developed primary care system. As a result, geriatric service has evolved to encompass primary care, to include outreach geriatrics and psychogeriatric support to long-term residential care homes as well as frail elderly people living at home. There is room for innovation in the provision of community care, led by geriatricians, especially in management of chronic disease, incorporating the components of self management and use of telemedicine. Various models could be developed and evaluated to define which best meet the needs of the ageing population. The results would guide future government policy for health and social services for the elderly population in the community setting.
Long-term care represents one of the largest uninsured financial risks facing the elderly in the United States. Whether the small size of this market is driven primarily by supply side market imperfections or by limitations to demand, however, is unresolved, largely due to the paucity of data about the structure of the private market. We provide what is to our knowledge the first empirical evidence on the pricing and benefit structure of long-term care insurance policies. We estimate that the typical policy purchased by a 65-year old has an average pricing load of about 18 percent and has a very limited benefit structure, covering only one-third of the expected present discounted value of long-term care expenditures. These findings are consistent with the presence of supply side market imperfections. However, we also find enormous gender differences in pricing -- typical loads are 44 cents on the dollar for men but better than actuarially fair for women -- that do not translate into differences in coverage. And, although purchased policies provide limited benefits, we demonstrate that more comprehensive policies are widely-available at similar loads, but are rarely purchased. These findings suggest that while supply-side market imperfections exist, they are not the primary cause of the small size of the private long-term care insurance market.
The 2014-15 Budget. Speech by the Financial Secretary, the Hon John C Tsang moving the Second Reading of the Appropriation Bill
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What are the advantages and disadvantages of restructuring a health care system to be more focused on primary care services? Copenhagen: WHO Regional Office for Europe
- R Atun
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- Kwan Lou
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- P P Yuen
Elderly Commission’s Study on Residential Care Services for the Elderly: Final Report
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Balancing fair protection and financial sustainability in long-term care
- F Colombo
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Introduction of Long-Term Care Insurance in Korea. Paper presented at the Asian Social Protection in Comparative Perspective Conference
- S Kwon