Efficiency changes in long-term care in OECD countries: A non-parametric Malmquist Index approach

Abstract

Future demographic projections indicate that long-term care (LTC) demand will put significant pressures on the long-term sustainability of public finances. Efficiency gains could potentially compensate for increasing LTC expenditures. Nevertheless, among the factors that drive LTC expenditures, efficiency, or productivity discussions have received little attention. This paper provides the first analysis of the efficiency levels of LTC for a subset of OECD countries. In doing so, the study adopts a non-parametric approach and performs a Data Envelopment Analysis (DEA). The results of the DEA show that average efficiency scores have a slight tendency to increase. There was a 0.1% increase in productivity in the provision of LTC between 2009 and 2014, which mainly resulted from an increase in technological change. However, the slight increase in efficiency is insufficient to offset fiscal pressures led by the increasing number of LTC beneficiaries and amount spent on LTC. The second stage Tobit analysis results further indicate that the productivity of LTC provision does not differ across countries with different public LTC financing arrangements.