Equity, efficiency, and financial risk of alternative arrangements for funding long-term care systems in an ageing society

Abstract

Partly a reflection of the increasing volume and hence political influence of the older population, recent reforms of long-term care (LTC) systems across developed countries have sought to expand the coverage of the services provided, and have defined increasingly universal levels of state support for people with social-care needs. At the same time, some of the factors leading to the expansion of the objectives and ambitions of the care system, such as the ageing of the population, pose significant challenges to its long-term financial sustainability. In this context, the paper first reviews the main factors likely to contribute to the growth in LTC demand and expenditure, and reflects on the policy priorities associated with state-backed funding systems in the area. Using results from a bespoke dynamic micro-simulation model, it then illustrates the discussion through a quantitative analysis of the equity and efficiency implications of alternative funding models discussed in the context of the ongoing reforms of the LTC system in England.