Filed Under:Health Insurance, Ltci

LTC Spectre Also Haunts Europe

A London School of Economics economists warns that Europe should look out for LTC costs. (AP Photo/Sang Tan)
A London School of Economics economists warns that Europe should look out for LTC costs. (AP Photo/Sang Tan)

Few developed countries have done enough to insure -- either through public or private programs -- against looming long-term care (LTC) costs.

Joan Costa-i-Font, an associate professor at the London School of Economics, makes that argument in an article published on Vox, a website published by the school's Centre for Economic Policy Research.

Developed countries already are spending about 1.5% of gross domestic product on LTC, and that percentage could double or triple by 2050 Costa-i-Font writes in the article.

In the United states, he says, expenditures on nursing homes, home health care and other forms of LTC already account for about 8.5% of U.S. health care spending.

Most developed countries have well-developed insurance systems for acute health care but not for LTC, he says.

That lack "leaves people in need of care having to rely either on public support when available and they qualify (after needs and means testing), or if they can afford it, to self-insure such needs," he says.

Risk pooling through insurance programs can give people an efficient way to handle LTC costs, but many people are reluctant to participate in voluntary long-term care insurance (LTCI) programs, he says.

Too often, he says, government-supplied programs crowd out private LTCI.

Meanwhile, he says, government financial problems have blocked the creation of a government LTC program in the United States and could kill government LTC programs in Scotland and Spain in the next few years.

Costa-i-Font says managers of public and private LTCI programs have to figure out how to deal with the incentive for people with health problems to buy LTCI, and the incentive for LTCI insureds to claim more LTCI benefits than they really should be getting.

"Most insurance contracts, such as the existing schemes in Germany try to address this problem by introducing cost sharing schemes and tend to reduce the amount of cash benefits compared with ‘in kind’ benefits," he says.

The German systems do not seem to have been sustainable, and Germany tried to reform them in 2008 by increasing social insurance contributions, Costa-i-Font says.

Similarly, he says, U.K. authorities are talking about requiring people to spend at least £35,000 on LTC before they can get help with paying for it.

The high deductible "solves the catastrophic nature of long-term care but fails to address the core of the insurance problem," he says.

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