No Silver Bullet: Lessons From International Programs for Financing Long-Term Services and Supports
By Don Redfoot, February 9, 2015 07:00 AM
Life spans are increasing around the world, but countries differ enormously in how they deal with increasing demands for long-term services and supports (LTSS). AARP International recently sponsored a policy symposium on the LTSS systems in Germany, France and the United Kingdom to inform important discussions about how to reform the U.S. system.
As AARP Executive Vice President Debra Whitman noted in her opening remarks, the costs associated with LTSS represent the largest uninsured risk to the retirement security of older Americans. Public spending on LTSS in the U.S. is only slightly below the OECD average, even though the U.S. is almost unique among developed countries in its lack of a universal public insurance program to cover such risks. Instead, public spending in the U.S. is primarily through Medicaid, a program that requires beneficiaries to impoverish themselves before becoming eligible.
Symposium facilitator Howard Gleckman noted that other countries have tried using public insurance programs as a foundation to enhance private insurance and savings, adding that any successful U.S. reforms will require both public and private financing. Matthias von Schwanenfluegel (German Federal Ministry of Family Affairs, Senior Citizens, Women and Youth) described Germany’s social insurance program, implemented in 1995. More recently, Germany added incentives for individuals to purchase supplemental private insurance, which now covers half a million citizens. Since January 2015, German workers who provide caregiving to aging family members have access to expanded paid family leave, a protection not afforded most U.S. workers.
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Pamela Nadash (University of Massachusetts) described the French system, which provides universal coverage of LTSS risks as a cash benefit. While eligibility is universal for those who experience disabilities in old age, cash benefit amounts are steeply income-related. Beneficiaries with lower incomes receive higher amounts of support. This social insurance program has stimulated a robust market for private supplementary coverage through individual plans, employee benefit programs and mutual societies. The benefits of the supplemental coverage are typically modest — averaging from $202 a month under employer plans to $728 per month for individual coverage. Combined, public and private insurance covers about one-third (32 percent) of LTSS costs in France.
Jane Vass (Age UK) described the public catastrophic insurance plan being implemented in England. The English plan offers public insurance to those whose LTSS costs exceed 72,000 pounds (approximately $109,000). The plan also offers “deferred payment” loans (secured by home values) to help homeowners pay for costs not covered by the plan. The government hopes that offering coverage for catastrophic costs will spur the development of a private long-term care insurance market where none exists. However, the process of reaching the cap is complicated, and many costs are ineligible. Few are predicted to qualify. Moreover, local cost variations and program complexity have discouraged the development of gap-filling coverage by private insurers.
While no country has found the perfect solution, policymakers in the U.S. can learn from the experiences of these and other nations that are struggling to meet the challenges associated with providing LTSS in rapidly aging societies.
Don Redfoot is a senior strategic policy adviser with the AARP Public Policy Institute, where he works on issues related to long-term services and supports.
Natalie Turner is a senior adviser with AARP International, where she works on health, long-term care and age-friendly communities. She is responsible for a number of AARP’s global relationships, including the World Health Organization (WHO) and European Union government and nongovernment agencies.
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