Long-term care Dilemmas concerning sustainable financing (Ljubljana, November 2014) 1

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1 Long-term care Dilemmas concerning sustainable financing (Ljubljana, November 2014) 1 Heino Jespersen The National Social Appeals Board This paper briefly describes the organisation and funding of long-term care for senior citizens in Denmark How would you define the role of the state in your country with regard to long-term care (LTC) needs? The overall public governance structure in Denmark can be characterised as being highly decentralised. Public assistance for senior citizens is provided mainly by the national government and the 98 municipalities. The Social Services Act (serviceloven) governs the framework of the services provided by municipalities to senior citizens and their obligations for the entire field of social services. Municipalities have a relatively large freedom of action to plan activities, including determining their own service levels. Some of the essential elements according to the Social Services Act are self-help and prevention. The Ministry of Children, Gender Equality, Integration and Social Affairs is the supreme administrative authority in charge of the Government's policies on social affairs, including on matters relating to senior citizens. Following the structural reform in , the Municipalities have assumed responsibility for implementing almost all legislation relating to senior citizens. This applies both to determining service levels and the range of offers and to analysing initiatives and targeting them to citizens. Municipalities usually apply a combination of their own services and schemes run by other municipalities or private providers. This leaves the municipalities with the full responsibility for public governance, provisions, delivery and funding. The interests of the municipalities are managed by Local Government Denmark (Kommunernes Landsforening). The municipalities set up and run different councils intended to promote user influence, such as senior citizen councils. Local government decisions can be appealed to the Social Appeals Board (Ankestyrelsen). Decisions can also be brought before the ordinary courts or appealed to the Parliamentary Ombudsman. 1 Prepared for the Peer Review in Social Protection and Social Inclusion programme coordinated by ÖSB Consulting, the Institute for Employment Studies (IES) and Applica, and funded by the European Commission. ÖSB Consulting, Sources: 'Ældreområdet internationale perspektiver, Social- og Integrationsministeriet' (Senior Citizens International Perspectives, Ministry of Children, Gender Equality, Integration and Social Affairs) published by Deloitte, January 2013, and numbers from StatBank Denmark managed by Statistics Denmark, the Social Appeals Board (Ankestyrelsen) (SLIS) and (numbers and statistics on senior citizens). 3 The 2007 structural reform created a new regional structure in Denmark, abolishing 14 counties and establishing five new regions. Amalgamations also occurred at local level, reducing the number of municipalities from 271 to 98. The purpose of the reform was to maintain and further develop a public sector governed by democracy and having a solid base for the continued development of the Danish welfare society. 1

2 The Social Appeals Board has an essential function in determining case law in the social affairs field. Its leading decisions are published in anonymised form as test case decisions, which are considered a binding source of law and accordingly a practical guiding principle that must be relied on by the municipalities in similar cases. 2. What are the public financing arrangements for long-term care in your country? Have there been any recent reforms related to the financing of long-term care or are there reforms under preparation? In Denmark, the funding of the services field, and accordingly the field of senior citizens, is the responsibility of the municipalities. They must ensure the availability of the necessary service offers and also allocate the necessary funds for their service offers to senior citizens from the municipal budget. The funds for municipal social measures for senior citizens originate mainly from the municipal tax revenue and block grants from the national government. Those block grants include a general grant and an equalisation system that takes into account the different tax bases of the individual municipalities and the differences in social and age composition in the individual municipalities. The equalisation scheme ensures that the municipalities have more uniform conditions for taking care of municipal tasks. The overall economic framework of the provision of municipal services is negotiated annually by Local Government Denmark and the Ministry of Finance. Senior citizens in Denmark are offered a wide range of services. All municipalities have prepared quality standards describing the specific services offered in the individual municipalities. The services granted depend on a specific and individual assessment. Home care services are the most common services. Homecare services are targeted at seniors who live at home but who are unable to manage everyday life without help. Citizens are both entitled to practical assistance (e.g. cleaning and laundering) and personal assistance (e.g. bathing or shaving). Both types of assistance are free of charge and are available 24 hours a day. There s no maximum limit to the number of visits a citizen can receive. Many municipalities are making targeted home care rehabilitation efforts. Rehabilitation means that the old person learns how to minimise or how to cope with his or her disabilities, e.g. by using welfare technology. Rehabilitation takes both the citizen s physical and mental well-being into account, for example by offering to help a lonely senior getting into contact with other seniors. In recent years, many municipalities in Denmark have also started using welfare technology solutions to an increasing extent to streamline home care services, to offer better coordinated and more coherent services to citizens. E.g. several pilot projects are testing robotic feeding assistants, intelligent multi-function toilets, etc. Danish pension system The Danish pension system is composed of: 1) A public pension pillar (state); 2) Occupational pension savings based on collective agreements between labour and employer organisations; 3) Private pension scheme with a pension fund or a bank. 2

3 Public Pensions Public pensions ('folkepension') is a universal basic pension financed by the state through general tax revenues and consists of an annual basic amount (reduced if labour income is received), a pensioner s supplement (reduced according to labour income, capital income and spouse income) and a supplementary pension benefit. The public pension is funded through a PAYG system and tax-financed from general state budget revenues The normal retirement age is currently 65 years but will increase to 67 during the period by half year each year, and onwards, the statutory retirement age will be indexed to life expectancy taking into account increasing longevity. The occupational pension was introduced in the late 80s. Elderly with only income from public pensions, thus consists primarily of the oldest and citizens who have not held a job. As a supplement to the pension system there are several targeted benefits for elderly with low income (for example rent allowances, cost for heating, transport). These benefits are funded by the municipalities (partly reimbursement from state). Municipality s co-payment to health services Municipalities pay an activity based contribution for the treatment of local citizens in the hospital sector and the primary health care service. In addition, municipalities fund treated patients and outpatient rehabilitation and pay thus full rate in these areas. The intention of the local co-financing is to give the municipalities an incentive to invest in prevention and cooperation on coherent patient. Local co-financing amounts to approximately 18 % of the funding in

4 Facts about the field of senior citizens Comments Total inhabitants 5,560,628 5,580,516 5,602,628 The number of inhabitants in Denmark in Denmark increased each year from 2011 to 2013 by around 20,000 persons. In 2030, the population will be 5,974,766. Persons aged , , ,801 The number of persons aged 65 is increasing. In 2030, this group will comprise 1,365,472 persons. Proportion of 17% 17% 18% The proportion of the population aged 65 persons aged 65 is increasing. The proportion will reach 24% by Persons aged , , ,683 The number of persons aged 80 will in 2030 comprise 427,329 persons. Proportion of 4 % 4 % 4% The proportion of the population aged 80 persons aged 80 will reach 7 % by Persons receiving home care (aged 65 ) Persons aged 65 living in care homes, etc. Persons aged 70 living in their own homes 4 Average hours of home care delivered each week to the individual senior citizen Eldercare sector employees Total expenditure (DKK bn, current prices) Total expenditure as a percentage of GDP 138, , ,230 Home care services were provided to almost 125,000 citizens aged 65 in ,220 41,100 40,471 The number of persons living in care homes, sheltered housing, extra care housing or independent extra care housing for senior citizens is declining. These figures do not include individuals living in adapted housing for disabled people and ordinary social housing for senior citizens. 597, , ,413 The number of persons aged 70 living in their own homes is increasing. Please note that this age category is different compared with the above rows. 3.2 hours 3.1 hours 3.3 hours In 2013, each senior citizen received 3.3 hours of home care each week on average. 104, , ,066 In 2013, 104,066 full-time employees were involved in providing care for senior citizens in extra care housing and for home care, preventive measures, health aids and rehabilitation, which is a minor increase of 422 persons on (approx. EUR 4.9 bn) 37.1 (approx. EUR 5 bn) 38.4 Expenditure for care homes and extra (approx. care housing, home care, health aids, EUR 5.2 preventive measures, etc. bn) 2% 2% 2% Expenditure on care homes and extra care housing, home care, health aids, preventive measures, etc., total 2 % of GDP. Sources: StatBank Denmark managed by Statistics Denmark, the Social Appeals Board (SLIS) and the Ministry of Children, Gender Equality, Integration and Social Affairs. Note: The exact expenditure on senior citizens and disabled people, respectively, cannot be calculated based on the statements of accounts. The expenditure on senior citizens is therefore calculated based on the breakdown of expenditure on disabled people and senior citizens. 4 Statistics Denmark, BOL201. The category of persons living in their own homes comprises persons living in single-family houses/farmhouses, terraced/semi-terraced/semi-detached houses and flats. 4

5 3. What is your experience with private (voluntary or compulsory) long-term care insurance? Have there been attempts of introducing private long-term care insurance in the past or are there any plans for the future? It is a characteristic feature in Denmark that services for senior citizens are provided by both public and private actors. Therefore, some municipalities also have care centres operated by private individuals and organisations. The introduction of the free-choice scheme has meant that personal care and domestic help are provided by both public and private actors. Domestic help, in particular, is now provided by private companies to an increasing extent in many municipalities. All providers must be approved by a local government. This happens through a municipal approval scheme or through a public procurement process of home care services. It should be noted that the individual citizen does not have to pay himself or herself for choosing a private service provider. Volunteers also have an important function within the field of senior citizens, and some are involved as friendly visitors and for activities at care centres. Several municipalities make targeted efforts to involve volunteers. They are usually performing activities not covered by the municipal service level. Senior citizens in general have a great deal of free choice among the services offered. Senior citizens must therefore be given a choice between at least two different suppliers of personal care services and domestic help. Denmark has introduced an extra care housing guarantee, which means that a citizen must be offered extra care housing within two months from the date when the local government has decided that the relevant person has a need for such residence. However, if a citizen requests a particular residence, this guarantee no longer applies. 4. What share of the costs of LTC has to be borne by the person in need of care? What forms does this cost-sharing take? Has the extent of cost-sharing evolved over recent years or are any changes under preparation? User charges play only a minor role in Denmark in the funding of social measures. User charges may be collected for co-funded temporary assistance and care, payment for food delivery services and payment for accommodation and meals at care housing, but senior citizens seldom pay the full cost of the services. In some situations, the charges payable are based on income. There is no general requirement that senior citizens have to pay for services themselves. Services and accommodation are separate budget items, and therefore senior citizens living in care homes are charged for rent, meals, etc. Maximum amounts of user charges based on income have, however, been stipulated in executive orders for temporary home care, as has also the maximum amount for care housing (a percentage of the household income). In combination, about 5-10 % of the aggregate expenditure in the fields of senior and disabled citizens (excluding housing for senior citizens) is covered by user charges. These figures include rent, which is not usually considered a user charge in Denmark. 5

6 5. Which relatives/household members are responsible for a dependent person s care needs (providing care or by financing it)? To which extent are their assets and income protected against catastrophic care costs? Denmark and the rest of the Nordic countries adhere to a universalist welfare model according to which the government has primary responsibility for social services (funded mainly by taxes) and for allocating social services according to the principle of universalism, that is, without making any distinction according to financial capabilities. In general, this universalist model entails a high degree of redistribution and a correspondingly high rate of taxation. 6