Demographic Change in the EU, the Oldest-old and the Need for Innovative Models of More Efficient Elderly Care

Demographic Change in the EU, the Oldest-old and the Need for Innovative Models of More Efficient Elderly Care Martin Karlsson, CINCH University of Duisburg-Essen March 7, 2017 Martin Karlsson Demographic Change in the EU 1 / 22

Research focus Demographic ageing in Europe Low birth rates Increasing life expectancy Martin Karlsson Demographic Change in the EU 2 / 22

Research focus Demographic ageing in Europe Low birth rates Increasing life expectancy What are the trends regarding the need for, the financing of, and the delivery of long-term care (LTC)? Martin Karlsson Demographic Change in the EU 2 / 22

Research focus Demographic ageing in Europe Low birth rates Increasing life expectancy What are the trends regarding the need for, the financing of, and the delivery of long-term care (LTC)? How can the challenges of a rising demand for LTC and the associated cost increase be mastered? Martin Karlsson Demographic Change in the EU 2 / 22

The Issue A wide range of funding sources are used for long-term care, with four common models: (1) a special long-term care insurance scheme, as in Germany, Japan, and South Korea; (2) general taxation, as in Austria; (3) a combination of insurance, general taxation, and private contributions, as in Greece; and (4) special programs, as in the Netherlands (Chawla, Betcherman, and Banerji, 2007). Private cofunding also plays a role in almost all European countries. However, the annual growth in public long-term care spending increased in most OECD countries between 2005 and 2011 (Figure 5-7); over the same period, the growth in spending on institutional long-term care decreased in Finland and Hungary. Long-term care programs also differ in terms of whether they cover people needing such care at all ages or are limited to older people, whether there is means testing, the degree of cost-sharing, the scope and depth of coverage, and whether they support care by family members or by trained and supervised staff (Tamiya et al., 2011). Regardless, there is substantial scope for better organization and coordination of services (Kendrick and Conway, 2006). Figure 5-7. Annual Growth Rate in Public Expenditure on Long-Term Care (LTC) in Institutions and at Home in Selected Countries: 2005 2011 Home LTC Institution LTC Slovenia Netherlands Czech Republic Hungary Denmark Canada Germany Sweden Austria Poland Belgium Norway New Zealand Finland France Japan Switzerland Spain Estonia 1.0 4.3 1.3 3.5 1.8 8.2 1.6 1.9 2.2 2.5 3.1 3.1 1.7 1.7 6.0 Source: Organisation for Economic Co-operation and Development, 2013. 3.7 3.1 3.2 4.5 11.6 4.8 8.1 6.4 4.9 6.4 3.9 4.0 6.5 6.9 4.7 7.3 2.6 7.6 4.0 8.0 4.0 16.6 8.7 Outside of wealthy countries, long-term care remains a neglected policy issue. The common view in lower-income countries relates Increase in LTC Spending 2005 11. to the primacy of family provision Source: OECD (2013). Martin Karlsson Demographic Change in the EU 3 / 22

Analysis of Medical Spending Medical Spending During the Last Weeks of Life (Germany). Source: Karlsson et al (2016), Fiscal Studies. Martin Karlsson Demographic Change in the EU 4 / 22

Aggregate Care Costs Care Expenditure in the Last 12 Months Service Type Mean (Deceased) Share of Total (%) Mean (All) Hospital 37.057 10.65 1.223 Doctor/dentist/professional 7.019 0.80 3.095 Pharmaceutical 11.062 3.39 1.147 LTC 12.526 20.40 216 Total 69.633 4.05 6.043 Source: Karlsson et al (forthcoming), Health Affairs. Martin Karlsson Demographic Change in the EU 5 / 22

Structure 1. Assessment of Future LTC Needs Projections of the future demand for LTC and associated costs Martin Karlsson Demographic Change in the EU 6 / 22

Structure 1. Assessment of Future LTC Needs Projections of the future demand for LTC and associated costs 2. Evaluating Policy Reforms in the LTC Sector Norwegian Care Plan 2015 Preventive Home Visits in Norway Personalised Autonomy Allowance in France 3. Care Provision in a Changing Society Decomposition of Changes in Disability Formal and Informal Care Use in Different LTC Systems The Effects of Caregiving on Work Martin Karlsson Demographic Change in the EU 6 / 22

WP1: Assessment of future LTC needs Aim Projections of the future demand for LTC and associated costs Martin Karlsson Demographic Change in the EU 7 / 22

WP1: Assessment of future LTC needs Aim Projections of the future demand for LTC and associated costs Activities Research collaboration of University Duisburg-Essen with developer of projection model at Cass Business School, London Outputs Descriptive statistics and streamlined database Research papers on care costs Research papers based on projection results Online database of projections Martin Karlsson Demographic Change in the EU 7 / 22

Projecting future numbers of disabled people Projected Number of Older People with Limitations, Germany, 2014 2060 Note: Projected number of people aged 65 or older by severity of health-related limitation in everyday activities. Own calculations based on SHARE data and population projections from the German Federal Statistical Office. Weights provided by SHARE are used. Martin Karlsson Demographic Change in the EU 8 / 22

Mapping from disability to care setting Projected population by type of care setting, Germany, 2014 2060 Note: Projected number of people aged 65 or older by type of care setting. Own calculations based on care statistics and population projections from the German Federal Statistical Office. Martin Karlsson Demographic Change in the EU 9 / 22

Inferring future LTC costs Formal care How much will tax payers be burdened? Informal care Will there be a shortage of carers? How high will opportunity cost be? Martin Karlsson Demographic Change in the EU 10 / 22

WP2: Evaluating policy reforms in the LTC sector Aim Evaluations of past policy reforms in the LTC sector regarding their success in meeting the growing demand for LTC and the associated financial needs Activities Research collaboration of University Duisburg-Essen with researchers at University of Oslo Martin Karlsson Demographic Change in the EU 11 / 22

WP2: Evaluating policy reforms in the LTC sector Aim Evaluations of past policy reforms in the LTC sector regarding their success in meeting the growing demand for LTC and the associated financial needs Activities Research collaboration of University Duisburg-Essen with researchers at University of Oslo Outputs Research papers based on empirical evaluation results Policy paper giving advice to policy makers Martin Karlsson Demographic Change in the EU 11 / 22

Reform 1: Norwegian Care Plan 2015 Provision of investment grants for 12,000 nursing homes and assisted living facilities Did the reform affect formal care utilisation and health prevention? Investment grants and supply of new places Note: Total amount of investment grants paid out to the municipalities and number of newly created places in sheltered housing and nursing homes under Norwegian Care Plan 2015 during period 2008 2014. Own calculation. Martin Karlsson Demographic Change in the EU 12 / 22

Reform 2: Preventive home visits to elderly in Norway By 2013, 25% of Norwegian municipalities had introduced preventive home visits to the elderly Did these visits improve older people s health? Number of municipalities with preventive home visits by year Note: Own calculation. Martin Karlsson Demographic Change in the EU 13 / 22

Reform 3: Personalised Autonomy Allowance (APA) in France In 1997, France introduced a system of LTC allowances to elderly In 2002, the APA reform moved this system from a comparably low coverage to universal coverage of elderly 60+ Need-based benefits and means-tested coverage Coverage was enlarged to an additional AGGIR level In 2001, only 175,000 frail elderly benefited from the allowance By 2003, the number of beneficiaries approached 800,000, increasing to 1 million in 2006 and 1.2 million in 2012 Did the allowance have beneficial effects on health? Martin Karlsson Demographic Change in the EU 14 / 22

WP3: Care provision in a changing society Aim Analyses of the consequences of population ageing for morbidity, labour market participation and the tradeoff between formal and informal care Activities Research work at RWI Essen and RWI Berlin Outputs Calculation of morbidity and LTC needs Development of an efficient LTC mix model Analysis of the economic burden of informal caregiving Martin Karlsson Demographic Change in the EU 15 / 22

Q1: Increase in morbidity and disability by proximity to death Note: Mean values. Own calculations based on SHARE. N=200 / 18,116 for < 12/ 12 months in 2004/05; N=355 / 26,095 in 2011. Missing category: time to death unknown. Martin Karlsson Demographic Change in the EU 16 / 22

Q1: Decomposition of changes in activity limitations Disability levels close to death increase in size that is comparably large. Martin Karlsson Demographic Change in the EU 17 / 22

Q1: Decomposition of changes in activity limitations Disability levels close to death increase in size that is comparably large. A rise in life expectancy for older age groups is accompanied by increasing limitations with everyday activities Disability levels increased due to population ageing and an increase in the prevalence of diseases. Martin Karlsson Demographic Change in the EU 17 / 22

Q1: Decomposition of changes in activity limitations Disability levels close to death increase in size that is comparably large. A rise in life expectancy for older age groups is accompanied by increasing limitations with everyday activities Disability levels increased due to population ageing and an increase in the prevalence of diseases. The disabling effect of health conditions remained constant over time. Martin Karlsson Demographic Change in the EU 17 / 22

Q2: Formal and informal care utilisation rates differ by country (older people 65+) Note: Individual weights are used for calculation. Own calculations based on SHARE W5. Martin Karlsson Demographic Change in the EU 18 / 22

Q2: Determinants of care choices in Europe Differences in care choices are caused by population composition and differences in the impacts of certain characteristics. More generous in-kind benefits tend to increase the demand for professional formal care services (e.g. Czech Republic vs. Germany/France). An increase in formal care use can only occur if such care options are available (e.g. Germany vs. Spain). Martin Karlsson Demographic Change in the EU 19 / 22

Q2: Determinants of care choices in Europe Differences in care choices are caused by population composition and differences in the impacts of certain characteristics. More generous in-kind benefits tend to increase the demand for professional formal care services (e.g. Czech Republic vs. Germany/France). An increase in formal care use can only occur if such care options are available (e.g. Germany vs. Spain). Since different forms of long term care are associated with different costs, our results can inform policymakers aiming to reduce or promote certain care options. Martin Karlsson Demographic Change in the EU 19 / 22

Q3: Does the negative effect of caregiving on work persist over time? (Preliminary) Negative labour market effects exist for men and women. Persistence of negative labour market effects from informal caregiving seems to be stronger for men then for women. Men are more likely to quit a full-time job and not return to the labour market after the care spell has ended. Martin Karlsson Demographic Change in the EU 20 / 22

Q3: Does the negative effect of caregiving on work persist over time? (Preliminary) Negative labour market effects exist for men and women. Persistence of negative labour market effects from informal caregiving seems to be stronger for men then for women. Men are more likely to quit a full-time job and not return to the labour market after the care spell has ended. Do men have less flexible jobs? Is it more "acceptable" for women to care? Martin Karlsson Demographic Change in the EU 20 / 22

Q3: Does the negative effect of caregiving on work persist over time? (Preliminary) Negative labour market effects exist for men and women. Persistence of negative labour market effects from informal caregiving seems to be stronger for men then for women. Men are more likely to quit a full-time job and not return to the labour market after the care spell has ended. Do men have less flexible jobs? Is it more "acceptable" for women to care? Opportunity costs could be higher than suggested so far. Martin Karlsson Demographic Change in the EU 20 / 22

Lecture series on LTC May 2016: Jonathan Kolstad University of California, Berkeley March 2017: Pieter Bakx Erasmus University Rotterdam Martin Karlsson Demographic Change in the EU 21 / 22

Thank you cinch.uni-due.de/research/projects/eib Martin Karlsson Demographic Change in the EU 22 / 22