The Economics of Long-Term Care: Key Concepts and Major Financing and Delivery Models

The Economics of Long-Term Care: Key Concepts and Major Financing and Delivery Models

Peter P. Yuen (The Hong Kong Polytechnic University, Hong Kong)
DOI: 10.4018/978-1-5225-2633-9.ch001
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Abstract

This chapter presents key concepts of economics relevant to the financing and delivery of long term care services. It first examines the magnitude of population aging in developed economies, and the associated implications for long term care. Key economic concepts relating to the demand, supply and financing of long term care services are then discussed. Policies, practices and major models of financing of long term care are further explored followed by a presentation of the conceptual framework for reform. It concludes that in view of the magnitude of the problem, incremental changes in the existing systems are unlikely to be adequate. A clear understanding of the economic concepts to underpin major transformation of existing systems and policies that do not align with populations trends is urgently needed.
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Background

As a result of longer life-expectancies, the elderly population is rising at a speed, which is unprecedented in the history of mankind. It is a global phenomenon affecting every country and region, with industrialized economies experiencing the highest ageing growth rate at the present time. The share of the population aged 80 years and over is expected to more than double in coming decades across the OECD, growing from 4% in 2010 to close to 10% by 2050 (Colombo & Mercier, 2011).

This ageing process is widespread and enduring, because of the ubiquitous and sustaining nature of the trend of longer life expectancies and lower fertility rate of developed economies. The world is not likely to return to the kind of age structure that the previous generations experienced (United Nations Population Division, 2001).

Associated with ageing is the increasing need for long term care for a significant percentage of the elderly population. Long term care expenditure has been on the increase for most countries, and is expected to increase at a much greater rate in the coming decades. In the USA, it was estimated that 25% of its population age 65 and above requires some form of long term care (Feldstein). In the United Kingdom it was found that while, on average, people could expect to live to age 77, 15 of these years would be spent with some form of disability (WHO, 2015). In Australia, it was found that three quarters of the elderly persons who died used some form of long term care during the twelve months before death, and around half of them used long term care services more than four years before death (Australian Institute of Health and Welfare 2015). In Hong Kong, it has been projected long term care spending will increase from 1.4 percent of GDP (in 2011) to 3 percent of GDP by 2036, with an average growth rate of 3.1% (Chung et al, 2009).

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