Transcript Fiscal outlook for long-term-care spending in Poland

Challenges for financing and
providing long-term-care in
Eastern Europe
Johannes Koettl and Sarbani Chakraborty
Europe and Central Asia Regions – Human Development Sector
Background
 World Bank prepared report on LTC challenges for the
New Member States of the EU and Croatia
 Focus on
 Demographic transition in Eastern Europe and
implications for LTC
 Current LTC systems (financing, provision of services,
regulations) in Bulgaria, Croatia, Latvia, and Poland
 Lessons learned from OECD countries (Austria,
Germany, France, United States)
Key messages
1. LTC sector has to prepare for future demographic
“shocks”
2. Substantial future fiscal pressure from LTC
expenditures in ECA countries
3. Policy implications
i)
ii)





Urgent need to mobilize financing for future LTC
expenditures now
Control demand and costs for formal LTC services:
From health to social services
From institutional to community-based care
From care fragmentation to care coordination
From producing to purchasing LTC services
From in-kind to cash benefits
1. Prepare for demographic
shocks
 Population is aging rapidly, yet not at a constant rate, but in
waves
 These waves will lead to sudden increases in the number of
dependent people
 There will be much less healthy people, and more and more
dependent people
 Who will then care for the dependent?
 There will be much less young people, and more and more
old people
 Who will then pay the care for the dependent?
Example: Poland
Polish society is aging rapidly, yet not at a
constant rate, but in waves: 2010
Source: Eurostat
Example: Poland
Polish society is aging rapidly, yet not at a
constant rate, but in waves: 2020
Source: Eurostat
Example: Poland
Polish society is aging rapidly, yet not at a
constant rate, but in waves: 2030
Source: Eurostat
Example: Poland
Polish society is aging rapidly, yet not at a
constant rate, but in waves: 2040
Source: Eurostat
Example: Poland
Polish society is aging rapidly, yet not at a
constant rate, but in waves: 2050
Source: Eurostat
Example: Poland
Polish society is aging rapidly, yet not at a
constant rate, but in waves: 2060
Source: Eurostat
Sudden increase of 75+ age group
during 2020s and after 2045
Annual population growth rate by age group
Source: Eurostat
Dependency level is highest among
older age groups…
Dependency level by age group for Poland
Source: SILC
…so demographic waves will lead to sudden
increases in the number of dependent people…
Projected annual population growth rates by dependency level in Poland
Source: World Bank staff calculations
…while the healthy population is constantly
decreasing (green line)
Projected annual population growth rates by dependency level in Poland
Source: World Bank staff calculations
Who will care and who will
pay?
 There will be much less healthy people, and more and
more dependent people
 Who will then care for the dependent?
 There will be much less people in working age, and
more and more retired people
 Who will then pay the care for the dependent?
Today: 11 healthy per severely dependent
2060: 5 healthy per severely dependent
Projected inverse dependency ratios for Poland
Source: World Bank staff calculations
Today: 5 aged 15-64 per 65+
2060: less than 2
Projected inverse dependency ratios for Poland
Source: World Bank staff calculations
Key messages
1. LTC sector has to prepare for future demographic
“shocks”
2. Substantial future fiscal pressure from LTC
expenditures in ECA countries
3. Policy implications
i)
ii)





Urgent need to mobilize financing for future LTC
expenditures now
Control demand and costs for formal LTC services:
From health to social services
From institutional to community-based care
From care fragmentation to care coordination
From producing to purchasing LTC services
From in-kind to cash benefits
2. Substantial future fiscal pressure from
LTC expenditures in ECA countries
 Combination of
 Steep expenditure increases per beneficiary in the past
(quality improvements)
 Expansion of formal services (larger share of elderly
consume formal services)
 Overall increase in number of elderly
 Strong expenditure growth dynamic
Example: Poland
 Two scenarios:
 If expenditures per beneficiary continue to grow like
between 2006 and 2008, cost explosion (pessimistic
scenario)
 If expenditures per beneficiary grow with GDP per capita,
still considerable increase in spending (optimistic
scenario)
Public expenditures per
beneficiary increase strongly…
Public expenditures per beneficiary by benefit type and sector in Poland
(current PLZ, 2005 to 2008)
Source: Wieckowska (2009) and own calculations
…on average more than 8%
annually for in-patient LTC
Annual real growth rates of public expenditures per beneficiary by benefit type
and sector in Poland (percent, 2006 to 2008)
Source: Wieckowska (2009) and own calculations
The pessimistic scenario
Projected public expenditures on LTC (as share of GDP)
Source: World Bank staff calculations
Example: Poland
 What are assumptions in optimistic scenario?
 Return to strong GDP growth
 Likely to happen, but what if not?
 Expenditures per beneficiary (costs) increase with GDP
per capita
 Unlikely
 Share of population who demand formal services stays
constant
 Very unlikely
 Optimistic scenario seems more like minimum increase
in public expenditures (over-optimistic)
Share of dependents who receive NO care in
Poland more than 80 percent
=> most likely to decrease strongly
Share of dependents with no or informal care, 2005
Source: EC
The optimistic scenario
Projected public expenditures on LTC (as share of GDP)
Source: World Bank staff calculations
Example: Poland
 Where will Poland end up? Somewhere in between….
 In any case, sharp increase in spending during “shock”
years (2020s and after 2050)
Key messages
1. LTC sector has to prepare for future demographic
“shocks”
2. Substantial future fiscal pressure from LTC
expenditures in ECA countries
3. Policy implications
i)
ii)





Urgent need to mobilize financing for future LTC
expenditures now
Control demand and costs for formal LTC services:
From health to social services
From institutional to community-based care
From care fragmentation to care coordination
From producing to purchasing LTC services
From in-kind to cash benefits
3.i) Urgent need to mobilize financing for
future LTC expenditures now
 Risk-pooling is essential to avoid old-age poverty
 Private LTC insurance has not been very successful
 Market failures (adverse selection, risk selection)
 Unpredictability of costs lead to high mark-ups
 Large role for public sector
 Tax-financed (cash benefits, social assistance)
 Contribution financed (social security)
 Both are pay-as-you-go mechanisms
 Who will pay?
Who will pay?
Today’s young can pay for tomorrow’s old…
Source: Eurostat
…but who will pay for today’s young when
they are old?
?
Source: Eurostat
Increase private savings for
retirement and dependency now
 Increase savings of current working age population for
their own retirement and dependency needs
 Private financial products (not LTC insurance for in-kind
benefits) to insure against poverty in case of
dependency
 Example of France
 Enhanced annuity (life insurance payments increases in
case of dependency)
 Reversed mortgage
3.ii) Control demand and costs for formal LTC
services
 Promote healthy life-styles
 From health to social services and from institutional to community-based
care
 Channel future demand for formal LTC to more adequate and less
expensive services
 Away from medical care and hospital care
 Toward social care, especially community-based care
 Resist converting hospital infrastructure into inpatient LTC infrastructure
 Rather, invest in community care centers that offer a wide variety of
(outpatient) care services (daycare and home-based care)
 From care fragmentation to care coordination
 Especially between health and social sector to avoid cost shifting at the
expense of patients
 Joint needs assessments by inter-disciplinary teams (GP and social
worker)
 Scaled benefits
3.ii) Control demand and costs for formal LTC
services
 From producing to purchasing LTC services
 In the future, a much larger share of the economy will evolve
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around providing care
Cannot be done by public sector alone
Define core competencies of the public sector
The rest, buy from private market
Proper regulation, accreditation, standards of care, and quality
control mechanisms
Institutions and mechanisms might take time to develop
In the meantime, explore potential of public-private partnerships
 From in-kind to cash benefits
 Puts consumer in charge
 Main vehicle to support (cheap) informal care
 Maybe easier to control public expenditures on cash benefits
 Explore potential of vouchers