According to the United Nations, the world is getting older as virtually every country in the world is experiencing a substantial increase in the population aged 60 years or over.
With greater longevity, the number of people who suffer from chronic disease rises as well. Many of these health and age-related problems will mean more people worldwide will have age-related disabilities from chronic diseases such as pulmonary disease and diabetes. They suffer from mobility problems and suffer from falls. There is an increased loss of hearing and sight. With longevity also comes an increase in cognitive illnesses like Alzheimer's and other forms of dementia.
Advances in Medical Science Increase Longevity - And Long-Term Care
With more advances in medical science, the world is getting older. The consequences of aging have huge impacts on governments and families. Ignoring the costs and burdens of aging can be devastating.
Cognitive decline is a worldwide concern because of aging. An expected 75 million people worldwide will have some form of dementia by the year 2030. As a person gets even older, the risk of dementia increases substantially. For example, in the United States, nearly 40% of the population aged 85 years and older suffer from Alzheimer's and dementia.
Some countries project the aged 65+ population to triple by the year 2050. Costa Rica, Estonia, Czech Republic, and Chile predict that by 2040-2050 the population of 65+ individuals will be 30% of the population. Hungary estimates this to reach 24% by 2030, and Switzerland 8-10% of the population by 2030.
Thailand - An Example of Demographic Change
Thailand is an excellent example of how long-term care has become a primary public concern. In Thailand, the Buddhist principle of filial piety still prevails. Family members provide most long-term health care informally at home. There have been significant demographic changes in Thailand, which has created a crisis in providing long-term care services.
Adult children are moving to cities for better job opportunities, making it even more difficult for them to juggle their jobs and other family responsibilities with caregiving. At the same time, people live to older ages and with longevity come multiple chronic health issues that require long-term health care services. Nursing homes, adult day care centers, and other formal care, including better-skilled in-home care, have become a more significant part of care for older people, especially those with savings.
The problem is getting more prominent as the country gets older. The number of people aged 60 and above should reach 22 million by the year 2040. By that time, 33.5% of Thailand's total population will be aged 60 and above. By 2040, one in every five older people will be above 80 years old.
Long-Term Care Insurance World View
Mandatory public Long-Term Care Insurance programs exist in Germany, Japan, the Republic of Korea, Luxembourg, and the Netherlands, which see ongoing adjustments in benefits and premiums to secure the sustainability of the programs.
Some countries, like Germany, also have private Long-Term Care Insurance available.
Some governments provide long-term care at the government's expense or either all their population or some population groups. The United States has by far the largest, spending $369 million, which is 2.04% of GDP. In the U.S., the Medicaid program, which is means-based (must have little or no income and assets), will pay for long-term health care. Medicaid is a joint federal and state program providing health coverage to over 72.5 million Americans including long-term health care. Otherwise, the rest of the population either self-funds, purchases Long-Term Care Insurance, or has family provide unpaid informal care.
Private Long-Term Care Insurance exists in some countries, with the largest being in the United States.
How is long-term health care publicly financed around the world?
Self-Funding Default Solution
However, for most older persons who want to or even can access any type of formal care services, they must utilize their savings or "spend down" their assets to qualify for government-funded services–either institutional or in-home.
Self-funding long-term health care creates adverse financial outcomes both for the care recipient themselves and, often, their families who often supplement care, if not provide a majority of the care.
Japan and Germany spend a substantial amount of money on long-term health care, increasing every year. The United States and Luxemburg have the highest expenditure per capita in the world.
Public expenditure on long-term health care (2015-2017, excluding US) (USD million)
Average per capita expenditure on long-term health care (USD)
Data: The Organization for Economic Co-operation and Development
Around the Globe
In Austria, 80% of those who need long-term health care receive in-home care. In the Czech Republic, care is taking place in health care facilities, social services facilities, and at home. In Germany, care is provided at home (cash or in-kind) or institutionally.
In Japan, 70% of long-term health care is provided by family members, followed by companies (13%), others (1.0%), and unknown providers (15.2%). In Luxembourg, anyone needing long-term care services can choose to get help from a private-sector provider or informal care from a family member, or a combination of both. The remaining care is providing a facility.
In Turkey, the public sector provides the financing and infrastructure for long-term care. In the United Kingdom and Estonia, local authorities have a statutory duty to meet the needs of someone requiring care, generally provide care through contracting private sector providers, primarily in a residential care home setting or in a person’s home.
U.S. Leads the Way with Private Long-Term Care Insurance
The United States has the largest private Long-Term Care Insurance market with $11 billion (USD) in gross written premiums in 2017. Policies pay been paying huge dividends for American families. In 2020 the major companies paid over $11.6 billion (USD) in benefits, much of it for in-home care, although policies pay for all types of and levels of long-term care services.
The next largest market is Germany, with USD 4 billion gross written premiums in 2017. In Korea, Long-Term Care Insurance represented $1 billion (USD) in new premium in 2016. Israel also has a substantial private Long-Term Care Insurance market.
The amount of dollars being paid in claims for Long-Term Care Insurance is substantial and is increasing year after year, not just in the United States, but worldwide. Switzerland, Germany, Israel, Hungry, Czech Republic, and Belgium see increasing claims being paid by LTC Insurance.
Gross written premiums of LTC insurance market (USD million)
Tax Incentives for LTC Insurance
Some countries with private Long-Term Care Insurance marketplaces offer tax incentives to encourage more people to purchase private Long-Term Care Insurance.
In the Czech Republic, Japan, Lithuania, and Turkey, Long-Term Care Insurance premiums have tax advantages. In Germany, the contributions made to long-term care are generally taken into account for tax purposes.
In the United States, tax-qualified Long-Term Care Insurance premiums can be deducted in certain situations. Benefits are always tax-free. Some states offer incentives as well.
Don’t Ignore Future Long-Term Care
There are still many people throughout the world that would prefer to ignore the consequences of aging. Governments worldwide are reviewing their planning as their populations continue to age, and fewer children are available to become caregivers.
Family caregivers face physical and emotional stress and must juggle their role as caregivers with their responsibilities to their employer, family, and communities.
The cost of long-term health care gets more expensive every year, depending on where you live, according to the LTC NEWS Cost of Care Calculator.
In the United States and Canada, private Long-Term Care Insurance can be an essential part of an individual's retirement planning. Despite what you might hear, policies are affordable and custom-designed. Premiums vary over 100% between insurance companies.
However, Long-Term Care Insurance is medically underwritten. That means you cannot purchase a policy once you need it. The best time to purchase coverage is in your 40s or 50s when you have better health and premiums are at their lowest.
In the U.S., individuals with Health Savings Account can use the pre-tax funds to pay for their premium. Those people who are self-employed or who own a business or partnership have tax incentives as well.
Be sure to seek the assistance of a qualified and experienced Long-Term Care Insurance specialist to help navigate the underwriting and policy design options, in addition to shopping for the lowest cost.
About the Author
Linda is a freelance writer interested in retirement planning, health and aging.
Contributor since October 31st, 2017
Yes, long-term care costs drain assets and change lifestyles. Yes, long-term care is a cash flow issue. It is a significant cash flow problem. However, long-term care is also a family problem. Affordable Long-Term Care Insurance addresses both family and finances.
Preparing your family and finances for changing health in the future will safeguard assets and reduce the stress and anxiety otherwise placed on your loved ones.
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