Who Will Pay for Long-Term Care in the UK? Projections Linking Macro- and Micro-Simulation Models

• Published in: Fiscal studies Vol. 24; no. 4; pp. 387 - 426
• Main Authors: Hancock, Ruth, Comas-Herrera, Adelina, Wittenberg, Raphael, Pickard, Linda
• Format: Journal Article
• Language: English
• Published: London, UK The Institute for Fiscal Studies 01.12.2003; Institute for Fiscal Studies; Blackwell Publishing Ltd
• Subjects: Ability to pay; Age groups; Beneficiaries; Costs; Dependency; Economic models; elderly; Expenditures; Fees; Finance; Fiscal policy; Funding; Government spending; H51; H53; Health care; Health care expenditures; Health care policy; Health economics; Health policy; Health services; Homes; Hospitalization; Housing; I38; Institutional care; J14; J18; Life expectancy; Long term; Long term care insurance; Long term health care; Long-term care; Macroeconomics; Modeling; Nursing care; Nursing homes; Older adults; Older people; Personal grooming; Projections; Simulation; state provision; Studies; Taxation; Trends; Uncertainty; Unit costs; United Kingdom; United Kingdom > UK
• ISSN: 0143-5671; 1475-5890
• DOI: 10.1111/j.1475-5890.2003.tb00089.x

The long-term care funding system continues to attract much debate in the UK. We produce projections of state and private long-term care expenditure and analyse the distributional impact of state-financed care, through innovative linking of macro- and micro-simulation models. Variant assumptions about life expectancy, dependency and care costs are examined and the impact of universal state-financed ('free') personal care, based on need but not ability to pay, is investigated. We find that future long-term care expenditure is subject to considerable uncertainty and is particularly sensitive to assumed future trends in real input costs. On a central set of assumptions, free personal care would, by 2051, increase public spending on long-term care from 1.1 per cent of GDP to 1.3 per cent, or more if it generated an increase in demand. Among the care-home population aged 85 or over, the immediate beneficiaries of free personal care would be those with relatively high incomes.