A Budget Proposal for Long-Term Care in China: A means tested model Bei Lu (CEPAR,UNSW) Xiaoting Liu (Zhejiang University) Mingxu Yang (Zhejiang University) 1
China s Current LTC Policy Each region design their own LTC regulations fragmented Mixed subsidy based: Beijing voucher to oldest old as community/home care delivery methods; with targeted subsidy to the very poor if living in nursing homes Long term medical care insurance: Qingdao with RMB 160-200 per day for hospital LTC beds and RMB 60 for nursing home beds Means-tested, need based subsidy: Zhejiang (9732) for frail elders with MLA, up to RMB 15,000/RMB 6,000 per year in 2014 for nursing home/residential care subsidy Carer subsidy initiative: Nanjing RMB 400-500 per month for cares if not in formal labour force taking care of family member 2
Motivation China has many types of policy initiatives for LTC in local regions, and it will need a unified funding scheme for general budget in the near future Fragmented unified Type of Funding model: insurance or public finance Coverage: universal or means tested 3
Outline Background and literature review Means tested public funding for LTC using CHARLs data for budget analysis Projection for future cost and Conclusion 4
Background: International experiences LTC Cost in OECD Countries (2011) 5
Two Main Models for LTC Policy Insurance Model: Germany (Based on needs and blind care), Informal Care-Led): 1.95% of wage contribution (1% of GDP) Japan: Very generous eligible criteria Service led, 1.8% of GDP, with 10% co-payment, remaining half insurance contribution and half govt. subsidy Tax based Model: Universal, high coverage: Netherland, Sweden, Norway Service led models (2.4-3.7% GDP) Means tested, need based: USA and Australia (0.6-0.8% GDP) 6
Literatures on China s LTC Funding Literatures on budget estimate: Ma (et al 2012) estimate the cost of LTC in general for 2011 was about 0.5% of GDP and increase to 1.7% of GDP by year 2050. Zhou and Jia (2009) estimate that the LTC demand for Chinese elders would grow to 33 million in 2050 and would cost about RMB 802 1336 billion (in 2004 price, 5.7-9.8% of 2004 GDP). LTC Insurance System for China Cao and Cheng (2014) estimate the contribution rates of wage rate at 2.01% in 2015 and will go up to 8.61% in 2050 Subsidy public finance estimation: Tang (2012) estimates a cost of 0.32-1.58% of fiscal revenue (about RMB 37.6-184.9 billion in 2012 currency) Dong (2012) calculates RMB 13.4 billion (0.028% GDP) for elders with MLAs and RMB 108 billion (0.23% of GDP) for all elders 7
Means tested Proposal for LTC using CHARLs Data 8
Why Means Tested Safety Net Model? It costs less to start, especially when elder dependency ratio (DR) in China is still low (13.9%,2014) Though aged population countries like Japan (42% DR) and Germany (34% DR) adopted insurance system, there is always a public funding part to support low incomers This model protects the most vulnerable as a priority and can be integrated into an insurance system in the future for public funding considerations It is the cornerstone for establishing unified LTC system in China 9
Means tested Model for LTC using CHARLs CHALRs data used here was collected in 2011 The survey used PPS methodology, and covered 150 counties of 28 provinces in China, about 10,000 households (about 17,000 individuals more than 45 years old). We target at elders with age 60 and up and have about 7532 individuals. 10
Frail Elders Health Level Definition Health measurement in the CHARLs survey 12 IADLs questions: relevant to instrumental activities of daily living walking,sitting,climing,kneeling,extending,carrying,picking,household chores, cooking, shopping, money management, taking medication 6 ADLs questions: relevant to activities of daily living Dressing, bathing, eating, into or out of bed, using toilet, controlling urination We define: Health 12 IADLs 6 ADLs states questions questions Definition Healthy [0,2] 0 bad Healthy IADL ADLS2 >=3 bad 3-4 bad 0 bad ADLS1 ADLS3 5-6 bad 1-2 bad Mild disabled Disabled Proportion Urban Rural Total 80.35% 75.10% 77.16% 16.81% 22.08% 20.01% 2.84% 2.82% 2.83% 11
Frail Elders Financial Groups We defined 3 income groups: Poverty Insufficient Sufficient Rural <RMB299 RMB 300-600 RMB 600+ Urban <RMB 600 RMB600-1499 RMB 1500+ Official statistical data in 2011: Urban per capita disposable income :RMB 1817 Rural per capita net income :RMB 581 Unit: RMB per month 12
Financial deficiency in two major disabled groups for LTC services (% of population of 60+) Proportion of the frail elders by income and heath level Mild Disabled Disabled Total Poverty Insufficient Poverty Insufficient Rural 9.61% 1.86% 1.14% 0.27% 12.88% Urban 3.44% 1.09% 0.68% 0.16% 5.36% Total 16.00% 2.24% 18.24% It implying that around 18.24% of 60+ people need to use the LTC services 13
Public Subsidy Standard Design We assume the caring subsidy would be based on the current regional economic status, using rural as half of the cost as urban. Subsidy standard: Proportion to GDP per capita Rural Urban Mild Disabled &Poverty/Insufficient 1/20 1/10 Disabled & Poverty/Insufficient 1/6 1/3 The GDP per capita in 2014 is RMB 46524 per year, 3877 per month This subsidy standard is referenced by the experiences of Germany and Japan 14
LTC Cost of GDP to compensate frail groups at 2014 level Costs measured by percentage of GDP for different frail elder groups Mild disabled (%) Disabled Poverty Insufficient Poverty Insufficient Rural 0.067 0.013 0.027 0.004 0.111 Urban 0.048 0.015 0.032 0.0074 0.102 Total 0.143 0.07 0.213 Population for 60 above is about 13.9% in 2014 Total 15
PROJECTION FOR FUTURE COST AND CONCLUSION We use the logit model to analyse the influence factors to health and income level Consider the mixed marginal effects of changes in the influence factors from now to 2050,Predict the development trend of the proportion of the unhealthy and lower-income elders Predict the LTC cost by our designed subsidy standard, including accommodation and medical care costs. 16
The Projection of the Proportion of elders 60 and above need LTC financial public transfers from 2015-2050 ( of population 60+) Year 2011 2015 2020 2030 2050 Mild Disabled in poverty &insufficient 16.00% 15.40% 14.80% 13.60% 11.20% Disabled in poverty +insufficient 2.24% 0.02184 2.13% 0.0201 1.79% Total 18.24% 17.58% 16.93% 15.61% 12.99% Declining due to the influence factors, like education, urbanization improved The average descending ratio of the frail elders is 1.32% per year totally 17
Projection for 2050 LTC Cost If by 2050, average subsidy is about 1/3 of GDP per capita, public transfer for 2050 to elders will be 1.58% of GDP, with 12.99% of 60+ elders as beneficiaries; If the Mild Disabled groups receive 1/6 of GDP per capita as subsidy, the total cost will be 0.90% of GDP in 2050. This is based on population for 60 above is about 40% of the total by 2050 (Lu et al 2014). 18
Conclusion With urbanization, better education, poverty and insufficient ratios for disabled & mild disabled elders are expected to decline by 1.32% per year. It s well worth spending about only 0.213% GDP to initialize the LTC financial subsidies now. It will only spend 1.58% GDP in 2050 for LTC subsidy, even if including the costs of accommodation and medical nursing. 19
Email Web Twitter Sign up for our newsletter lubei@unsw.edu.au www.cepar.edu.au @cepar_research Follow us on twitter Questions?