RICERCA ITALIANA     

Theories and policies of long-term care in an ageing society

Università degli Studi di Modena e Reggio Emilia

Abstract

The design of policy programs for long term care has become one of the major topics in the field of public economics in the last decade. It is indeed at the crossroad of many research strategies in economics. Its importance stems from the well known ageing process of our society, and thus needs to be studied also by the builders of long run models with particolar emphasis on financial and redistributive effects. The design of long term care policies needs not be studied only by welfare state scholars, because it requires also strong competencies in the field of fiscal federalism, in order to make compatible a decentralised provision of services with a framework of general principles of uniformity in the provision of services.
The structure of care services depends not only on the market and on public institutions, but also on the role of the household. In this sense, the contribution of household economics can be very important. Finally, in the markets of care services a great fraction of total supply is provided by female immigrant workers, whose incentives to migrate depend strongly on the evolution of the globalisation processes.
The two operating units involved in this project have the necessary scientific competences needed to face the complexity of the phenomenon, from all the points of observations considered.
The research will be finalised not only to a general objective of theoretical knowledge, but will also formulate a consistent set of proposals of specific public policies in this field.
This research is aimed to provide a deeper knowledge of long-term care, in order to permit the rational design of service programmes. In our view, a central role has to be played by public sector and significant public funding problems have to be faced.
Our research proposal is articulated as follows:
1. building a theoretical consistent framework designed to analyse long-term care macro economic effects;
2. projecting the number of disabled elderly, the severity of disability and other socio-economic characteristics of disabled elderly in the medium-long run, by developing a dynamic microsimulation model;
3. assessing the design of long-term care programs coordinated by the public sector in a context where services are mostly provided by immigrant workers and where the presence of firms is significant;
4. defining the different financial choices permitted by the reform of title V of the Constitution, with a special attention to schemes that allow for a full public funding of long-term care expenditure. <<<

Principal Investigator

Paolo Bosi Università degli Studi di MODENA e REGGIO EMILIA

Research Objectives

Public policies for long-term care represent one of the more challenging tasks in the field of welfare states reform, and have been studied under a vast variety of economic approaches, both theoretical and applied (see for example Eisen, Sloan, 1996; Norton, 2000 Jacobzone 1999). The main object of this project is the study of the organization of the policies for disabled elderly in our country, in a perspective that assumes a relevant role for the financing from the public sector, and where therefore the State must decide how and where to find the necessary resources.

This project has thus an eminently normative objective, and is based on a well defined institutional context, the
Italian legislation following the recent reform of the title V of the Constitution, that assigned social expenditure to the Regions, and introduced the concept of essential social protection levels (known with the acronym LEP in Italian), whose definition is reserved to the exclusive competence of the central State.
The decision to concentrate on a LTC program financed primarily with public resources prevents us from considering the typical problems of the private insurance sector, but is not sufficient to enucleate a unique model of public intervention. Within the organizational and financial models guaranteed by public expenditures, we ascribe a particular importance to the distinction between "complete" and "incomplete" models (CAPP, CER, Servizi nuovi (2004) and Bosi, Guerra and Silvestri (2005)). The essential characteristic of a complete model is that it fully states the rights of the beneficiaries, the responsibilities of the various actors that must provide the services (adequacy of productive capacity) and the specification of the funding sources necessary to support the whole set of services, in a sufficiently long time span. We start, however, from the awareness that, despite a huge literature, this field requires a further investigation on the definition of the theoretical models, and on the set up of tools for the econometric forecast of the economic and demographic variables that may be relevant for the definition of the dynamics of the phenomenon under study.

Among the many aspects that require further study, this project will concentrate on the following:

1. Define the tools and economic models able to explain the connections among the economic actors, the relevant economic variables and their evolution in a long-term care policy. We want to examine some aspects that are generally treated separately in the literature following the household economics approach: the links between paid labour supply of women, their care giving activities inside the family, the level of inequality in household incomes, the incidence of immigrants in the relevant labour markets. The main objective of this part of the project is to verify the possibility of building a reference theoretical framework, as far as possible and complete, for the study of the macroeconomic sustainability of LTC policies.

2. Describe, explain and forecast the medium and long run dynamics of the phenomenon. We plan to simulate, besides the number of non self-reliant people by age classes, gender and gravity levels, also the degree of heterogeneity in the economic and social conditions of people requiring LTC, in order to estimate both the family financial resources and those involving care work, on which they will be able to rely. To reach this aim, a dynamic population microsimulation model will be built, the first in Italy dealing with LTC problems.

3. At a more institutional level, we shall asses the sustainability in the long run of a model dominated by public supervision but with a significant supply of foreign workers and many private firms operating in the third sector. In this context, we will focus on wages and working conditions.

4. on the basis of the results of the three previous points, the project will define the available options for a public funding of an LTC program in Italy. Given the devolution process currently taking place, we shall analyse different alternatives, considering whether the funding system allows the construction of a fund from the central state exclusively devoted to the financing of LTC. In the first case the emphasis is placed on the suitable responsibleness mechanisms so as to guarantee uniform standards in the services provided by the Regions; in the second case we shall concentrate on the possible alternatives to finance a regional fund and on the possible allocation rules of the resources among the various actors that actually provide the services at the local level. A special attention will be devoted to the exam of the more appropriate methods for requiring a fee from users of LTC services, taking account the opportunity of discriminating among different economic conditions of the beneficiaries, and considering also the possibility of including, among the LTC services, the care work potentially available from the relatives of the frail elderly. <<<

Timescale

24 months

National and international background

An increasing number of new proposals for long-term care have been made available out from different scientific fields, as long-term care literature is becoming increasingly important. We will focus here on scientific background in economics.


Economic models for long term care programmes.
There are several strands of economic literature which may be relevant for the theoretical analysis of single aspects a LTC program, namely the choice between work inside ad outside the family, macroeconomic role of care demand and care supply, the role of increasing demand and supply of services provided by immigrant workers and the impact on earnings and household income inequality. However, a theory able to consider jointly these aspects and to provide a unified picture programs is still missing.
Among these very interesting, though incomplete, analysis, the neoclassical Household Economics started by G. Becker adopts a micro approach in a partial equilibrium context (Gronau 1986, Juster, Stafford, 1991; Cigno, 1991; Bergstrom 1997; Ermisch 2003; Apps 2003), to investigate the economic reasons that explain the choices between work inside and outside the family (Gronau 1986; Juster, Stafford 1991; Cigno 1991; Bergstrom 1997; Ermisch 2003; Apps 2003). Much effort has been devoted to the study (Chiappori 1992 e 1997) intra-household distribution, building categories of models of great interest, but not inserted in a general equilibrium context.
There are very few macroeconomic general equilibrium models applied to this problem; see however Benhabib et al., 1990, who uses a real business cycle approach. A greater interest have the papers by Pugno (2001 and 2003), which however are only a first, albeit relevant, step in this direction. There are still no works that, on the basis of a consistent dynamic macro model, are able to treat jointly the problems of the market of care services, the tendencies toward the commodification of these activities, the sustainability of social expenditure, and the mechanisms necessary to finance this expenditure. Hamada et al. (2003) develop a very interesting theoretical overlapping generations model able to explicitly consider the role of care work in a rapidly ageing society.
We also intend to develop a different approach directly related to Classical Political Economy. This approach, using the classical notion of ‘subsistence wages’, allows one to make visible, as a central problem of functional distribution betweeen wages and profits, what is effectively spent in the ‘conventional necessaries’ that enable people to work. In these necessaries are we to include private and public expenditure, and upaid work, for long term care? Is the aged and non self- sufficient population’s subsistence to be considered a necessary or a surplus? Moreover, has it to be paid out of wages or out of public expenditure? These are crucial questions related to the distribution of incomes. Subsistence refers to a multidimensional and social process that has to be analized on the ground of the quality of life and not only in terms of basic needs, incomes and paid labour inputs (Picchio, 1992, 2003, Sen, 1987). On this very ground of the quality of life of all the subjects involved the impact of policies has to be assessed.
Finally there is a rich litarature on effects of different assistance regimes on gender and inequaliy (Bettio e Plantenga 2004; Bettio, Simonazzi, Villa 2006). They analyse the rapid growth of personal services provided by private market where a disproportionate number of immigrant women work. After being considered a pre-modern economic sector for decades, paid domestic service seems to have seen a "resurgence" in Europe, especially south Europe, in recent years (Colombo 203; Andall 2003; Anderson 2000). Occupation consists mainly of low paid immigrant workers, who are not substitute of local workers due to the high degree of labour segregation.


Microsimulation models: definitions and main typologies.
Microsimulation provides a number of options among which we can select the most suitable model to project care demand and to asses long term care programmes.
Models can be grouped in the following three types:
i) the static models;
ii) the dynamic population models;
iii) the dynamic cohort models.
The most suitable kind of model seems the dynamic population models. The economic literature (Jakobzone [1998], CBO [2004]) stressed how the ageing in developed countries, already in place, will show the effects on medium-long term.
There are many models of interest of us described in international literature. Among them: PRSIM [Rivlin 1990], ASIM, [Lagergren 2003], CareMod [Brown, Harding 2004], NCCSU [Wittenberg et al. 2004].
In italy dynamic population models have been developed by Baldacci e Tuzi [1997], Vagliasindi et al. [2004], Ando e Nicoletti Altimari [2005] e dal Capp [Mazzaferro e Morciano 2006]. None of them is able to project health status of disabled population.
Dynamic population models have been recently developed in Italy at the National Institute of Statistics [Baldacci, Tuzi 1997], at the University of Parma and Pisa [Vagliasindi 2004; Nicoletti, Altimari and Ando 2004] and at the Centro per l'analisi delle politiche pubbliche - CAPP - [Mazzaferro, Morciano 2006]. However, none of the dynamic models currently in use in Italy focuses on the health status of the population or on the issue of long-term care.
So far, the expected evolution of long-term care in Italy has been studied only by the so-called multi-state models. In particular, the public expenditure for long-term care between 2005 and 2050 has been estimated by the Ragioneria Generale dello Stato [RGS 2006] and with the model presented in EPC [2005].
Such models represent an important tool in the study of the long-term care expenditure, nevertheless a further improvement of our knowledge with respect to the expected number of dependent older people and the distributive implications of alternative policies of long-term care is urgently needed.


Organisation of care services and their markets.
There is at present a great variety of care regimes across industrial countries, at different intersections between the family, the state and the market. In Italy (as in other Mediterranean), elderly care has recently attracted large flows of care migrants, ushering in a new division of labour among public and private sector, family carers, female immigrants, and skilled native workers.
Different strands of the literature illustrate ongoing developments (Anxo and Fagan, 2005; Bettio and Plantenga, 2004; Eborall, 2005; Gray, 2005; Lethbridge, 2005; OECD, 2005).
Our aim is to assess the sustainability of this new model based on the supply of immigrant labour and its compatibility with public management of policies for the non self-sufficient.


Long term care financing.
The topic of Ltc financing has received increasing attention from the economic literature. Most contributions, both normative and positive, are deeply influenced by the institutional context to which they refer.
Among them, we can remind: the earlier contributions by Cutler (1993), Laing (1993) and Scanlon (1992); the more recent ones, by Cbo (2004), Howe (2000), Ihara (2000), Karlsson et al. (2004) Royal Commission on Long Term Care (1999) and Schmall e Rothgang (1996), that offer an assessment and a comparative analysis of the more important international models of Ltc financing; the most relevant contributions to the Italian debate on the subject by Beltrametti (2000, 2002), Gori (2002 e 2003), Isvap (2001) and Mastrobuono (2002).
As we stressed in our previous analyses of Ltc - CAPP, CER, Servizi nuovi (2004) and Bosi, Guerra and Silvestri (2005) - a complete model of financing is necessary. <<<