Long-term care spending and unit costs

Compared to other areas of health care, spending on LTC has seen the highest growth in recent years (see indicator “Health expenditure by type of service” in Chapter 7). Population ageing leads to more people needing ongoing health and social care; rising incomes increase expectations of the quality of life in old age; the supply of informal care is potentially shrinking; and productivity gains are difficult to achieve in such a labour-intensive sector. All these factors create upward cost pressures, and substantial further increases in LTC spending in OECD countries are projected for the coming years.

In 2019, 1.5% of gross domestic product (GDP) was allocated to LTC (including both the health and social component) across OECD countries (Figure 10.24). At 4.1% of GDP, the highest spender was the Netherlands, followed by Norway (3.7%), Denmark (3.6%) and Sweden (3.4%). At the other end of the scale, Mexico, Chile, Greece and Turkey only spent between 0.1% and 0.2% of their GDP on the delivery of LTC services. This variation partly mirrors differences in the population structure, but mostly reflects the stage of development of formal LTC systems, as opposed to more informal arrangements based mainly on care provided by unpaid family members. Some level of underestimation can exist for those countries unable to record spending on social LTC. Across OECD countries, four out of five dollars spent on LTC come from public sources.

The way LTC is organised in countries affects the composition of LTC spending and can also have an impact on overall spending. Across OECD countries, more than half of health and social LTC spending in 2019 occurred in nursing homes (Figure 10.25). In most OECD countries, these providers account for the majority of LTC spending. On average, around one-fifth of all LTC spending was on professional (health) care provision at home. Other LTC providers are hospitals, households – if a care allowance exists that remunerates the informal provision of such services – and LTC providers with a clear social focus. Each accounts for an average of 9% of total LTC spending. The importance of these modes of provision varies widely across countries, reflecting differences in the organisation of LTC and policy priorities.

Public schemes play a crucial role in maintaining the costs of care for older people with LTC needs at affordable levels. Without public financial support, the total costs of LTC would be higher than median incomes among older people in most OECD countries and EU Member States. On average across OECD countries, institutional care for severe needs would cost more than twice the median income among older people (see Figure 10.26). Compared to median incomes among older individuals, total costs of care were highest in Finland and Sweden and lowest in Croatia and Slovenia, among countries providing data in 2020. Only in these latter two countries would an older person with median income be able to afford the total costs of institutional care for severe needs from their income alone. Public social protection systems provide support to older people with LTC needs so that they are able to afford care. It is because of public support that the costs older people ultimately face are far below what is shown in Figure 10.26 for Finland and Sweden (Oliveira Hashiguchi and Llena-Nozal, 2020[12]).

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