The future of long-term care. Development trends up to 2035

Long-term care covers various health and social services that stop people’s health from deteriorating and their capacities from failing, support them in coping day to day, and maintain their well-being. A survey by Turu-uuringute AS found there are 160,900–190,500 people living in Estonia who use outside help to cope in their daily lives.

Many will need help, but not everybody. It is not possible to predict very accurately how much help people will need in the last years of their lives. Help is likely to be needed in old age, but not everybody needs it, and the amount of help that is needed can vary very widely. Few people suffer accidents or injuries during their lives that cause them to need long-term care. Some children are born with special needs, and they have a substantial need for help throughout their lives. Although the risks are similar for all, the costs of long-term care are distributed very unevenly between people.

Recent research in the USA found that 52% of people aged 65 will need some degree of longterm care at some point during the rest of their lives, with 58% of women and 47% of men needing it. Help is needed for on average around two years, but one in seven of those aged 65 will need help for more than five years. It is estimated it will cost around 75,000 dollars (65,000 euros) in current terms for each person currently aged 65. As half of people will need care in the future, the average cost per person needing help will reach 150,000 dollars (130,000 euros), and the costs will be many times higher for some (Favreault and Dey 2015).

The need for long-term care is increasing

• The share of the population aged over 65 will increase to around one third by 2050, from one fifth in 2019. A survey in 2020 found that one person in five in this age group needed care. Assuming that the share of those needing help remains the same, the part of the population receiving care will increase by 2%, or more than 26,000 people. The need for care could easily increase more than this, as the number of people with dementia and special needs is also increasing.
• The number of people aged over 80 will have almost doubled by 2050 from what it is now. The European Commission forecasts that there will be 125,000 people aged over 80 in Estonia by then. There will be six times as many people aged over 100 by 2050, as they will number around 700 (Statistics Estonia).
• The elderly can suffer from several chronic illnesses or syndromes that cause them to need long-term care. The number of people suffering from dementia will almost double by 2050, accounting for more than 3% of the population.
• People cope very differently at the end of their lives. This is exacerbated by the widening of the pension gap, especially as many people do not have a second pillar pension. The first pillar pension may be around only 20-30% of the average gross wage (Ministry of Social Affairs, Ministry of Finance 2016).
• Those in need will be less able to rely on their relatives. Elderly people mainly live alone or in couples. They have fewer children. There are fewer and fewer households where children live together with elderly grandparents, and children do not live close to their parents.
• People are not able to imagine themselves needing help in the future. Estonian society needs to be better informed about long-term care. Raising awareness needs information to be collected and distributed on topics like the probability of each individual person needing care, how much care might be needed and what it might cost.

The role of professional services is increasing

Professional domestic services need to be developed for the sake of those needing care and of their relatives, and to restrain the increase in the need for care.

Technological development can provide solutions in care, but it needs society to create the right conditions for it.

Health status can to a large extent be monitored remotely using ICT (Vandebosch et al. 2005). It has become normal to transmit health, mobility and location data in real time. People accept the loss of privacy.

The need for foreign workers will increase in the future in order to provide the care services that clients can pay for, as the ageing of the population will cause labour shortages in the care sector (ILO, OECD 2019).

There are different scenarios possible for long-term care in the future given how the services are divided between the state and local authorities and the different possible funding options:

• The care insurance model (centrally managed, state funded)
• The lifestyle model (centrally managed, privately funded)
• Synergy of local authorities and communities (locally managed, state funded)
• The market economy model (locally managed, privately funded)

The key question in funding is covering risks

Everybody is at risk of needing long-term care, and it is reasonable to share the costs arising from those risks. It is not a solution to make each person responsible for themselves, nor to assume that they have savings.

Decisions are needed about whether the cost should be borne directly through payments for services, or indirectly through family carers being unable to earn an income from work and suffering a loss to their own wellbeing.

Long-term care services are largely funded by the state to ensure access to them. The sector is funded from labour taxes and general taxation.

State funding can primarily be used to provide a minimum level of service. The state must provide the legislative foundation for long-term care insurance, perhaps together with life insurance or health insurance, and for reverse mortgages or equity withdrawal. Services can be distributed using a star or rating system.

Estonia needs to move towards having a pre-funded system, where part of the money is put aside to cover costs in the year 2035 and beyond.

The funding scenarios cover different uses of both private and public sector resources:

• SOS (small private funding, small public funding)
• The winner takes it all (small private funding, large public funding)
• Money, money, money (large private funding, small public funding)
• People need love (large private funding, large public funding)

The total cost of the combined solutions recommended for Estonia in the future will be around 2% of GDP:

• Insurance paid from household incomes: people aged over 25 without children pay an extra 0.25% tax. This brings total funding to 0.7% of GDP, or 188 million euros from the GDP of 2020.
• Public sector contribution from the general state budget revenues of 0.7% of GDP, or 188 million euros.
• Social security budget contribution of 0.1% of GDP, or 27 million euros, for those not able to finance their own contribution for services.
• Individual contributions for services of 0.2% of GDP, or 54 million euros, covered currently from income and from savings.
• Funds from insurance contracts and reverse mortgages and sales of real estate contribute 0.3% of GDP or 80 billion euros to the costs of care.