Sustainability of long-term care financing in the Netherlands

Presenter: Frederik T. Schut, Erasmus University, Rotterdam

Abstract

The Netherlands was the first country that introduced a universal mandatory social health insurance scheme (abbreviated: AWBZ) for covering a broad range of long-term care (LTC) services provided in a variety of care settings. Since its introduction in 1968, the scope of the scheme was gradually expanded from nursing home care and institutional care for the mentally and physically handicapped to home health care, mental health care and residential care for the elderly.

In comparison to most other OECD countries both total and public expenditure on LTC is high, particularly since the Dutch population is relatively young. This can be explained by the relatively generous social health insurance scheme.

Because of the generous insurance scheme, in the 1990s stringent supply and price regulation was introduced to control the growth of LTC expenditure. As a consequence the share of GDP spent on LTC remained more or less stable at 3.5 percent for more than a decade, despite a growing demand for LTC-services. The increasing gap between demand and supply resulted in growing waiting lists and a deterioration of quality and service levels. As alternative for getting care in kind, in 1996 cash benefits for LTC were introduced. For part of the clients getting a cash benefit was a way to get around the waiting lists. Forced by court decisions and growing political pressure, in 2000 the government lifted the budgetary controls. This resulted in a huge expenditure growth: from 2000 to 2003 the share of GDP spent on LTC increased from 3.5 to 4.0. Since 2004 the government increased income related co-payments and introduced regional budgets to regain control over the growth of LTC spending. In addition, several benefits (housekeeping, transitory mental health care) were excluded from coverage.

Since the regional budget mechanism does not provide appropriate incentives for quality and efficiency and may not be feasible in the long run given the previous court decisions, the government aims at a structural reform of LTC financing and delivery. The reform is based on three pillars: (1) a reduction of the coverage of the LTC insurance scheme to benefits that are targeted to those who need help with basic activities of average daily living (ADL) over an extended period of time; (2) an improvement of the system of need assessment; and (3) the introduction client-based budgeting based on a classification of “care service packages.” Depending on the choice of the client the budget can either be used by health insurers to purchase and arrange care on behalf of their enrolees or can be used by the client itself to purchase care.

The objective of this paper is to analyse the deficiencies of the current system of LTC financing and to assess the feasibility and financial sustainability of the intended reforms. Findings are particularly relevant for other countries that have or considering to introduce a social insurance scheme for LTC (e.g. Germany, Japan, Belgium, US).