Ensuring Sustainability in Long-Term Care: Challenges and Strategies for the European Union

This article was exclusively written for The European Sting by Ms. Sadia Khalid, a dedicated professional with an extensive academic background, holding an MBBS and an MD degree. She is affiliated with the International Federation of Medical Students Associations (IFMSA), cordial partner of The Sting. The opinions expressed in this piece belong strictly to the writer and do not necessarily reflect IFMSA’s view on the topic, nor The European Sting’s one.

The sustainability of long-term care (LTC) is a critical policy priority for many European Union (EU) countries due to the increasing elderly population. The European Commission estimates that public LTC expenditures will rise from 1.6% of gross domestic product (GDP) in 2013 to 2.7% by 2060. The expectations of the ‘baby boom generation’ regarding service provision further exacerbate fiscal pressures. In response, the European Semester, the EU’s annual cycle of economic policy guidance and surveillance, has emphasized country-specific recommendations for LTC since 2014.

To ensure financial sustainability in healthcare, increasing private funding through limiting entitlements or increasing out-of-pocket payments, and enhancing productivity to reduce unit costs are essential. However, these approaches face significant challenges. Many LTC systems heavily rely on informal care supplemented by private payments. Increasing productivity in LTC is inherently difficult due to its high labour dependency, a phenomenon often described as the Baumol Effect.

Private funding mechanisms, such as out-of-pocket payments, come with serious drawbacks. They are often inaccessible to low-income individuals, potentially leading to greater dependence on informal caregivers. This dependence could outstrip the supply of informal care, resulting in significant externalities for caregivers, including health issues and lost employment opportunities. While labour immigration from new EU Member States and developing countries could address this gap, it may create additional problems such as the emergence of a grey labour market.

Policies that avoid increasing private funding must focus on significantly enhancing productivity and reducing costs. Given the labour-intensive nature of LTC services, achieving substantial productivity gains is challenging. Some countries have pursued policies aimed at increasing competition and marketization in LTC. Additionally, leveraging technology and process innovations holds potential for productivity improvements. One widely considered strategy is to reduce costly institutional care in favour of lower-cost home care.

The aging population, increasing scarcity of informal care, substantial market failures in private LTC funding, and fiscal imbalances present enduring challenges for EU LTC policymakers. Technological and process innovations offer promising solutions by potentially increasing productivity and reducing unit costs, thereby avoiding politically sensitive cuts to publicly funded services. However, implementing these innovations can be complex and may sometimes increase costs. Key areas for intervention include community care, assisted living technologies, support for informal caregivers, and mobilizing volunteerism in nursing homes, though these require careful policy design.

Stimulating informal care remains critical. Policies such as cash allowances, respite care, support services, and leave from work can support informal caregivers, but their cost-effectiveness is uncertain. Building supportive communities and encouraging family assistance are essential, though many countries already heavily rely on informal care, raising concerns about the sustainability of increased demand without adverse consequences. Removing caregivers from the workforce not only reduces tax revenues but also increases their long-term financial dependence on government support.

LTC overlaps with other sectors, such as social care, housing, social security, and acute healthcare. This intersection offers opportunities to shift costs and improve efficiencies across sectors but also makes LTC systems vulnerable to constant policy reforms. For instance, the Netherlands has reformed its LTC system by shifting parts to more competitive acute care arrangements and social care managed by municipalities, leaving a smaller inpatient sector as the core of public LTC insurance.

Increasing private funding, including self-funding, is a potential source for future LTC spending. However, due to market failures in private insurance and savings policies, government intervention—such as tax credits—may be necessary to build a minimum scale. While tax credits could encourage higher-income individuals to contribute personal resources, this only aids financial sustainability if public benefits are reduced or means testing is increased, which may disproportionately impact wealthier individuals.

Ensuring the long-term sustainability of LTC requires a multi-faceted approach. Private LTC insurance must complement public programs, and informal care needs to adapt to societal changes. Increasing LTC productivity through technology and process innovation is crucial. A consolidated demand side may offer efficiency gains. Our analysis underscores the complexity of these challenges and the necessity for informed policy experimentation, supported by in-depth research into effective strategies for sustainable LTC.

About the author

Sadia Khalid is a dedicated professional with an extensive academic background, holding an MBBS and an MD degree. She is an Early-stage Researcher (ESR), accomplished Medical Writer, and Research Engineer based at Tallinn University of Technology (TalTech) in Estonia. Sadia’s research interests span a wide spectrum within the realm of medical sciences, including Molecular Medicine, Cell Biology, Infectious Diseases, Bacteriology, Hepatology, and Gastroenterology. Her work is underpinned by a strong belief in the mission of promoting public health, safety, and awareness./