Long-Term Care: Other Countries Tighten Budgets While Seeking Better
Access (Chapter Report, 08/30/94, GAO/HEHS-94-154).

In the United States, the number of people age 65 and older will exceed
20 percent of the total population by the year 2030, up from 12.5
percent in 1990. Public and private spending for long-term care has
risen dramatically during the past decade--exceeding $100 billion in
fiscal year 1993--and is projected to continue this upward trend. At the
same time, there is considerable consumer dissatisfaction with the cost
of and access to this care. To varying degrees, other countries also
face aging populations, cost pressures, and service delivery problems.
This report reviews the provision of long-term care in Canada, Germany,
Sweden, and the United Kingdom. GAO examines (1) the financing and
cost-containment measures these countries use to control public spending
for long-term care and (2) administrative and delivery approaches the
countries use to expand the range of and access to services.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-94-154
     TITLE:  Long-Term Care: Other Countries Tighten Budgets While 
             Seeking Better Access
      DATE:  08/30/94
   SUBJECT:  Long-term care
             Community health services
             Health care cost control
             Elder care
             Foreign governments
             Medicaid programs
             Nursing homes
             Health services administration
             Comparative analysis
             Health care planning
IDENTIFIER:  Canada
             Germany
             Sweden
             United Kingdom
             
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Cover
================================================================ COVER


Report to the Special Committee on Aging, U.S.  Senate

August 1994

LONG-TERM CARE - OTHER COUNTRIES
TIGHTEN BUDGETS WHILE SEEKING
BETTER ACCESS

GAO/HEHS-94-154

International Long-Term Care


Abbreviations
=============================================================== ABBREV

  CAP - Canada Assistance Plan
  DM - deutsche mark
  GDP - gross domestic product
  HHS - U.S.  Department of Health and Human Services

Letter
=============================================================== LETTER


B-249870

August 30, 1994

The Honorable David H.  Pryor
Chairman, Special Committee on Aging
United States Senate

The Honorable William S.  Cohen
Ranking Minority Member
Special Committee on Aging
United States Senate

This report, prepared at your request, examines long-term care
reforms in Canada, Germany, Sweden, and the United Kingdom.  Our
report specifically addresses how these countries attempt to control
long-term care spending while responding to individuals' needs for
services. 

As arranged with your office, unless you publicly announce the
contents of this report earlier, we plan no further distribution
until 30 days from its issue date.  At that time, we will send copies
of the report to interested congressional committees and other
interested parties.  We will also make copies available to others
upon request. 

This report was prepared under the direction of Mark V.  Nadel,
Associate Director, National and Public Health Issues.  If you have
any questions, Mr.  Nadel may be reached on (202) 512-7119.  Major
contributors to this report are listed in appendix II.




Janet L.  Shikles
Assistant Comptroller General


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

The aging of our nation's population and rising health care costs
have elevated long-term care for older Americans to an issue of
national importance.  In the United States, the number of people age
65 and older will exceed 20 percent of the total population by the
year 2030, up from 12.5 percent in 1990.  Public and private spending
for long-term care has risen dramatically over the past 10
years--exceeding $100 billion in fiscal year 1993--and is projected
to continue this upward trend.  At the same time, there is
considerable consumer dissatisfaction with the cost of and access to
this care.\1

To varying degrees, other countries also face aging populations, cost
pressures, and service delivery problems.  As part of their
long-standing health and welfare systems or through recent
modifications, these countries are trying to address the difficulties
of providing long-term care benefits.  To examine these efforts, the
Chairman and Ranking Minority Member, Senate Special Committee on
Aging, asked GAO to review the provision of long-term care services
in Canada, Germany, Sweden, and the United Kingdom.  Specifically,
GAO examined (1) the financing and cost-containment measures these
countries use to control public spending for long-term care and the
(2) administrative and delivery approaches the countries use to
expand the range of and access to services. 


--------------------
\1 Long-Term Care:  Demography, Dollars, and Dissatisfaction Drive
Reform (GAO/T-HEHS-94-140, Apr.  12, 1994). 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

Long-term care is shorthand for a wide array of services for the
elderly and the chronically ill or persons of any age with
disabilities.  The services range from the treatment of chronic
illnesses to housekeeping and personal care assistance, such as
bathing and grooming.  They are provided in nursing homes, at home,
or at community facilities. 

In the United States, numerous federal, state, and local programs are
available to fund and deliver long-term care services, but
individuals often have trouble gaining access to services.  Many
people are not aware of available services; others find that services
are unaffordable and that eligibility criteria for publicly provided
or subsidized services vary among agencies and programs.  The drain
on an individual's resources to finance long-term care is also
common.  In the case of nursing home care, for example, the Medicaid
program requires that individuals "spend down," or deplete, most of
their assets before becoming eligible for Medicaid assistance. 

The countries reviewed have faced access barriers and service
delivery problems resulting from circumstances similar to those in
the United States.  Responsibility for long-term care has been
fragmented among many agencies and providers; some countries have had
strict financial criteria to obtain public assistance for long-term
care; and most public funds have been spent on expensive
institutional care. 

Like the United States, these countries must also handle aging
populations and rising government spending on long-term care.  In
1990, 18 percent of Sweden's population, almost 16 percent of the
United Kingdom's population, and 12.5 percent of the U.S.  population
were over age 65.  Between 1980 and 1990, national welfare spending
on nursing home care rose two and a half times in Germany, over two
times in the United States, and from virtually nothing to $2 billion
in the United Kingdom as a result of 1983 legislation providing
government support of residential long-term care. 

In recent years, the Congress has considered numerous proposals for
reforming the financing and delivery of long-term care services.  As
originally introduced, the Health Security Act of 1993 included a new
federal-state program sponsoring home and community care.  Key
features of the legislation were similar to reforms undertaken in the
countries reviewed. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

Like the United States, other countries are pursuing competing goals
for long-term care:  to contain public spending while enhancing
access to services, particularly home and community care.  To contain
spending growth, the countries reviewed are applying global or capped
budgets (limits on public spending) to long-term care expenditures
and have strengthened other controls, such as cost sharing, fee
negotiation and rate setting, and management of nursing home bed
supply.  Germany is in the process of developing a budget expressly
for long-term care spending, while certain Canadian provinces, the
United Kingdom, and Sweden have recently given local governments
fixed budgets to fund nursing home care or home and community
services. 

Limited budgets have prompted the countries to seek ways to deliver
services more efficiently.  One method is to decentralize and
consolidate responsibility for long-term care.  Sweden, the United
Kingdom, and several Canadian provinces have empowered single local
government agencies to administer services, creating a "one-stop
shopping" or single point of entry approach for long-term care
services.  These agencies rely increasingly on case management to
assess needs, coordinate the health and social services components of
care, and allocate resources.  Germany has invested its sickness
funds--its nationally regulated insurers--with the responsibility for
administering long-term care benefits. 

In addition, the countries have instituted, or plan to institute, one
or more of the following features: 

  eligibility based on functional rather than financial need;

  emphasis on home and community care rather than the more expensive
     institutional care, where appropriate; and

  support for family members and other informal caregivers through
     financial or other benefits. 

Whether the countries can broaden the pool of individuals eligible
for public benefits, develop and encourage home and community
services, and support informal caregivers within existing budgets
remains to be seen.  Of the countries reviewed, only Germany will add
new funds ($7.3 billion annually) to expand long-term care coverage
and benefits.  Using existing funding levels, the other countries
hope to expand access through some combination of a reallocation of
funds among sectors and greater efficiency in service delivery. 
Officials in some countries are skeptical, however, about the
likelihood of expanding services without also increasing
expenditures.  If public budgets are not adequate, officials fear
that governments may raise cost-sharing requirements to a level that
exceeds the means of many people, resulting in having to either deny
access to services or make services dependent on means testing. 

For Sweden and certain Canadian provinces, where universal health
care coverage has traditionally included certain long-term care
benefits and reforms include reallocation of funding, there is
potential to cover a greater array of services while controlling cost
growth.  Expansion of services also appears feasible in Germany,
where additional taxes will be used to pay for long-term care.  In
the United Kingdom, however, concern exists that recent efforts to
reorganize the financing and delivery of long-term care without
explicitly increasing resources may not improve access to services. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      COUNTRIES PUT LONG-TERM CARE
      ON A BUDGET
-------------------------------------------------------- Chapter 0:4.1

Until recently, Germany and the United Kingdom provided benefits
largely through welfare programs with uncapped entitlements.  The
United Kingdom has just put long-term care benefits on a fixed
budget, and Germany plans to do so in 1995.  Germany intends to cap
spending by tying spending growth for long-term care to growth in the
payroll taxes used to finance care.  The United Kingdom, basing its
long-term care budget on existing funding levels, has temporarily
restricted the amount of money local authorities can raise through
imposing taxes. 

In Canada, many provinces are increasing support for long-term care
by reallocating funds from acute care.  However, to control costs of
long-term care, provinces are also beginning to fix spending for
certain services.  For example, British Columbia has set a global
budget for nursing home care, and Ontario has capped the budgets for
locally administered home and community care.  When Sweden recently
consolidated the responsibility for financing long-term care within
its municipal governments, it temporarily restricted municipalities'
authority to raise taxes for all public services.  This restriction
implies that long-term care spending can only increase at the expense
of other services. 

Critics of the new budget reforms are concerned that spending limits
could create shortages of services or discourage delivery
innovations.  They also cite the need to conduct periodic assessments
of the population's long-term care needs to develop appropriate
funding levels. 


      COUNTRIES STRESS COST
      SHARING, OTHER CONTROLS TO
      STRETCH LIMITED PUBLIC
      FUNDING
-------------------------------------------------------- Chapter 0:4.2

Except for Germany, the countries reviewed are generally unwilling to
commit new funds to expand access and coverage for long-term care, as
suggested by the spending limits recently imposed.  Countries are
therefore asking individuals to pay out of pocket--or share
costs--usually in the form of copayments based on ability to pay. 

Germany, Sweden, and some Canadian provinces separate the costs of
institutional care into a lodging component and a care component. 
Public funds generally pay for care, while the individual generally
pays for lodging.  Under recent reforms to be implemented in 1995,
Germany has not established guidance on what constitutes care as
distinct from lodging, giving payers and possibly providers the
incentive to shift as much of the care costs as possible to the
individual.  If the individual's cost-sharing requirements make
services unaffordable, more people then become eligible for public
assistance, with welfare remaining a major source of funds for
nursing home care.  In the United Kingdom, cost sharing for nursing
homes is set centrally while requirements for other services are
established locally.  Under tax-raising restrictions, local
authorities anticipate growing cost-sharing requirements that could
result in pricing long-term care services beyond the reach of
individuals of modest means.  In Sweden, despite traditionally heavy
government subsidies of long-term care, recent limits on
municipalities' authority to raise taxes lead officials to expect
additional cost-sharing requirements. 

The countries' new budget limits underscore the importance of other
cost controls.  Governments will continue to set prices for services
either independently or through negotiations with providers. 
Officials report that budget concerns will likely result in greater
efforts to limit prices, raising fears that low prices may require
providers to compromise on quality.  Governments will also continue
to control the supply of beds in nursing homes and other institutions
to limit use. 


      COUNTRIES SEEK TO ENHANCE
      ACCESS THROUGH
      DECENTRALIZATION AND
      CONSOLIDATION
-------------------------------------------------------- Chapter 0:4.3

In the United Kingdom, Sweden, and certain Canadian provinces,
responsibility for long-term care, which was previously divided among
many agencies and governmental levels, has been decentralized and
consolidated at the most local levels of government.  Now individuals
can seek access to services through single local agencies.  In the
United Kingdom, for example, local authorities are newly responsible
for determining the community's long-term care needs.  The intent is
for case managers--generally a team of health and social service
professionals--to assess individuals' needs and obtain the
appropriate mix of services that are available from various public
and private organizations providing care.  Similar arrangements exist
in Sweden and the provinces of British Columbia and Ontario. 

Germany's fragmentation of home and community long-term care among
various private organizations has created uneven access to services
across geographic areas.  When reforms are implemented in 1995,
Germany will mandate that its 1,200 sickness funds, which currently
reimburse providers for acute health care services, provide a
standard package of long-term care benefits. 


      COUNTRIES BROADEN
      ELIGIBILITY BY MAKING
      FUNCTIONAL NEED TOP
      CRITERION
-------------------------------------------------------- Chapter 0:4.4

Under countries' new arrangements for administering long-term care,
an individual's eligibility for services is not intended to be based
on ability to pay.  By contrast, in the United States, Medicaid
provides financial assistance for long-term care only to individuals
with few financial assets.  The program tests people's financial
means to determine eligibility for benefits.  Although this is true
for Germany now, coverage for long-term care benefits--both nursing
home and home and community care--will be provided through insurance
in 1995, making financial need a consideration only for services not
covered by the standard package of benefits. 

Sweden and certain Canadian provinces have traditionally provided
long-term care services on the basis of functional need--that is, a
person's ability to perform self-care functions such as bathing,
grooming, and housekeeping.  In the United Kingdom, functional need
is expected to be the local authority's first consideration in
providing benefits, but officials are concerned that fixed budgets
may require the agency to apply some form of means testing once it
makes an initial functional need assessment. 


      COUNTRIES SEEK TO CULTIVATE
      HOME AND COMMUNITY CARE
      SERVICES
-------------------------------------------------------- Chapter 0:4.5

For the countries reviewed, most public spending on long-term care
has supported institutional--largely nursing home--care.  In cases
where care needs are modest or family caregiving is available, care
provided at home or a community facility is generally more economical
than nursing home care. 

The German reforms to be implemented in 1995 explicitly endorse the
use of home and community care.  The legislation states that, to the
extent possible, individuals requiring long-term care should be able
to live at home.  Similarly, a stated goal of U.K.  reforms is to
improve access to services, including home and community care.  Local
officials are doubtful, however, that public support for these
services will expand significantly with the use of only existing
funds.  British Columbia has begun reallocating funds from its global
budgets for physician and hospital services to spending for home and
community services.  Ontario's goal is to increase public spending on
home and community care by 1997 from 20 to 30 percent of all
long-term care spending.  Sweden, which already spends 35 percent of
its long-term care resources on home and community care, has recently
expanded services in this area, providing a wider variety of home
nursing, personal care, adult day care, supportive housing, meal, and
transportation services. 


      SOME COUNTRIES ENCOURAGE
      INFORMAL CAREGIVING
-------------------------------------------------------- Chapter 0:4.6

To stretch public resources and compensate families for the burden of
providing long-term care at home, countries provide various financial
benefits to family caregivers.  Germany's reforms will enable
individuals to receive cash benefits to pay family members and others
for providing long-term care services.  In addition, unpaid informal
caregivers will be entitled to certain employment benefits, such as
public pension credits.  Sweden requires employers to grant up to 30
days of paid leave for providing home care.  Sweden also pays
salaries to family members who give full-time or part-time care. 
Under 1992 reform legislation, the national government expected to
provide municipalities additional funds to support informal
caregiving. 


   IMPLICATIONS FOR LONG-TERM CARE
   REFORM IN THE UNITED STATES
---------------------------------------------------------- Chapter 0:5

Observations made on other countries' efforts to expand access to a
broader range of long-term care services while keeping public costs
manageable may help inform policy decisions in the United States.  It
is too soon to judge the outcome of countries' recent reforms, but it
may be useful to recognize certain common themes in their approaches
to controlling costs and administering services: 

  Fixed budgets or spending caps, coupled with other controls, may
     control costs but could also threaten access. 

  Consolidating the administration of long-term care should make
     service delivery more responsive to the individual. 

  Increased public support for home and community care should improve
     individual satisfaction with services while avoiding costly
     institutional care. 

Mindful of the foreign experience, the United States will want to
deliberate on the division of responsibility between the public and
private sectors and the appropriate role of these sectors in both the
financing and the delivery of care. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:6

GAO is making no recommendations. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:7

GAO obtained comments on this report from long-term care experts and
from selected officials in each country studied.  Their suggested
revisions were incorporated, as appropriate, into this report. 


INTRODUCTION
============================================================ Chapter 1

The aging of the population and the escalating cost of providing
services has made long-term care--nursing home services and home and
community-based care--a critical public policy issue in the United
States.  Demographic trends point to a significant rise in the number
of frail elderly in need of long-term care.\2 At the same time, the
supply of family and friends who currently provide most of the
long-term care informally, or on an unpaid basis, is expected to
decline. 

Numerous federal, state, and local programs fund and administer
various long-term care services and serve a large portion of the
population in need of care.  Not all those who need care, however,
have access to appropriate or preferred services or an adequate means
to pay for them.  Individuals and their families must either make
substantial contributions to pay for their care, deplete income and
assets to qualify for public assistance, or simply do without needed
services. 

Other countries are also experiencing aging populations, rising
public costs for long-term care, and service access problems.  In
response to these concerns, some countries are modifying their
existing systems or overhauling their systems of financing and
administration.  Accordingly, the Chairman and Ranking Minority
Member of the Senate Special Committee on Aging asked us to examine
recent reforms as well as traditional mechanisms for financing and
delivering long-term care in Canada, Germany, Sweden, and the United
Kingdom.  This review examines the countries' controls for containing
public spending and strategies for enhancing access to services. 


--------------------
\2 Persons in need of long-term care include not only the frail
elderly but also younger persons with chronic disabilities. 


   LONG-TERM CARE REFORMS BEING
   CONSIDERED IN THE UNITED STATES
---------------------------------------------------------- Chapter 1:1

Long-term care encompasses a variety of services ranging from
therapeutic interventions for the treatment and management of chronic
illness to assistance with basic activities of daily living, such as
bathing, dressing, and other personal care needs.  These services are
needed by individuals who have lost some capacity for self-care due
to chronic illness or physical or mental conditions that result in
both functional impairment and physical dependence on others for an
extended period.  Major subgroups of individuals needing such care
include the frail elderly, those with physical or developmental
disabilities, and those with cognitive impairments.  Health and
social service professionals are the formal providers of care; family
and friends are the informal caregivers.  Services are delivered in
institutions (primarily nursing homes), the community, or the home. 

In the United States, public spending for long-term care primarily
supports institutional--largely nursing home--care and is increasing
rapidly.  Multiple agencies and various levels of government and the
private sector share responsibility for funding and providing care. 
At the federal level, Medicaid is the largest program providing
support for long-term care services.\3 Other federal programs include
Medicare, the Social Services Block Grant, the Older Americans Act,
and the Rehabilitation Act.  In addition, a number of state and local
programs fund long-term care services. 

Despite high levels of public and private spending, which exceeded
$100 billion in 1993, considerable dissatisfaction exists with the
current financing and delivery of long-term care.  Many people find
services costly, difficult to access, and not matched well with
individual needs and preferences.\4

Over the years, the Congress has considered numerous proposals for
reforming the financing and delivery of long-term care.  Proposals
have ranged from social insurance programs that would provide
universal coverage to other programs that would limit federal support
to tax incentives for the purchase of private long-term care
insurance. 

Most recently, the Health Security Act of 1993 proposed several
long-term care reform provisions, including a new federal-state
program sponsoring home and community care.  Federal funding for the
new home and community-based services program would be phased in,
reaching a level of $38 billion in fiscal year 2003.  Three features
of this program are as follows: 

  Capped federal funding:  The legislation would set annual limits on
     the federal share of public spending.  Regardless of the size of
     the pool of eligible individuals, access to this program's
     services would be limited by the funds available.  By contrast,
     there are no limits on federal outlays for Medicare and
     Medicaid, which fund acute health care and certain long-term
     care services. 

  Cost sharing by individuals, proportionate to income:  Individuals
     would pay, out of pocket, up to 25 percent of the costs for
     services.  Payments typically would be made as copayments, with
     the rate based on the individual's income. 

  Eligibility based on need rather than means:  Regardless of income,
     individuals'eligibility would be determined by an assessment of
     their functional need for assistance.\5 By contrast, to become
     eligible for Medicaid, individuals must have extremely limited
     income and assets. 


--------------------
\3 Medicaid, the health care program for the poor, is jointly funded
by federal and state governments.  It is a means-tested welfare
program, requiring individuals to meet strict income and asset limits
set by the state before becoming eligible for benefits. 

\4 Long-Term Care:  Demography, Dollars, and Dissatisfaction Drive
Reform (GAO/T-HEHS-94-140, Apr.  12, 1994). 

\5 Functional need is a measure of a person's ability to perform
self-care functions such as bathing, grooming, and housekeeping. 


   DEMOGRAPHIC CHANGES ARE
   EXPECTED TO INCREASE DEMAND FOR
   LONG-TERM CARE
---------------------------------------------------------- Chapter 1:2

In the countries reviewed, the most dramatic growth in the elderly
population is expected for those over age 80, who are most likely to
be frail and in need of sustained care.  As shown in figure 1.1,
except for Canada, the populations of the countries reviewed have
proportionately more elderly than the U.S.  population.  Sweden has
the most elderly, with 18 percent of its population over age 65 and
approximately 4 percent over age 80.  These countries have
experienced an earlier and more rapid shift in the age structure of
their populations. 

   Figure 1.1:  Elderly as Share
   of Population in the United
   States and Other Countries,
   1970-2010

   (See figure in printed
   edition.)

Source:  U.S.  Bureau of the Census, Center for International
Research, International Data Base on Aging. 

At the same time, family and friends, who currently provide most
long-term care, are becoming less able to meet increased caregiving
responsibilities.  Wives, daughters, or daughters-in-law provide most
long-term care services on an informal, unpaid basis.  During the
last decade, however, more women have entered the labor force, and
families have become smaller and more geographically dispersed.  In
addition, the number of informal caregivers is not expected to keep
pace with the growing number of people who will need long-term care. 

One measure of the availability of informal care is the parent
support ratio.  This is an approximation of the number of children
(aged 50 to 64) available to care for an aging parent (aged 80 or
older).  As shown in figure 1.2, the number of children potentially
available to care for aging parents has declined significantly over
the past 40 years.  This decline is expected to continue over the
coming decades, though not as dramatically as in the past. 

   Figure 1.2:  Parent Support
   Ratios in the United States and
   Other Countries, 1950-2025

   (See figure in printed
   edition.)

Note:  We have defined the Parent Support Ratio as the number of
persons in the population age 50-64 for each person age 80 or older. 

Source:  U.S.  Bureau of the Census, Center for International
Research, International Data Base on Aging. 


   COUNTRIES FACE RAPID GROWTH IN
   PUBLIC SPENDING FOR LONG-TERM
   CARE
---------------------------------------------------------- Chapter 1:3

In Germany and the United Kingdom, means-tested welfare
programs--programs that base eligibility on financial need--have been
the source for most public funding for long-term care.\6 In such
programs, individuals are typically required to have limited
resources or to deplete assets before becoming eligible for public
assistance to pay for long-term care.  Because long-term care
services are expensive, these welfare systems have served not only as
a safety net for poor, but also as the primary source of public
financing for formal long-term care.\7 As shown in figure 1.3,
welfare-based spending for nursing homes increased dramatically in
Germany, the United Kingdom, and the United States during the past
decade. 

   Figure 1.3:  Total Welfare
   Spending for Nursing Home Care: 
   Germany, the United Kingdom,
   and the United States,
   1980-1990

   (See figure in printed
   edition.)

Notes:  The purchasing power parity exchange rate for gross domestic
product (GDP) was 2.50 deutsche marks (DM) per U.S.  dollar in 1980
and 2.09 in 1990. 

The purchasing power parity exchange rate for GDP was 0.520 British
pounds per U.S.  dollar in 1980 and 0.602 in 1990. 

The dramatic increase in spending for nursing homes in the United
Kingdom between 1980 and 1990 was due primarily to the introduction
of national social security (welfare) support for residential
long-term care in 1983. 

As in the United States, private insurance contributes little to the
financing of long-term care in the countries reviewed.  In Canada and
Sweden, little or no private insurance exists.  In Germany, the
private insurance industry began offering long-term care policies in
1986.  To date about 133,000 private policies, representing less than
1 percent of the total population, have been sold.  In the United
Kingdom, the first policies were sold in 1991 and as of 1992 seven
insurers reported offering some long-term care coverage. 


--------------------
\6 In the United States, Medicaid supported an estimated 63 percent
of all public long-term care spending in 1993, according to
projections by the Department of Health and Human Services (HHS). 

\7 Because nursing home costs range from $24,761 to $37,000 per year
in the countries that still maintain welfare-based systems (Germany,
the United Kingdom, and the United States), the nonpoor
"middle-class" often quickly exhaust their resources and become
dependent upon welfare assistance. 


   COUNTRIES SUPPORT MOSTLY
   INSTITUTIONAL CARE
---------------------------------------------------------- Chapter 1:4

In Canada, Germany, Sweden, and the United Kingdom, home and
community care services are often less developed and less well funded
than institutional care.  As in the United States, the more generous
or readily available public funding for institutional care has
created incentives in these countries to favor the use of nursing
home care over home or community care.\8 In these countries, the
majority of public resources for long-term care supports
institutional services. 

In many cases, the absence of sufficient or affordable home and
community-based alternatives has made institutional care the only
option for elderly individuals living at home and unable to manage
with the assistance of family and friends.  Consequently, individuals
needing care may receive institutional services when a less intensive
and potentially lower cost mix of services would be more desirable. 
While some elderly manage to remain at home, the burden of caregiving
on their families and friends can be considerable. 


--------------------
\8 In the United States, approximately two-thirds of total public
spending for long-term care, estimated by HHS to be $45.5 billion in
1993, supports institutional long-term care services. 


   COUNTRIES CHALLENGED BY
   FRAGMENTED ADMINISTRATION AND
   DELIVERY SYSTEMS
---------------------------------------------------------- Chapter 1:5

The fragmentation of administrative and financial responsibility for
long-term care among levels of government and between public and
private entities is a common concern expressed by officials in all
countries.  National governments set broad guidelines for the
delivery of services; with some exceptions, they finance medically
related services and nursing home and other institutional care. 
State, regional, and local governments generally provide social
services, including personal care in the home, congregate and
home-delivered meals, adult day care, specialized housing
arrangements, and respite care services.  Private and voluntary
organizations, such as charities, churches, and foundations, also
provide a variety of care services. 

The multiplicity of players involved in long-term care has produced
complex and overlapping sets of health and social programs with
varied objectives.  As a result, individuals experience great
differences in service levels, eligibility criteria, and service
availability within the countries reviewed. 


   COUNTRIES RESPOND TO LONG-TERM
   CARE CONCERNS
---------------------------------------------------------- Chapter 1:6

Demographic, financing, and service delivery concerns have prompted
the four countries reviewed to modify or reform the way in which they
organize, provide, and pay for long-term care.  Table 1.1 highlights
the key measure undertaken in each country. 



                          Table 1.1
           
            Key Long-Term Care Reform, by Country

Country                        Reform
-----------------------------  -----------------------------
Canada                         1978 to present: Most
                               provinces, using incremental
                               reforms, have developed long-
                               term care as a universal
                               benefit program.

Germany                        1995-96: Reforms will make
                               long-term care services
                               standard benefits to be
                               provided through national
                               health insurance.

Sweden                         1992 Adel Reform: The
                               legislation shifts resources
                               and taxing authority to
                               municipalities, making them
                               fully responsible for
                               administering long-term care
                               services.

United Kingdom                 1990 Community Care Act:
                               Implemented in 1993, the act
                               grants local authorities
                               strict global budgets for
                               long-term care services.
------------------------------------------------------------
Changes have occurred at different times and entail a variety of
financing and administrative arrangements tailored to each country's
unique social and economic environment.  In general, however, the
countries made the modifications or developed the reforms to achieve
the following common goals: 

  control the escalating public costs for long-term care;

  improve the efficiency of service delivery through decentralization
     and consolidation; and

  enhance access to services by attempting to (1) broaden the pool of
     eligible individuals, (2) develop a broader range of services,
     namely, home and community care services, and (3) acknowledge
     the value of family and friends providing care informally. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:7

At the request of the Chairman and Ranking Minority Member of the
Senate Special Committee on Aging, we examined the experiences of
Canada, Germany, Sweden, and the United Kingdom in providing for the
long-term care needs of their populations.  Specifically, we sought
to determine what (1) financing and cost-containment mechanisms the
countries use to control public spending for long-term care and (2)
new approaches to the administration and delivery of care the
countries are taking to expand access to services. 

Our review includes data and information obtained from Canada,
(particularly the provinces of British Columbia and Ontario),
Germany, Sweden, and the United Kingdom.  We interviewed officials
and experts in each country, including government officials,
providers of long-term care, consumer advocates, and embassy
officials.  In addition, we participated in several meetings of
domestic and international health and long-term care experts and
obtained information from representatives of the Organization for
Economic Cooperation and Development in the United States and Europe. 

Most data on the four countries contained in this report were
provided by officials of the respective countries or by international
research organizations.  As such, we did not verify the data obtained
and made no judgments about the reliability of the systems which
produced the data. 

We conducted our review from July 1992 through July 1994 in
accordance with generally accepted government auditing standards. 


COUNTRIES EMPHASIZE CONTROLLED
PUBLIC SPENDING FOR LONG-TERM CARE
============================================================ Chapter 2

Like the United States, Canada and the European countries reviewed
all currently face mounting long-term care costs that have focused
the governments' attention on spending controls.  Government funds
for long-term care are straining under demographic trends:  greater
numbers and proportions of the total population are aged (see figs. 
1.1 and 1.2) and unpaid caregivers--family and friends--are less able
to provide needed care. 

Each country has in place or is planning to use certain controls to
moderate public spending for long-term care services.  The controls
countries use to varying degrees--as part of their current financing
systems or under planned reforms--array themselves generally into the
following categories: 

  "Global" budgets:  Limits on the amount the government spends for a
     particular group of services.  Officials in each country
     reviewed believe that the discipline of a global budget is
     necessary to control the rising costs of long-term care. 
     Recently, in Germany global budgets have trimmed the annual rate
     of growth for acute care spending from 9.2 percent in 1992 to
     -1.6 percent in 1993.\9 However, some critics are concerned that
     global budgets may adversely affect access and quality by
     creating shortages of services or discouraging the development
     of innovative services. 

  Cost sharing:  An individual's out-of-pocket spending for costs not
     paid by insurance or other sources.  Typical forms of cost
     sharing include deductibles and copayments.  Cost sharing may
     produce savings for the payer because a portion of the cost of
     services is passed on to the consumer and because the
     individual's financial obligation may discourage unnecessary
     utilization. 

  Fee negotiation and rate setting:  The process of negotiating with
     nursing homes and other providers to get their best price for
     long-term care services and residential care rates.  The ability
     of governments to influence the prices of services has become an
     increasingly important cost-containment tool.  Providers are
     concerned that arbitrary rate setting may threaten their ability
     to remain in business.  Consumer advocates also fear that
     quality of care may be compromised or costs shifted to consumers
     if rates are not adequate. 

  Managing supply:  The practice of limiting the construction of
     facilities to control the use of nursing home beds.  The
     countries reviewed are increasingly placing limits on the number
     of beds in nursing homes and other institutions that provide
     long-term care.  These limits include requiring prior
     certification to construct new facilities and limiting nursing
     home licenses on the basis of bed-to-population ratios.  Some
     government officials and consumer advocates in the countries
     reviewed are concerned that localities facing budget constraints
     will not expand supply when needed.  Inadequate supply of
     nursing home beds could result in individuals waiting, at public
     expense, in more costly hospital beds or in people going without
     needed services. 


--------------------
\9 While the declines in the growth rate for some sectors such as
hospital care were modest, falling from an annual rate of 8.3 to 5.2
percent, other sectors such as pharmaceuticals showed a more dramatic
decline from 9.1 to -19.6 percent over the period. 


   GERMANY WILL USE EXISTING
   SOCIAL INSURANCE SYSTEM TO
   FINANCE LONG-TERM CARE
---------------------------------------------------------- Chapter 2:1

Of the countries reviewed, Germany is the only one that plans to add
new funds--approximately $7.3 billion annually--for the financing of
long-term care services.  Between 1995 and 1996, Germany plans to
convert its financing of long-term care from welfare funds to a
tax-based system of social insurance.  It will add long-term care
benefits to the standard package of acute health care benefits
provided through its national health insurance system. 

Most Germans obtain their health insurance from one of approximately
1,200 government regulated payers called sickness funds.  These funds
provide a comprehensive benefits package covering most health costs
with little or no copayment.  Under reform, the new long-term care
funds (part of the sickness fund structure) will also cover certain
nursing home and home and community care services.  A
government-mandated payroll tax shared equally by workers and their
employers will continue to finance this system, with an increase in
the tax rate to fund the new benefits. 

Until Germany's reform is fully implemented in 1996, means-tested
welfare will remain the primary mechanism of public financing for
long-term care.  Local welfare offices grant public benefits only
after strict financial requirements are met.\10 An estimated 70
percent of individuals in nursing homes in the former West Germany
and 100 percent in the former East Germany have exhausted their
resources and depend on welfare assistance to pay for a portion of
their care. 


--------------------
\10 To qualify for welfare in Germany, not only must individuals
exhaust personal income and assets, but family members such as adult
children are legally obligated to contribute as well. 


      BUDGET CONTROL
-------------------------------------------------------- Chapter 2:1.1

To finance the new long-term care benefits, a new payroll tax will
contribute an estimated $11.7 billion annually.\11 Reforms call for
limiting long-term care spending growth to the amount of increase in
wages.  The government through locally administered social assistance
schemes will continue to use general tax revenues to pay the
cost-sharing obligation (uncovered costs) of those recipients who
cannot afford to do so themselves.\12

Under the new financing arrangement, the government's spending on
long-term care from general revenues is expected to drop to $1.9
billion from current spending of $4.6 billion.  Benefits financed by
the new payroll tax will substitute for hospital and home care
services for long-term care patients.  As a result, sickness funds
are expected to save an estimated $3 billion, which they currently
pay in hospital costs and home care services. 

The reform proposal has caused a heated political debate in Germany,
with employers demanding to be compensated for the increased tax
burden added to their already high labor costs.  Some opponents of
reform are concerned that plans to finance long-term care through an
additional mandatory payroll contribution will hurt their
international competitiveness.  Furthermore, German industry is
concerned that once a mandatory contribution is in place, it will
inevitably be raised as the country faces pressure from the growing
aging population, increasing care costs, and rising expectations of
coverage and quality. 

Since Germany's long-term care budget--financed by payroll
contributions--will be based on only an initial needs assessment,
German officials warn that the changing long-term care needs of the
population should be continually measured to ensure that the budget
is adequate.  Provider organizations, insurers, and trade union
representatives are already concerned that the budget may be
inadequate by the time the reforms are implemented in 1995 and that
payroll contribution rates will have to increase to meet the
shortfall. 


--------------------
\11 The payroll tax will equal 1.0 percent of wages in 1995 and
increase to 1.7 percent in 1996, borne equally by employers and
employees.  The payroll tax is based on a nationwide needs assessment
which determined that 1.65 million citizens were in need of long-term
care. 

\12 For those individuals claiming public welfare and unemployment
benefits, the respective provider of the benefits is liable to pay
the contributions.  In the case of pensioners, half of the
contribution is paid by the pensioner and half by the pension
insurance fund. 


      COST SHARING
-------------------------------------------------------- Chapter 2:1.2

Financing reforms will require individuals to pay out of pocket a
portion of their long-term care insurance.  Nursing home residents
will be required to pay room and board costs, while the sickness fund
will pay for care-related costs.  Specific guidance on what
constitutes a "care" cost versus a "lodging" cost has not been
established, however, and providers and payers may have incentives to
overstate lodging costs to shift them to individuals.  Because the
public welfare program will contribute to the lodging component of
care for those unable to afford the full cost, welfare could remain a
major source of funds for nursing home care in Germany. 


      FEE NEGOTIATION AND RATE
      SETTING
-------------------------------------------------------- Chapter 2:1.3

Proposed reforms call for the sickness funds to negotiate rates and
fees annually with local providers of long-term care services, using
explicit national guidelines governing the content and conduct of
these negotiations.  If the rate setting and fee negotiation process
is comparable to that used for acute health care, it will incorporate
the views of major stakeholders:  the central government, state and
local governments, sickness funds, and providers of long-term care
services. 


      MANAGING SUPPLY
-------------------------------------------------------- Chapter 2:1.4

A legislative provision that requires the German states and the
sickness funds to agree on decisions to construct new facilities is
intended to control Germany's supply of nursing homes.  The rationale
for this approach is that the sickness funds, through their
reimbursements to providers, will pay the operating costs of these
new facilities. 


   UNITED KINGDOM SETS LOCAL
   BUDGETS TO CONTROL LONG-TERM
   CARE SPENDING
---------------------------------------------------------- Chapter 2:2

In the United Kingdom, public expenditures for nursing homes rose
dramatically over the past decade, straining the national welfare
budget.  Approximately 57 percent of nursing home residents met the
financial criterion of less than $12,698 in assets and were dependent
on welfare.  As of May 1992, the welfare budget equaled $3.9 billion,
which supported 270,000 people in nursing homes. 

Public financing for most nonmedical long-term care is separate from
National Health Service funding for acute health care.  It is
financed from national welfare funds, which are transferred to local
authorities as part of the reforms implemented in 1993. 


      GLOBAL BUDGETS
-------------------------------------------------------- Chapter 2:2.1

In 1993, the United Kingdom created a global budget--a spending
limit--for national government spending on long-term care.  The
national government allocates this budget incrementally over 3 years
(again $3.9 billion for 1993) to local authorities to cover not only
residential and nursing home care but also home and community-based
care.  Allocations in the form of block grants are based primarily on
past expenditures.\13 For the first 3 years of the new system,
national government funds are earmarked for long-term care, with
local authorities required to spend the full amount of transferred
funds solely on long-term care needs.  Of this amount, 85 percent
must be spent in the private sector.  After the first 3 years,
however, the funds will no longer be earmarked for long-term care,
and the local authorities can spend it according to their priorities. 

The 3-year restriction on the use of block grants was intended to
ensure that localities would develop and fund long-term care services
and would encourage the policy of privatization of these services. 
Once the restriction is lifted, critics warn that localities' funding
flexibility may result in diminished spending on long-term care in
favor of other local spending priorities, such as child care and
substance abuse treatment.  In addition, the reform's requirement
that 85 percent of the funds be spent in the private sector raises
concerns about availability and cost of services.  For example, as
local authorities divert funds to home care, they are finding that
private home and community care services have been only minimally
developed. 

The most serious concerns about the United Kingdom's long-term care
financing reforms relate to the adequacy of funding levels contained
in the national government's global budget and to limitations on
local authorities' ability to raise additional taxes in support of
long-term care.  The national government based localities' long-term
care block grants on past expenditures rather than on an assessment
of population need.  Past expenditures, however, covered care after
recipients had spent down their income and assets and rarely covered
the full cost of nursing home care, which relatives and charities
would frequently supplement.  In addition, the national government
imposed a 3-year restriction, also beginning in 1993, on the amount
of money that can be raised through local taxes.  Local authorities
are therefore concerned that their long-term care block grants may
not be sufficient to provide the range of services needed and that
they will be unable to supplement funds through increased local
taxation. 


--------------------
\13 The block grants, using past expenditures as a baseline, are then
distributed according to a demographically based formula referred to
as the standard spending assessment.  The formula considers
population, age structure, housing conditions, and other factors. 


      COST SHARING
-------------------------------------------------------- Chapter 2:2.2

In the absence of specific national guidance regarding cost sharing
for services other than nursing home care, requirements for
out-of-pocket long-term care spending may vary widely at the
discretion of local authorities.  Given localities' current fixed
budgets and tax-raising restrictions, officials anticipate that
individuals' cost-sharing requirements could increase significantly,
thereby raising the family burden for long-term care financing or
barring an individual's access to services altogether.  Although, in
such cases, most authorities are likely to include a means-tested
allowance. 


      FEE NEGOTIATION AND RATE
      SETTING
-------------------------------------------------------- Chapter 2:2.3

Under the 1993 reforms, local authorities are responsible for
negotiating rates for nursing homes and other institutions and fees
for other long-term care services.  By requiring 85 percent of the
long-term care budget to be spent on private sector services, the
government hopes to increase consumer choice and competition among
providers.  Officials believe that increased competition will create
incentives not only for efficient provision of services but for
improved quality as well. 


   CANADIAN PROVINCES REDIRECT AND
   INTEGRATE FUNDING STREAMS AS
   PART OF REFORM
---------------------------------------------------------- Chapter 2:3

Canadian provinces finance long-term care from a variety of sources,
mostly supported by general tax revenues.  These sources primarily
include federal block grants for health services under the Canada
Health Act, matching payments for nonmedical services provided under
the Canada Assistance Plan (CAP),\14 and provincial general revenues. 
Both federal and provincial governments have been under considerable
pressure in recent years to control rapidly increasing health costs
while responding to growing demand for long-term care.  Because of
recessionary pressures nationwide, the federal government has frozen
its block grant payments to all provinces for the past several years,
and matching payments under the CAP have been capped for the
provinces of British Columbia, Alberta, and Ontario. 

In response to these and other pressures, provinces are seeking
greater efficiency and cost-effectiveness in the delivery of health
and long-term care services.  As part of an overall cost containment
strategy, many provinces are seeking to redirect funds from costly
acute health care and into home and community-based services.  In
addition, some provinces are attempting to expand support for
long-term care through integration of fragmented health and social
service funding streams.  Many officials believe this fragmentation
creates a bias toward high-cost institutional services when low-cost
community supports may be more appropriate.  Within the long-term
care sector, provinces are attempting to manage or control costs
through increased use of global budgets, increased consumer cost
sharing, and tighter limits on the supply of expensive institutional
beds. 


--------------------
\14 Under the CAP, provinces collect matching payments from the
federal government for services provided to low-income persons. 


      GLOBAL BUDGETS
-------------------------------------------------------- Chapter 2:3.1

Some Canadian provinces are beginning to impose global budgets or
other spending caps to control long-term care costs.  For example,
British Columbia funds nursing homes through an annual global budget. 
The province also allocates annual capped budgets to some of its 21
regional health authorities to fund home and community care services. 
Similarly, under the proposed reforms in Ontario, the province will
allocate fixed home and community care budgets to newly created
"multiservice" agencies. 


      COST SHARING
-------------------------------------------------------- Chapter 2:3.2

Unlike acute care in Canadian provinces, long-term care services are
not required to be "free at the point of service." Most provinces
require copayments for both institutional and community care. 
Typically, nursing home residents pay a fixed daily fee for the room
and board component of care.  In some provinces, this copayment is
set according to old age pension levels and leaves even the poorest
pensioner with a modest spending allowance.  These lodging charges
for institutional care have long been a feature of long-term care in
most provinces, and they are justified on the basis of equity since
permanent institutional residents do not have to maintain a separate
residence.  For most home and community care services that are not
considered medical, individuals pay modest, income-related
copayments. 


      MANAGING SUPPLY
-------------------------------------------------------- Chapter 2:3.3

Recently the provinces have directed spending control efforts at
expensive institutional care.  They have imposed limits on the number
of beds eligible for public reimbursement and have restricted the
construction of new nursing homes.  However, home care and community
support services are beginning to be developed and expanded. 


   SWEDEN SEEKS BETTER VALUE
   THROUGH CONSOLIDATION OF PUBLIC
   LONG-TERM CARE SPENDING
---------------------------------------------------------- Chapter 2:4

Sweden has historically financed long-term care as a socially insured
benefit that is paid for through taxes, as is acute health care. 
Services are funded primarily by local governments; the national
government's share of public spending for long-term care is less than
10 percent. 

In 1992, Sweden enacted the Adel Reform, which consolidated
responsibility for long-term care at the municipal level.  Prior to
reform, county councils and municipalities shared responsibility for
long-term care, with county councils responsible for home health and
hospital geriatric care and municipalities responsible primarily for
social services.  In 1992, municipalities assumed primary
responsibility for all aspects of long-term care, including that
provided in hospitals, nursing homes, people's homes, and the
community.  Municipalities also gained new taxing authority to fund
services and additional staff resources to provide them.  In 1992,
nearly 55,000 county employees became municipal employees, and more
than $2 billion in annual taxing authority was transferred from the
county to the municipal level. 


      CONSOLIDATION AND TAX CAPS
-------------------------------------------------------- Chapter 2:4.1

Swedish officials point out that, since municipalities are now
required to pay for hospital expenses when an individual no longer
needs acute medical treatment, they have a clear financial incentive
to find the least costly alternative to meet individual needs. 
Officials believe that the decentralized and consolidated approach
has been successful in reducing unnecessary or inappropriate
institutionalization.  For example, officials documented a dramatic
reduction (50 percent) in the number of individuals in hospitals who
no longer require hospitalization but may need either nursing home or
community-based care. 

To stem the rising tax burden on its citizens, the Swedish government
limited for 3 years, beginning in 1990, the amount of taxes that
municipalities could raise for all public services.  While Swedish
officials credited the tax caps with encouraging improved efficiency,
they expressed concern about their ability to meet new
responsibilities for long-term care if the government continues the
restriction on raising taxes. 


      COST SHARING
-------------------------------------------------------- Chapter 2:4.2

Despite a tradition of heavily subsidizing long-term care services,
Sweden is shifting a greater share of the costs to consumers--from 4
percent in 1991 to about 10 percent in 1993.  Officials expect
consumer charges will increase further in response to growing
budgetary pressures and the recent limits on the ability of
municipalities to raise taxes.  Income-related charges and copayments
are increasingly being applied for home and community- based care and
vary considerably among municipalities.  In addition, municipalities
are now charging individuals for the lodging component of residential
or nursing home care. 


      MANAGING SUPPLY
-------------------------------------------------------- Chapter 2:4.3

Because municipalities finance most long-term care, they also control
the supply of services.  Recent reform efforts have concentrated on
restricting the supply of institutional services, expanding home and
community-based services, and reducing the use of hospital beds for
long-term care patients.  They also call for supporting the
construction of specialized housing, to house people of lesser
disabilities to avoid their placement in more expensive,
resource-intensive nursing homes. 


COUNTRIES SEEK TO ENHANCE ACCESS
AND IMPROVE SERVICES WITHIN
LIMITED BUDGETS
============================================================ Chapter 3

Several concerns--in addition to burgeoning costs and limited
budgets--have prompted the countries reviewed to seek enhanced access
and improved service delivery for long-term care services.  Among the
concerns, which parallel problems in the United States, are that (1)
the administration and delivery of services are fragmented among
agencies and levels of government and not well coordinated, (2) in
some countries individuals must meet overly strict financial criteria
to qualify for public assistance, and (3) public long-term care
spending favors institutional over home and community care. 

To simplify access to care and target public resources more
efficiently, the countries have acted to decentralize the
responsibility for long-term care and consolidate the administration
of services at the local government level (or, in the case of
Germany, through a network of regulated authorities).  Except for
Germany, consolidation has meant that an individual can obtain
initial access to services at a single public agency.  These agencies
can capitalize on the case management approach to coordinating health
and social services, where one or more professionals assess an
individual's needs and coordinate the provision of services for the
individual. 

Decentralization and consolidation have been most pronounced in the
United Kingdom, where the financing of services has shifted from a
national welfare program with uncapped entitlements to decentralized
authorities with well-defined or global budgets.  In the United
Kingdom, the administration of long-term care services has shifted
from multiple agencies and levels of government to a single local
authority.  In Germany, long-term care funds within the sickness fund
structure have assumed the responsibility for administering services
from locally administered public welfare schemes and an array of
public agencies and private organizations.  In some Canadian
provinces, the responsibility for administering services and
allocating resources is shifting from provincial to subprovincial
(regional, district, and local) governmental levels.  In Sweden, the
administration of long-term care services, once divided between
county councils and municipalities, has shifted almost exclusively to
municipalities. 

The countries reviewed have also modified or developed one or more
strategies to improve access to care and efficiency in service
delivery, including

  basing eligibility for public assistance on functional rather than
     financial need;

  emphasizing the use of home and community-based care over expensive
     institutional care, where appropriate; and

  supporting family members and other informal caregivers through
     financial or other benefits. 

Of the countries reviewed, only Germany has added new funds to expand
coverage and benefits.  The other countries hope to expand access
largely through reallocating existing resources and increased
efficiency in service delivery.  Officials in these countries were
hopeful that broadening home and community care options, in
conjunction with the consolidated, single agency delivery approach,
would make the most efficient use of long-term care resources. 
Officials in some countries were skeptical, however, about the
likelihood of expanding services with policy changes that allow for
the use of only existing funds. 


   GERMANY WILL ADMINISTER
   LONG-TERM CARE SERVICES THROUGH
   SICKNESS FUNDS
---------------------------------------------------------- Chapter 3:1

Currently in Germany, public welfare funds institutional care, and
several charitable organizations provide support for most home and
community-based services.  Germany's fragmentation of responsibility
for administering long-term care services has created access
disparities across geographic areas.  When Germany's national health
insurance system begins covering long-term care in 1995, the 1,200
sickness funds will assume responsibility for administering services. 
Each fund will be required to offer a standard package of long-term
care benefits, including institutional care and a range of home and
community-based services.  (See table III.1.)



                         Table III.1
           
            Germany's New Long-Term Care Benefits

Home and community-based care  Institutional care
-----------------------------  -----------------------------
Cash benefit to recipient      Up to $1,274 (DM 2800) per
ranging from $182 (DM 400) to  month for care-related
$592 (DM 1300) per month\a or  services\a
25 to 75 visits per month by
professional nursing staff     Lodging costs paid by
                               residents\b
Up to 4 weeks per year of
professional home care for
informal caregiver's
vacation

Informal caregivers are
included in all social
insurance schemes

Grants to adapt recipient's
home for special needs
------------------------------------------------------------
\a The 1993 purchasing power parity exchange rate for GDP was 2.197
deutsche marks (DM) per U.S.  dollar. 

\b Welfare will pay the lodging component for those unable to afford
full costs. 


      FUNCTIONAL NEED ELIGIBILITY
      CRITERION
-------------------------------------------------------- Chapter 3:1.1

Currently, Germany's welfare system for providing long-term care
benefits requires means testing.  To qualify for public assistance,
individuals must exhaust personal income and assets, and family
members, such as adult children, are legally obligated to contribute
as well.  Under the long-term care reforms, sickness funds, in
conjunction with physician associations, will determine eligibility
for benefits primarily on the basis of a person's inability to
perform certain basic self-care functions due to physical or
cognitive impairments.  This change in eligibility determination,
along with the universal provision of standard long-term care
benefits, will most likely result in expanding the number of
individuals obtaining services.  Over $7 billion a year will be added
to combined sickness fund and government long-term care budgets in
anticipation of expanded coverage. 


      HOME AND COMMUNITY CARE
-------------------------------------------------------- Chapter 3:1.2

Germany's reforms state explicitly that people in need of long-term
care should, to the greatest extent possible, be able to live at
home.  This inclusion of home and community care benefits and funding
in the nation's universal health insurance system will be a major
change in Germany's provision of long-term care.  German officials
believe that the sickness funds, which must cover the standard
package of services within a prescribed budget, will have the
incentive to promote home and community care when it is an
appropriate alternative to the generally more expensive institutional
care. 


      INFORMAL CARE SUPPORT
-------------------------------------------------------- Chapter 3:1.3

Germany will also provide economic and other types of support to
informal caregivers.  As part of the proposed reform, individuals
requiring home care can choose cash benefits to pay either formal or
informal caregivers on the condition that adequate home care is being
received.  Relatives will be entitled to 4 weeks of vacation a year. 
During this time, the sickness funds will pay up to set limits for
professional home care services.  Relatives, friends, or neighbors
who provide care on a regular basis and who do not receive payment
will be entitled to certain employment benefits, such as public
pension credits. 


   UNITED KINGDOM CONSOLIDATES
   RESPONSIBILITY FOR CARE IN
   LOCAL AUTHORITIES
---------------------------------------------------------- Chapter 3:2

Prior to the 1993 long-term care reforms, responsibility for
administering long-term care in the United Kingdom was fragmented
among multiple agencies and levels of government, including the
National Health Service and local authorities.  No single entity was
responsible for determining the population's need for care or for
allocating resources. 

With the implementation of reforms, local authorities are now
responsible for producing a comprehensive plan for meeting the
community's long-term care needs.  In preparing these plans, local
authorities are expected to consult with and coordinate the efforts
of various public and private organizations involved in providing
care. 


      FUNCTIONAL NEED ELIGIBILITY
      CRITERION
-------------------------------------------------------- Chapter 3:2.1

In the United Kingdom, local authorities now serve as the single
point of an individual's initial access to social care services. 
Local case managers are required to assess the individual's care
needs; determine eligibility for services based on functional
criteria; and obtain, to the extent possible, the necessary array of
services.  Local authorities are relying on case management to ensure
the care individuals receive is appropriate and necessary.  Because
of concerns over the adequacy of fixed budgets, however, country
officials worry that case management may be used more to ration
services than to ensure that individual care needs are met.  Some
also expect that insufficient funds may result in local authorities
again applying financial criteria, such as some form of means
testing, following the initial assessment of functional need. 


      HOME AND COMMUNITY CARE
-------------------------------------------------------- Chapter 3:2.2

A stated goal of the United Kingdom's reforms is to improve access to
a broader range of long-term care services, including home and
community-based care.  Although national welfare funds have been
reallocated to local authorities to fund expanded services, no
assessment of the population's needs has been performed and no
minimum package of benefits has been guaranteed.  Consequently, local
officials are doubtful that the reallocation of existing funds,
despite being earmarked for long-term care, will be sufficient to
significantly expand public support for home and community services. 
In addition, because local authorities are prohibited from raising
additional revenues through taxes to pay for services, country
officials express concern that while reforms will succeed in
controlling overall public costs, they will not broaden access. 


   CANADIAN PROVINCES CONSOLIDATE
   AND LOCALIZE LONG-TERM CARE
   RESPONSIBILITIES
---------------------------------------------------------- Chapter 3:3

In some Canadian provinces, responsibility for long-term care is
fragmented among multiple agencies and providers, while others have
long histories of coordinated and integrated systems of long-term
care.  Ontario exemplifies the former; British Columbia, the latter. 

Ontario is in the process of undertaking a major consolidation of
long-term care services at both the provincial and local levels. 
Until recently, both the Ministry of Health and the Ministry of
Community and Social Services separately funded and administered
long-term care services.  As part of the restructuring reform, the
health and social services components of long-term care are being
consolidated in a newly created long-term care division at the
provincial level, which will formally report to both Ministries.  In
addition, at the regional (subprovincial) level, responsibility for
long-term care services, currently fragmented among government
agencies and community providers, is scheduled to be consolidated in
multiservice agencies under the direction of District Health Councils
by 1995.\15 The intent is for each community to have at least one
multiservice agency that will serve as the individual's single point
of access to care and provide most long-term care services.  The
agencies will also conduct individual needs assessments, authorize
and arrange for institutional placements, and directly provide home
and community services. 

Unlike Ontario, British Columbia has a history of comprehensive and
coordinated long-term care delivery going back more than 15 years. 
Since federal grant funding for long-term care became available in
1977, a single division within the Ministry of Health has funded and
administered most services at the provincial level.  The Ministry's
regional offices (with a few exceptions) manage the delivery of
services.\16 They serve as single points of access to care, conduct
individual needs assessments, and authorize the provision of services
including facility placement.  Most long-term care services (other
than skilled nursing and medical therapy) are provided primarily by
private organizations under contract to the government. 


--------------------
\15 Approximately 32 District Health Councils serve as regional
health planning bodies, which advise the provincial ministries on
health needs and resource allocation.  With the restructuring reform,
multiservice agencies will be responsible for integrating health and
social service planning for long-term care and for allocating
resources to meet local long-term care needs. 

\16 Four municipalities and one district--rather than regional
Ministry offices--manage service delivery in certain locations. 


      FUNCTIONAL NEED ELIGIBILITY
      CRITERION
-------------------------------------------------------- Chapter 3:3.1

Since the late 1970s, coverage for a broad range of long-term care
services has been provided as a universal benefit in most Canadian
provinces.  Eligibility for covered services is based on functional
need.  Although the package of covered services may vary among
provinces, most provide home health care, nursing home care, and a
range of home and community-based supports without regard to ability
to pay.  As of 1991, only the less wealthy Maritime provinces still
applied some financial eligibility criteria for nursing home care. 


      HOME AND COMMUNITY CARE
-------------------------------------------------------- Chapter 3:3.2

Government officials in Canada generally agreed that the government
would not be able to raise overall spending on health and long-term
care, but they do believe that a redistribution of funds would better
meet the needs of the population.  They would like to reallocate some
funds from acute to long-term care and from institutional to home and
community-based care.  For example, British Columbia is decreasing
provincial budgets for hospital and physician care while increasing
funding for home and community- based services.  Further, the
province encourages, and in some cases requires, local case managers
to fully consider home and community care options before authorizing
institutional placement.  Ontario is also realigning budget
priorities and plans to increase public spending for long-term care,
despite a general climate of fiscal restraint.  The provincial
government's stated goal is to increase public spending on home and
community care from 20 to 30 percent of all long-term care spending
by 1997. 


   SWEDEN CONSOLIDATES
   RESPONSIBILITY FOR LONG-TERM
   CARE IN MUNICIPALITIES
---------------------------------------------------------- Chapter 3:4

In Sweden, where long-term care historically has been a social
insurance benefit, the 1992 Adel Reform consolidated responsibility
for long-term care at the municipal level.  Municipalities assumed
from counties the primary responsibility for most aspects of
long-term care, including that provided in hospitals, nursing homes,
and the home and community.  Prior to reform, 23 county councils and
286 municipalities shared responsibility for long-term care, with
county councils responsible for home health and hospital geriatric
care and municipalities responsible primarily for social services. 
Because Swedes have traditionally enjoyed universal access to care,
eligibility on the basis of financial need has not been a feature of
the system. 

Swedish officials believe that the decentralized and consolidated
approach, which gives municipalities responsibility for the full
range of long-term care services, has been successful in reducing
unnecessary or inappropriate hospitalization.  As discussed in
chapter 2, officials documented a dramatic reduction (50 percent) in
the number of individuals in hospitals who no longer require
hospitalization but may need either nursing home or community-based
care. 


      HOME AND COMMUNITY CARE
-------------------------------------------------------- Chapter 3:4.1

Historically, Sweden has provided generous support and invested
considerable resources to support the elderly and disabled in the
community, including ample pensions, housing allowances, home
modifications to meet individual care needs, and specialized housing
arrangements that integrate supportive and social services and offer
24-hour personal assistance.  Sweden spends a higher percentage
(approximately 35 percent) of its long-term care resources on home
and community care than the other countries reviewed.  The Adel
Reform has led to further expansion of home and community services,
including a greater array of home nursing, personal care, adult day
care, supportive housing services, meal services, and transportation. 


      INFORMAL CARE SUPPORT
-------------------------------------------------------- Chapter 3:4.2

The level of support Sweden has provided for informal care appears to
be the greatest of the countries reviewed.  Caregiving families are
eligible for both direct economic assistance and support services. 
Sweden requires employers to grant up to 30 days of paid leave for
individuals to provide care for elderly or disabled family members. 
In addition, Sweden uses public funds to provide salaries to family
caregivers for whom caregiving is a regular full-time or part-time
job.  The most recent estimate available indicated that 6,300 or 2.6
percent of all those receiving home-help services were helped by
relatives or close friends employed by the municipality. 

The commitment to expand support for family caregiving is explicit in
the 1992 Adel Reform.  The legislation requires municipal case
managers to integrate the role of informal caregivers in the planning
and delivery of long-term care.  Municipalities will receive
additional funding from the national government to support a greater
number of family caregivers.  The national government is also
recommending that municipalities expand outreach to identify family
caregivers and better target services to meet their needs, such as
providing special assistance when the caregivers are ready to reenter
the general workforce. 


CONCLUDING OBSERVATIONS
============================================================ Chapter 4

The steady demand for long-term care in the United States over the
next few decades will force policy choices about how to expand access
to a range of services while keeping public costs manageable.  Policy
decisions will need to be made about the division of responsibility
between the public and private sectors and about the appropriate role
of these sectors in both the financing and delivery of care. 
Observations made on how other countries have responded to long-term
care financing and delivery concerns may help inform these decisions. 

Challenges associated with aging populations, growing demand for
long-term care services, the rising costs of those services, and
dissatisfaction with access to care have propelled reform efforts in
each country.  While it is too early to determine the outcomes of
recent reforms, it may be useful to recognize certain common themes
in approaches to cost control and service administration.  Following
are the principal themes we observed. 

1.  Fixed budgets or spending caps, coupled with other controls, may
control costs but could also threaten access.  Faced with economic
and budgetary strains, the countries reviewed are hoping to limit
overall public cost growth and create incentives to efficiently
target services through capped spending, global budgets, greater
consumer cost sharing, and price controls.  Recognition of budgetary
limits may encourage governmental and service agencies to weigh
service needs and more carefully allocate services among individuals. 
However, capped budgets and other cost controls may not be viable
over time if resources are not based on the assessed needs of the
population.  Without such safeguards, countries could achieve cost
control at the expense of sufficient access to needed services. 

2.  Consolidating the administration of long-term care is expected to
make service delivery more responsive to the individual.  Reforms
seek to simplify access and make the system more responsive to
individuals by consolidating the administration of services into
single agencies and locating these agencies within local governments. 
Consolidation of responsibility within the same organization for
long-term and acute care or institutional and home care services
acknowledges the potential to substitute different services in
meeting individuals' needs.  It encourages officials to make
efficient and appropriate care choices, using the least costly
service in individual cases.  Further, it denies officials the
opportunity to shift responsibility for care to more expensive
alternatives financed by other bodies. 

3.  Increased public support for home and community care may improve
individual satisfaction with services while avoiding costly
institutional care.  The countries' reforms have recognized the
importance of individuals and families in several ways.  Reforms seek
to improve the well-being and satisfaction of persons with
disabilities by shifting resources away from institutional care to
preferred home and community-based services.  They also support
family and other informal caregivers through economic
compensation--either paying a salary or providing benefits.  Such
support underscores the essential role of informal caregivers in
providing the majority of long-term care and acknowledges the
sacrifice caregiving can entail. 


-------------------------------------------------------- Chapter 4:0.1

Expanding access while containing growth of public costs may
constitute competing goals.  Success may depend upon how vigorously
each is pursued.  The countries we reviewed aim primarily at slowing
the increases in costs, rather than seeking reductions in long-term
care resources.  With this objective, countries that have
historically spent more, such as Sweden and certain Canadian
provinces, may have greater flexibility in their attempts to improve
access and a higher probability of success.  The same may be true for
a country like Germany, which is willing to invest new funds to
establish a larger base of resources and is focused on future control
of cost growth. 


ACKNOWLEDGMENTS
=========================================================== Appendix I

GAO would like to acknowledge the assistance of the following
experts. 

Valuable insights and long-term care expertise were provided
throughout the review from Dr.  Joshua M.  Wiener, Senior Fellow, The
Brookings Institution, Washington, D.C. 

Other individuals provided constructive comments on a review of the
issues discussed in this report; however, they do not necessarily
endorse all of the positions taken in the report.  These individuals
include Professor Dr.  Jens Alber, Universitat Konstanz, Germany; Mr. 
David Browning, Associate Director, Health and Social Services
Studies, the Audit Commission, the United Kingdom; Pauline Chartrand,
Senior Consultant, Health Service Systems Directorate, Health and
Welfare, Canada; and Kristina Larsson, Stockholm Gerontology Research
Institute, Sweden. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II

Ann Calvaresi Barr, Evaluator-in-Charge, (202) 512-6986
Eric Anderson, Senior Evaluator, (202) 512-7129
Hannah Fein
Albert Jojokian (retired)
Maryanne Keenan
Thomas Laetz
William Scanlon
Suzanne Wren


RELATED GAO PRODUCTS
============================================================ Chapter 1

Older Americans Act:  Funding Formula Could Better Reflect State
Needs (GAO/HEHS-94-41, May 12, 1994). 

Long-Term Care Reform:  Program Eligibility, States' Service
Capacity, and Federal Role in Reform Need More Consideration
(GAO/T-HEHS-94-144, Apr.  14, 1994). 

Long-Term Care:  The Need for Geriatric Assessment in Publicly Funded
Home and Community-Based Programs (GAO/T-PEMD-94-20, Apr.  14, 1994). 

Long-Term Care:  Demography, Dollars, and Dissatisfaction Drive
Reform (GAO/T-HEHS-94-140, Apr.  12, 1994). 

Long-Term Care:  Status of Quality Assurance and Measurement in Home
and Community-Based Services (GAO/PEMD-94-19, Mar.  31, 1994). 

Long-Term Care:  Support for Elder Care Could Benefit the Government
Workplace and the Elderly (GAO/HEHS-94-64, Mar.  4, 1994). 

Long-Term Care:  Private Sector Elder Care Could Yield Multiple
Benefits (GAO/HEHS-94-60, Jan.  31, 1994). 

Older Americans Act:  Title III Funds Not Distributed According to
Statute (GAO/HEHS-94-37, Jan.  18, 1994). 

Health Care Reform:  Supplemental and Long-Term Care Insurance
(GAO/T-HRD-94-58, Nov.  9, 1993). 

Long-Term Care Insurance:  High Percentage of Policyholders Drop
Policies (GAO/HRD-93-129, Aug.  25, 1993). 

VA Health Care:  Potential for Offsetting Long-Term Care Costs
Through Estate Recovery (GAO/HRD-93-68, July 27, 1993). 

Long-Term Care Reform:  Rethinking Service Delivery, Accountability,
and Cost Control (GAO/HRD-93-1-SP, July 13-14, 1993). 

Massachusetts Long-Term Care (GAO/HRD-93-22R, May 17, 1993). 

Long-Term Care Case Management:  State Experiences and Implications
for Federal Policy (GAO/HRD-93-52, Apr.  6, 1993). 

