Long‐Term Care Financing: Lessons From France

Abstract

Policy Points: France's model of third‐party coverage for long‐term services and supports (LTSS) combines a steeply income‐adjusted universal public program for people 60 or older with voluntary supplemental private insurance. French and US policies differ: the former pay cash; premiums are lower; and take‐up rates are higher, in part because employer sponsorship, with and without subsidization, is more common—but also because coverage targets higher levels of need and pays a smaller proportion of costs. Such inexpensive, bare‐bones private coverage, especially if marketed as a supplement to a limited public benefit, would be more affordable to those Americans currently most at risk of “spending down” to Medicaid. Context An aging population leads to a growing demand for long‐term services and supports (LTSS). In 2002, France introduced universal, income‐adjusted, public long‐term care coverage for adults 60 and older, whereas the United States funds means‐tested benefits only. Both countries have private long‐term care insurance (LTCI) markets: American policies create alternatives to out‐of‐pocket spending and protect purchasers from relying on Medicaid. Sales, however, have stagnated, and the market's viability is uncertain. In France, private LTCI supplements public coverage, and sales are growing, although its potential to alleviate the long‐term care financing problem is unclear. We explore whether France's very different approach to structuring public and private financing for long‐term care could inform the United States’ long‐term care financing reform efforts. Methods We consulted insurance experts and conducted a detailed review of public reports, academic studies, and other documents to understand the public and private LTCI systems in France, their advantages and disadvantages, and the factors affecting their development. Findings France provides universal public coverage for paid assistance with functional dependency for people 60 and older. Benefits are steeply income adjusted and amounts are low. Nevertheless, expenditures have exceeded projections, burdening local governments. Private supplemental insurance covers 11% of French, mostly middle‐income adults (versus 3% of Americans 18 and older). Whether policyholders will maintain employer‐sponsored coverage after retirement is not known. The government's interest in pursuing an explicit public/private partnership has waned under President François Hollande, a centrist socialist, in contrast to the previous center‐right leader, President Nicolas Sarkozy, thereby reducing the prospects of a coordinated public/private strategy. Conclusions American private insurers are showing increasing interest in long‐term care financing approaches that combine public and private elements. The French example shows how a simple, cheap, cash‐based product can gain traction among middle‐income individuals when offered by employers and combined with a steeply income‐adjusted universal public program. The adequacy of such coverage, however, is a concern.

Financing Long‐Term Services and Supports: Ideas From Singapore

“…This is comparable to the average enrollment age in France (40 to 44 years5) and is lower than that in the United States, where 24.7% of new LTCI enrollees applied between the ages of 45 and 54, and 54% applied between the ages of 55 and 64 13. Early enrollment has the additional benefit of increased time for prefunding, as well as prefunding during people's most productive years.…”

Sustainability of Long-term Care: Puzzling Tasks Ahead for Policy-Makers

“…Recent figures show that — except in the United States 15 and France 16 — private insurance accounts for less than 2% of total LTC spending. 3 With public funding coming under pressure, there is an interest in better understanding how private insurance mechanisms could complement public coverage.…”

“…16 French private LTC insurers offer a variety of products that may be purchased individually or collectively. Policies tend to be cheap, but also to offer low benefits.…”

“…French people with pre-existing conditions are often exempted from insurance. 16,21 In 2001, the growth rate in the number of insurance contracts in France reached 22%, mainly because insurers started marketing or cross-selling their products. The growth rate declined in 2006, after the French Government announced its intention to reform LTC insurance.…”

“…16 Group insurance offers several advantages, including the mitigation of adverse selection. Risks are spread over a large group, which allows for better accessibility, fewer exclusions, and greater negotiation power for insurers vis-à-vis providers.…”