WORKPACKAGE 5: WORKPACKAGE 5: LONG-TERM CARE AND LONG-TERM CARE AND

PENSIONSPENSIONS ADELINA COMAS-HERRERA, PSSRU, LSEADELINA COMAS-HERRERA, PSSRU, LSECHRIS CURRY, PENSIONS POLICY INSTITUTECHRIS CURRY, PENSIONS POLICY INSTITUTERUTH HANCOCK, UNIVERSITY OF EAST ANGLIARUTH HANCOCK, UNIVERSITY OF EAST ANGLIASEAN JAMES, PENSIONS POLICY INSTITUTESEAN JAMES, PENSIONS POLICY INSTITUTEDEREK KING, PSSRU, LSEDEREK KING, PSSRU, LSEJULIETTE MALLEY, PSSRU, LSEJULIETTE MALLEY, PSSRU, LSEMARCELLO MORCIANO, UEAMARCELLO MORCIANO, UEALINDA PICKARD, PSSRU, LSELINDA PICKARD, PSSRU, LSEADAM STEVENTON, PENSIONS POLICY ADAM STEVENTON, PENSIONS POLICY INSTITUTEINSTITUTERAPHAEL WITTENBERG, PSSRU, LSERAPHAEL WITTENBERG, PSSRU, LSE

LONG-TERM CARE POLICY LONG-TERM CARE POLICY CONTEXTCONTEXT

Concern over future affordability of Concern over future affordability of long-term care and pensionslong-term care and pensions increasing numbers living to late old ageincreasing numbers living to late old age uncertainty over numbers who will need uncertainty over numbers who will need

carecare potentially rising expectations potentially rising expectations

Debate about the appropriate balance Debate about the appropriate balance between public and private funding between public and private funding

LONG-TERM CARE LONG-TERM CARE FINANCING SYSTEMFINANCING SYSTEM

Health care free of charge at point of use Health care free of charge at point of use throughout UKthroughout UK

Nursing care in nursing homes now also free Nursing care in nursing homes now also free throughout the UKthroughout the UK

Personal care free in Scotland but subject to user Personal care free in Scotland but subject to user charges in rest of the UKcharges in rest of the UK

Hotel costs in care homes and domestic help Hotel costs in care homes and domestic help subject to charges throughout UKsubject to charges throughout UK

Disability (cash) benefits are not subject to means Disability (cash) benefits are not subject to means test, throughout the UKtest, throughout the UK

Govt Green Paper on Care and Support expected to Govt Green Paper on Care and Support expected to be published early next yearbe published early next year

PENSIONS POLICY PENSIONS POLICY CONTEXTCONTEXT

The UK Government legislated for changes to The UK Government legislated for changes to statestatepensions (in Pensions Act 2007)pensions (in Pensions Act 2007) Earnings-link the level of Basic State Pension (BSP)Earnings-link the level of Basic State Pension (BSP) Make it easier to build up rights to state pensionsMake it easier to build up rights to state pensions Remove the earnings-related component of State Second Remove the earnings-related component of State Second

Pension (S2P) by around 2030Pension (S2P) by around 2030 Increase state pension age to 68 by 2046Increase state pension age to 68 by 2046 Limit the growth in means testingLimit the growth in means testing

And it has proposed reforms to And it has proposed reforms to privateprivate pensions: pensions: Auto-enrol most employees into saving for a private pensionAuto-enrol most employees into saving for a private pension Compel employers to contribute (if the employee does not Compel employers to contribute (if the employee does not

opt-out)opt-out) Introduce a national system of Personal Accounts, to operate Introduce a national system of Personal Accounts, to operate

alongside existing provisionalongside existing provision

METHODOLOGYMETHODOLOGY

Use of three linked models:Use of three linked models: PPI suite of models on pensionsPPI suite of models on pensions Caresim, UEA, model of resources of Caresim, UEA, model of resources of

older people and charging for careolder people and charging for care PSSRU at LSE model of long-term PSSRU at LSE model of long-term

carecare

Innovative combination of macro and Innovative combination of macro and microsimulation modelsmicrosimulation models

PSSRU MODELPSSRU MODEL

The PSSRU model aims to make projections of:The PSSRU model aims to make projections of:

Numbers of disabled older peopleNumbers of disabled older people

Long-term care services and disability Long-term care services and disability benefitsbenefits

Long-term care expenditure: public and Long-term care expenditure: public and privateprivate

Social care workforceSocial care workforce

CARESIM MODELCARESIM MODEL

Uses micro data on older people’s income and Uses micro data on older people’s income and capital assets (Family Resources Survey)capital assets (Family Resources Survey)

Simulates the means-tests for residential care Simulates the means-tests for residential care and for home careand for home care

Uncompleted lengths of stay assigned Uncompleted lengths of stay assigned randomly and contribution to fees calculated randomly and contribution to fees calculated for that pointfor that point

Calculates what each older person in the Calculates what each older person in the sample would pay for care sample would pay for care should they need itshould they need it

Does NOT predict who or how many will need Does NOT predict who or how many will need carecare

PPI MODELSPPI MODELS

Aggregate model projects Aggregate model projects total expenditure on state pensions, contracted-out rebates, total income from private pensions, tax-relief

Distributional model analyses Distributional model analyses distribution of pensioner incomes, expenditure on means-tested benefits, revenue from income tax

LINKING THE CARESIM LINKING THE CARESIM AND PSSRU MODELSAND PSSRU MODELS

PSSRU model provides age/gender/marital PSSRU model provides age/gender/marital status/housing tenure weights within type of status/housing tenure weights within type of care for each projection year up to 2032, to care for each projection year up to 2032, to act as weightsact as weights

CARESIM model provides to PSSRU modelCARESIM model provides to PSSRU model projected trend in % of care home residents and projected trend in % of care home residents and

home care clients eligible for state supporthome care clients eligible for state support projected average % of care home and home care projected average % of care home and home care

fees met by state supported service usersfees met by state supported service users Projected average % of user charges and private Projected average % of user charges and private

payments met using disability benefitspayments met using disability benefits

CENTRAL BASE CASECENTRAL BASE CASE

Official principal population projection, Official principal population projection, by age, gender and marital statusby age, gender and marital status

Unchanged age-specific disability ratesUnchanged age-specific disability rates No change in patterns of formal and No change in patterns of formal and

informal careinformal care Unit costs rise by 2% per year in real Unit costs rise by 2% per year in real

terms (but constant for non-staff, non-terms (but constant for non-staff, non-capital costs)capital costs)

No change in financing system from No change in financing system from current system in Englandcurrent system in England

BASE CASE PROJECTIONS: BASE CASE PROJECTIONS: PUBLIC PUBLIC EXPENDITURE AS % EXPENDITURE AS %

GDPGDP

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2006 2007 2012 2017 2022 2027 2032

% G

DP

PROJECTIONS UNDER DIFFERENT PROJECTIONS UNDER DIFFERENT FUNDING SYSTEMS: PUBLIC FUNDING SYSTEMS: PUBLIC

EXPENDITURE COSTS, ADDITIONAL EXPENDITURE COSTS, ADDITIONAL COSTS ABOVE BASE CASE, £millionCOSTS ABOVE BASE CASE, £million

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Free personal care without rise in LA fees Free personal care with rise in LA fees

Add

itio

nal

exp

end

iture

ove

r b

ase

case

(£m

)

2007

2032

PROJECTIONS UNDER DIFFERENT PROJECTIONS UNDER DIFFERENT FUNDING SYSTEMS: PUBLIC FUNDING SYSTEMS: PUBLIC

EXPENDITURE COSTS, ADDITIONAL EXPENDITURE COSTS, ADDITIONAL COSTS ABOVE BASE CASE, £millionCOSTS ABOVE BASE CASE, £million

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Housing disregard, Fixed carecosts

Housing disregard, Fixed carecosts, increase fee rates

Housing disregard, Fixed carecosts

Housing disregard, Fixed carecosts, increase fee rates

Add

ition

al e

xpen

ditu

re o

ver

base

cas

e (£

m)

2007

2032

Variant 1: Income first used to meet care costs Variant 2: Income first used to meet hotel costs

PROJECTIONS UNDER DIFFERENT PROJECTIONS UNDER DIFFERENT FUNDING SYSTEMS: PUBLIC FUNDING SYSTEMS: PUBLIC

EXPENDITURE COSTS, ADDITIONAL EXPENDITURE COSTS, ADDITIONAL COSTS ABOVE BASE CASE, £millionCOSTS ABOVE BASE CASE, £million

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Free personal care, Fixed care costs Wanless: England regime Wanless: Free personal care, Fixed care costs

Add

ition

al e

xpen

ditu

re o

ver

base

cas

e(£m

)

2007

2032

Relative gains from scenarios, care Relative gains from scenarios, care recipients aged 85+, 2007recipients aged 85+, 2007

(all fixed care costs without fee increases)(all fixed care costs without fee increases)

45

8897

107

168

91 92105

181

54

137 144

119

2843

106

127 128

85

36

0

50

100

150

200

Q1 Q2 Q3 Q4 Q5 quintile of age-specific equivalent household income

Rel

ativ

e ga

ins

(ove

rall

mea

n=10

0)

FPC Wanless patterns of care + FPC

Housing disregard on care, variant 1 Housing disregard on care, variant 2

Relative gains from scenarios, care Relative gains from scenarios, care recipients aged 85+, 2027recipients aged 85+, 2027

(all fixed care costs without fee increases)(all fixed care costs without fee increases)

6278

90 96

182

6680

91

227

143153

142

49

4

8398

117104

95

46

0

50

100

150

200

Q1 Q2 Q3 Q4 Q5 quintile of age-specific equivalent household income

Rel

ativ

e ga

ins

(ove

rall

mea

n=10

0)

FPC Wanless patterns of care + FPC

Housing disregard on care, variant 1 Housing disregard on care, variant 2

CONCLUSIONSCONCLUSIONS Public expenditure on long-term care Public expenditure on long-term care

projected to rise from 0.95% of GDP in 2007 to projected to rise from 0.95% of GDP in 2007 to 1.6% of GDP in 2032 under current funding 1.6% of GDP in 2032 under current funding systemsystem

Various options for reforming the means test Various options for reforming the means test could take this to 1.9% of GDP in 2032, while could take this to 1.9% of GDP in 2032, while free personal care could raise this to 1.8% of free personal care could raise this to 1.8% of GDP or moreGDP or more

Change to pattern of care in line with Wanless Change to pattern of care in line with Wanless could take this to 2.1% of GDP in 2032, or could take this to 2.1% of GDP in 2032, or more under different funding variantsmore under different funding variants

The benefits of a housing disregard on care go The benefits of a housing disregard on care go more to those on lower incomes than free more to those on lower incomes than free personal care (before considering how they personal care (before considering how they would be financed)would be financed)

But all results are preliminaryBut all results are preliminary

WORKPACKAGE 5: WORKPACKAGE 5:

INFORMAL CAREINFORMAL CARE

LINDA PICKARD, PSSRU, LSELINDA PICKARD, PSSRU, LSE

RAPHAEL WITTENBERG, PSSRU, RAPHAEL WITTENBERG, PSSRU, LSELSE

JULIETTE MALLEY, PSSRU, LSEJULIETTE MALLEY, PSSRU, LSE

DEREK KING, PSSRU, LSEDEREK KING, PSSRU, LSE

ADELINA COMAS-HERRERA, ADELINA COMAS-HERRERA, PSSRU, LSEPSSRU, LSE

INFORMAL CAREINFORMAL CARE Introduction Introduction

Demand for long-term care services may Demand for long-term care services may change due to policy changes or for other change due to policy changes or for other reasons e.g. changes in supply of informal or reasons e.g. changes in supply of informal or unpaid careunpaid care

PSSRU model makes projections of informal PSSRU model makes projections of informal carecare

Research reported todayResearch reported today(1) (1) recent informal care projections recent informal care projections

(2)(2) new research as part of MAP2030 new research as part of MAP2030 Research is about informal care for older Research is about informal care for older

people provided by adult childrenpeople provided by adult children

(1) Recent informal care (1) Recent informal care projectionsprojections

Informal Care for Older People by their Informal Care for Older People by their Children: Projections of Demand & Supply in Children: Projections of Demand & Supply in England to 2041England to 2041 (Pickard 2008a) (Pickard 2008a)

‘‘Informal care’ is unpaid care provided to a Informal care’ is unpaid care provided to a relative, friend of neighbour in need of help relative, friend of neighbour in need of help due to illness, frailty or disabilitydue to illness, frailty or disability

Projected supply of informal care compared to Projected supply of informal care compared to projected demandprojected demand

Focus on projected supply of Focus on projected supply of intenseintense care care provided for 20 or more hours a week and provided for 20 or more hours a week and projected demand for social care by projected demand for social care by disableddisabled older peopleolder people

Key assumptions of projections of Key assumptions of projections of informal care for older people by informal care for older people by

adult childrenadult children GAD principal population projection, by age, GAD principal population projection, by age,

gender, marital status (base case)gender, marital status (base case) DemandDemand

Unchanged age-specific disability rates Unchanged age-specific disability rates No change in probability of receipt of informal No change in probability of receipt of informal

care by disabled older person by key variables care by disabled older person by key variables including age, gender, marital statusincluding age, gender, marital status

SupplySupply Marital status projections implicitly take account Marital status projections implicitly take account

of changes in potential supply of spouse/partner of changes in potential supply of spouse/partner carecare

Separate projection of supply of care by childrenSeparate projection of supply of care by children Assumes no change in probability of providing Assumes no change in probability of providing

intense informal care to older parent by age, intense informal care to older parent by age, gender, marital status gender, marital status

Projections of demand for informal care by Projections of demand for informal care by older people from adult children and supply of older people from adult children and supply of

informal care for older parents by adult informal care for older parents by adult children, England 2005-2041 (Source: Pickard children, England 2005-2041 (Source: Pickard

2008a)2008a)

0100200300400500600700800900

10001100120013001400

2005 2007 2010 2012 2017 2022 2026 2031 2041

Numbers providing intenseinformal care to olderparents/-in-law at constantprobablities of providing care

Numbers of disabled olderpeople receiving care fromadult children

Difference between supply of intense Difference between supply of intense intergenerational care & demand for care by intergenerational care & demand for care by

disabled older people, disabled older people, England 2005-2041 (Source: Pickard 2008a)England 2005-2041 (Source: Pickard 2008a)

0

100

200

300

400

500

600

700

800

2005 2007 2010 2012 2017 2022 2026 2031 2041

Numbers providing intenseinformal care to olderparents/-in-law at constantprobablities of providing care

Numbers providing intensecare if 2005 ratio ofreceivers: providers staysconstant

Policy implicationsPolicy implications

To keep pace with demand Either more people will need to provide

intense informal care or more formal services will need to be

provided Any increase in intense care provision

may be associated with lower labour market participation

‘Care gap’ raises questions about sustainability of policies that rely heavily on informal care in future

(2) MAP2030 Work Package (2) MAP2030 Work Package 5 5

Research on informal careResearch on informal care So far PSSRU work on informal care

projections has included a number of aspects of informal care supply PSSRU long-term care finance model takes

into account marital status projections Work on informal care supply by children

takes into account trends in probability of providing informal care

Key objective of PSSRU work on informal care for MAP2030 modelling implications of changes in

availability of living children for informal care supply

MAP2030 Work Package 5 : Informal MAP2030 Work Package 5 : Informal CareCare

IntroductionIntroduction

Sources of Informal Care: Comparison of Sources of Informal Care: Comparison of ELSA and GHS ELSA and GHS (Pickard 2008b) (Pickard 2008b)

Key data source is English Longitudinal Study of Ageing (ELSA)

Objective is to use 2002 ELSA data to analyse variations in receipt of informal care by disabled older people, by age, gender, disability, marital status, household type, housing tenure + availability of living children and socio-economic variables

Link analysis of informal care to receipt of formal services in PSSRU model

MAP2030 Work Package 5 : Informal MAP2030 Work Package 5 : Informal CareCare

Introduction (continued)Introduction (continued)

PSSRU model uses GHS data to link informal & formal care

Comparability in analysis of informal care between the GHS and ELSA is important

First stage has been comparison of receipt of informal care by disabled older people in 2002 ELSA and 2001/02 GHS

Focus on sources of informal care, in particular receipt of informal care by disabled older people from adult children

MAP2030 Work Package 5: MAP2030 Work Package 5: Informal CareInformal CareInitial analysisInitial analysis

Differences of definitions of disability and informal care in ELSA and GHS but have been brought together (Pickard 2008b)

Similar proportion of disabled older people receive informal care from adult children in 2002 ELSA and 2001/02 GHS

Characteristics of disabled older people with care from children similar (bivariate analysis) increases sharply with age is twice as likely for women as men is associated with widowed, divorced or

separated older people, either living alone or with others

is more likely for tenants than owner-occupiers

MAP2030 Work Package 5: MAP2030 Work Package 5: Informal CareInformal Care

On-going analysisOn-going analysis Currently, multivariate analysis of receipt of

informal care by disabled older people from different sources in ELSA using variables not available in the GHS,

including availability of living children and socio-economic variables

To be followed by linkage to projections of availability of kin

and linkage to projections of demand for formal

servicesContact: L.M.Pickard@lse.ac.uk

ReferencesReferences

Pickard L, Wittenberg R, Comas-Herrera A, Davies B, Darton R Pickard L, Wittenberg R, Comas-Herrera A, Davies B, Darton R (2000) Relying on Informal Care in the New Century? Informal (2000) Relying on Informal Care in the New Century? Informal Care for Elderly People in England to 2031.  Care for Elderly People in England to 2031.  Ageing and Ageing and SocietySociety, 20: 745-772, 20: 745-772

Pickard L, Wittenberg R, Comas-Herrera A, King D, Malley J Pickard L, Wittenberg R, Comas-Herrera A, King D, Malley J (2007) Care by spouses, care by children: Projections of (2007) Care by spouses, care by children: Projections of informal care for older people in England to 2031. informal care for older people in England to 2031. Social Policy Social Policy and Societyand Society, 6, 3: 353-366 , 6, 3: 353-366

Pickard L (2008a) Pickard L (2008a) Informal Care for Older people provided by Informal Care for Older people provided by their Adult Children: Projections of Supply and Demand to 2041 their Adult Children: Projections of Supply and Demand to 2041 in England. Report to the Strategy Unit (Cabinet Office) and in England. Report to the Strategy Unit (Cabinet Office) and the Department of Healththe Department of Health. PSSRU Discussion Paper 2515 (. PSSRU Discussion Paper 2515 (www.pssru.ac.uk/pdf/dp2515.pdfwww.pssru.ac.uk/pdf/dp2515.pdf))

Pickard L (2008b) Pickard L (2008b) Sources of Informal Care: Comparison of ELSA Sources of Informal Care: Comparison of ELSA and GHS.and GHS. PSSRU Discussion Paper 2598 ( PSSRU Discussion Paper 2598 (www.pssru.ac.uk/pdf/dp2598.pdfwww.pssru.ac.uk/pdf/dp2598.pdf) )

Wittenberg R, Pickard L, Malley J, King D, Comas-Herrera A, Wittenberg R, Pickard L, Malley J, King D, Comas-Herrera A, Darton R (2008) Darton R (2008) Future demand for Social Care, 2005 to 2041: Future demand for Social Care, 2005 to 2041: Projections of Demand for Social Care for Older People in Projections of Demand for Social Care for Older People in England.England. Report to the Strategy Unit (Cabinet Office) and the Report to the Strategy Unit (Cabinet Office) and the Department of HealthDepartment of Health. PSSRU Discussion Paper 2514 (. PSSRU Discussion Paper 2514 (www.pssru.ac.uk/pdf/dp2514.pdfwww.pssru.ac.uk/pdf/dp2514.pdf) )

PPI MODEL PPI MODEL DEVELOPMENTDEVELOPMENT

Refreshing CareSim sample Possible spin-offs – add dynamic

capacity to distributional modelling? Housing assets – aggregate and

potentially distribution, scenario modelling

CARESIM developmentsCARESIM developmentsShort term:Short term: Incorporate more years’ FRSIncorporate more years’ FRS Analyse other scenariosAnalyse other scenarios

Medium term:Medium term:3.3. Refresh CARESIM sample (first steps)Refresh CARESIM sample (first steps)4.4. Allow for differential mortalityAllow for differential mortality

Longer term (beyond/outside MAP2030):Longer term (beyond/outside MAP2030):5.5. Model disability, informal care and carer’s Model disability, informal care and carer’s

allowanceallowance

Refreshing the sampleRefreshing the sample

05

101520253035404550556065707580859095

100

2005 2010 2015 2020 2025

simulation year

age

ACTUAL sample members

05

101520253035404550556065707580859095

100

2005 2010 2015 2020 2025

simulation year

age

NEW sample members ACTUAL sample members

+

CARESIM enhancements

METHOD of simulationMETHOD of simulationAgeing and “de-ageing” FRS sample + Simulation of new events (i.e. pension) +

linkage with macro model (PPI and PRSSU).

IMPROVEMENTS: analysis extended to people aged 65+ in all the simulated period or extend the period of simulation

START

Select people aged [45-64]

Update CARESIM Sample

END

Age>=tea?

Retrospective annual reconstruction of:- socio-dem. events;- economic events.

Y

Age<SPA?

Annual simulation of:- socio-dem. events;- economic events.

Y

N

New Pensioners

Pension earnings

N

Historical BlockHistorical Block reconstructs retrospectively, the

demographic and working path and earnings for sample members with a contributory history in the base year,

since their entry in the job market (using only retrospective information

available on FRS)

Future BlockFuture Block simulate the socio-economic

evolution of the micro-units until they reach the State Pension Age (SPA).

Pension BlockPension Blockcompute pension incomes for

eligible sample members.

Moving towards a Dynamic Microsimulation Model

PSSRU MODEL PSSRU MODEL DEVELOPMENTDEVELOPMENT

Include income in the model, such that receipt Include income in the model, such that receipt of services will be a function of incomeof services will be a function of income

Include a wider range of formal care services, Include a wider range of formal care services, such as supported housing, in the modelsuch as supported housing, in the model

Incorporate scenarios on mortality, disability, Incorporate scenarios on mortality, disability, household composition from the other WPshousehold composition from the other WPs

Examine a wider range of policy scenarios as Examine a wider range of policy scenarios as discussed at last year’s Advisory Group discussed at last year’s Advisory Group meetingmeeting

PSSRU MODEL PSSRU MODEL DEVELOPMENTDEVELOPMENT

INFORMAL CARE STREAMINFORMAL CARE STREAM Include analysis of availability of children, Include analysis of availability of children,

such that receipt of informal and formal such that receipt of informal and formal care will be a function of availability of care will be a function of availability of childrenchildren

Include intensity (hours) of informal care, Include intensity (hours) of informal care, based on analysis of informal (co-resident) based on analysis of informal (co-resident) care using 2002 ELSA datacare using 2002 ELSA data

Develop a wider range of scenarios around Develop a wider range of scenarios around future supply of informal care, especially future supply of informal care, especially by adult children, based on longitudinal by adult children, based on longitudinal analysis of first two waves of ELSAanalysis of first two waves of ELSA

PLANNED PAPERSPLANNED PAPERSWORKPACKAGE 5WORKPACKAGE 5

Financing long-term care for older Financing long-term care for older people in the UK: the costs and people in the UK: the costs and distributional effects of options for distributional effects of options for reforming the funding system reforming the funding system

An incremental approach to refreshing An incremental approach to refreshing the sample in CARESIMthe sample in CARESIM

Projections of demand and supply of Projections of demand and supply of informal care for older peopleinformal care for older people

Patterns of care under Wanless scenariosPatterns of care under Wanless scenarios Pensions policy optionsPensions policy options