Long-term care financing: lessons from France.Milbank Q 2015; 93(2):359-91MQ
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.
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.
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.
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.
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.