Ageing, Long-term Care Insurance and Healthcare Finance in Asia

Sabrina Ching Yuen Luk

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781351631341
• Edition: 1
• Topic: Business
• Subtopic: Insurance
• Index: Business

This book uses a revised version of Kingdon's multiple-streams framework to examine health financing reforms in China, Hong Kong, Taiwan, and the Republic of Korea (ROK) as well as long-term care insurance (LTCI) reforms in Japan and Singapore. It shows that the explanatory power of the multiple-streams framework can be strengthened through enriching the concepts of policy entrepreneurs, ideas, and windows of opportunity in the original framework as well as bringing the theoretical lens of historical institutionalism into the framework.

1
Population ageing and financing health and long-term care in Asia

Trends in population ageing

Population ageing, which refers to an increase in the proportion of older persons, has become one of the most significant trends of the 21st century (United Nations Population Fund 2012). It is the result of the continued decline in fertility rates and an increase in life expectancy (World Health Organization 2010a). There are myriad reasons for fertility decline, including delayed marriage, conflict between work and family responsibilities (Jones 2007), higher education of women, the increasing labor force participation of women, the decline of child mortality, the high cost of raising a child, family planning (e.g. the use of contraception, counseling by experts) (Roser 2014), and government policies (e.g. China’s one-child policy). There are also various reasons for an increase in life expectancy, including improved sanitation, safe drinking water, increased education, rising living standards, better nutrition, improved lifestyles, and greater access to quality health services (United Nations Economic and Social Commission for Asia and the Pacific 2017a: 19). From 1950 to 2017, the global population aged 60 years or over increased from 205 million to 962 million, representing almost a 4.7-times increase (United Nations Population Fund 2012: 13; United Nations 2017a: 2). By 2030, the global population aged 60 years or over is projected to reach 1.4 billion, and by 2050, the global population of older persons is projected to more than double its 2017 size, reaching nearly 2.1 billion (United Nations 2015: 9). ‘Globally, the number of older persons is growing faster than the number of people in all younger age groups’ (United Nations 2017b: 7). ‘In 2018, for the first time in human history, persons aged 65 years or over outnumbered children under five years of age worldwide’ (United Nations 2019: 16). Projections indicate that these two age groups will continue to grow in opposite directions (He et al. 2016: 3). By 2050, the proportion of the population aged 65 or over (15.6 percent) will be more than double that of children under five (7.2 percent) (He et al. 2016: 3). Moreover, the number of persons aged 65 years or over globally is projected to reach 1.5 billion by 2050, surpassing the number of adolescents and youths aged 15 to 24 years (1.3 billion) (United Nations 2019: 16).

‘World regions vary in their particular phase of the demographic transition and differ in their speed of aging’ (He et al. 2016: 6). In the 1950s, Europe and North America were the world’s oldest regions, with 12.1 percent and 12.4 percent of their population aged 60 years or over, respectively (Arivalagan 2019: 1). Latin America and the Caribbean had only 5.6 percent of their population aged 60 years or over during that period (Huenchuan 2013: 29). Asia was a young region in the 1950s, with only 6.8 percent of its population aged 60 years or over (Arivalagan 2019: 1). In 1980, the world’s top ten countries or areas with the largest share of persons aged 60 years or over were located in Europe (United Nations 2017b: 8). They were Sweden (22.0 percent), Norway (20.2 percent), Channel Islands (20.1 percent), United Kingdom (UK) (20.0 percent), Denmark (19.5 percent), Germany (19.3 percent), Austria (19.0 percent), Belgium (18.4 percent), Switzerland (18.2 percent), and Luxembourg (17.8 percent) (United Nations 2017b: 9). Since the 2000s, however, ‘Asia has become one of the world’s most rapidly ageing regions, outpacing the rate of ageing in Europe and Northern America’ (Arivalagan 2019: 1). To put this into historical context, the United States (US), Sweden, and France took 69 years, 85 years, and 115 years, respectively, to move from an ageing to an aged society (Garcia and Wong 2018: 10; United Nations Economic and Social Commission for Asia and the Pacific 2017b). In Asia, however, Japan took only 26 years to make the transition (Garcia and Wong 2018: 10), while ‘China is expected to make the transition in 25 years, Singapore and Thailand in 22 years, and Viet Nam in only 19 years’ (United Nations Economic and Social Commission for Asia and the Pacific 2017b: 3).

At present, Asia leads world regions in the size of its older population (He et al. 2016: 6). In 2017, Asia had nearly 549 million population aged 60 years or over, which constituted 57 percent of the world’s population aged 60 years or over (United Nations 2017b: 5). ‘In general, the countries of East Asia are furthest along in the population-aging process, followed by Southeast Asia and then South Asia’ (East-West Center 2002: 83). By 2050, Asia is expected to have nearly 1.3 billion people aged 60 years or over (United Nations 2017b: 5). That same year, East Asia will continue to have the oldest population in Asia (UNFPA Asia Pacific 2017: 10), while Japan will host the oldest population in the region (Menon and Melendez-Nakamura 2009: 3). According to the survey conducted by Pew Research Center in 2013 on public awareness of ageing in 21 countries, the view that ageing was a major problem for their country was the most prevalent in East Asia (Pew Research Center 2014). The level of concern with ageing was the highest in Japan (87 percent), followed by the Republic of Korea (ROK) (79 percent) and China (67 percent) (Pew Research Center 2014: 11). Meanwhile, more than half of the public in Germany (55 percent) and Spain (52 percent) said that ageing was a problem (Pew Research Center 2014: 5). The survey also found that the public in Japan had the lowest confidence in having the ability to maintain an adequate standard of living in their old age (Pew Research Center 2014: 6).

Indeed, population ageing ‘poses a number of challenges for governments, society and older persons themselves’ (United Nations Development Programme 2017: 14). These challenges include ensuring secure income in old age, maintaining good health of older adults and their access to healthcare, and ensuring a supportive environment necessary for ageing in place (United Nations Population Fund 2012: 29–30). Many older adults are financially insecure because of loss of work ability, a lack of employability, low savings, and the lack of financial support from family. This has raised concerns about the ability of governments to provide adequate social protection and social security (e.g. pensions) for the growing number of older adults (United Nations Population Fund 2012: 29).

Population ageing puts significant strain on the healthcare system. The incidence and severity of chronic diseases increase sharply with age. As a result of overall life expectancy growing faster than healthy life expectancy, many older adults live longer but spend more years in poor health (United Nations Economic and Social Commission for Asia and the Pacific 2017a: 37). Since per capita healthcare costs for older adults over 65 are three to five times greater than for those under 65 (Safiliou-Rothschild 2009: 57), they become a particular financial burden for older adults or households with them (United Nations Economic and Social Commission for Asia and the Pacific 2017a: 37). How to provide affordable healthcare for older adults while ensuring the financial sustainability of healthcare systems is an important task for governments. As the population ages, it is necessary to create age-friendly communities (AFCs) which offer barrier-free housing and facilities, affordable, frequent, and reliable public transport services, and a wide range of community activities to foster social participation of older adults, including those with disabilities (World Health Organization 2007: 44). It is only through the creation of AFCs that older adults can live a safe, independent, and dignified life in their communities for as long as possible.

Financing health and long-term care in Asia

‘Increasing age is frequently associated with increased health-care utilization and costs’ (World Health Organization 2019a). It is also associated with a higher risk for disability ‘as a result of an accumulation of health risks across a lifespan of disease, injury, and chronic illness’ (United Nations Department of Economic and Social Affairs n.d.). In the face of an ageing population, it is imperative for governments to establish effective mechanisms to ensure that older adults have access to health and long-term care (LTC) services without financial burden (World Health Organization 2019a). At present, however, ‘[e]nsuring universal coverage for health and long-term care for older people is still a distant ambition in many countries’ (World Health Organization 2019a) because many governments have limited financial resources and other funding priorities. Besides, health and LTC financing reforms are politically contentious. ‘Health financing reform often involves complex interactions among many stakeholders of varying positions, power, and influence, within the health sector and beyond’ (World Health Organization 2018). As regards LTC financing reform, it requires ‘navigating deep divides in society, from the social safety net to taxes to individual responsibility and private sector initiatives’ (Farrell 2016). In many cases, health or LTC financing reform encounters strong political opposition from vested interests. The reform usually has to go through many years of experimentation, debates, and negotiations before it is finally implemented. The process can be costly, time-consuming, and frustrating.

Health financing

The purpose of health financing is to provide sufficient funds for the operation of health systems (Schieber et al. 2006: 225), to set the right financial incentives for providers (World Health Organization 2000: 95), and to ensure that all individuals have access to needed healthcare services without the risk of severe financial hardship (often called financial catastrophe or impoverishment) (World Health Organization 2010b: 72). The three key functions of a health financing system are revenue collection, pooling of funds, and purchasing of services (World Health Organization 2010b: 72). Revenue collection refers to the sources of funds for healthcare (Mclntyre and Kutzin 2012: 77). Funds can come from domestic sources (e.g. households, businesses) and external sources (e.g. donor governments or agencies) (Schieber et al. 2006; Health Policy Plus n.d.). Pooling of funds refers to the accumulation of prepaid healthcare funds so that members of the pool collectively share the financial risk of paying for healthcare (Mclntyre and Kutzin 2012; Health Policy Plus n.d.). ‘Risk pooling addresses the unpredictability of illness, particularly at the individual level’ (Mclntyre and Kutzin 2012: 77) and promotes equity, as those with greater ability to pay and those with lower health risks subsidize financially poor and high-risk individuals (Health Policy Plus n.d.). Purchasing of services refers to ‘the process of transferring pooled funds to healthcare providers to ensure that appropriate and efficient services are available to the population’ (Mclntyre and Kutzin 2012: 77). Services can be purchased from public and private providers (Schieber et al. 2006). In theory, there are five types of health financing models around the world: tax-funded model, social health insurance (SHI) model, private health insurance (PHI) model, mandatory savings model, and out-of-pocket model. In reality, most countries or cities adopt a pluralistic approach to finance health care. In Asia, healthcare financing models are quite diverse in terms of their development (Kwon 2011: 651) due to differences in history, political, economic, and social conditions.

Tax-funded model

The tax-funded model funds healthcare through government tax revenues. Tax revenues can be collected by local, provincial, or national government authority on incomes, purchases, sales, property, corporation profits, land, and the like (Roemer 1976; Savedoff 2004). This model seeks to make health services available on a universal basis and pool both income and health risks (McKenna et al. 2017). It has the advantages of providing equitable access to healthcare, having simple and low-cost administration, and redistributing wealth from high-income groups to low-income groups (Food and Health Bureau 2008: 58–9). But the major disadvantage of this model is the risk of unstable funding or underfunding because of competing public expenditures (International Labour Organization 2015). As the payer of healthcare, governments are likely to prioritize cost efficiency and containment (Blank and Burau 2007: 76) and ‘weigh tradeoffs between health and roads, education, defense and other public functions’ (Savedoff 2004: 7). Countries or cities using this model or variations of it include the UK, Italy, Spain, the Nordic countries, New Zealand, Cuba, and Hong Kong (Reid 2009a, 2009b).

Social health insurance (SHI) model

The SHI model funds healthcare through mandatory contributory schemes. It requires wage-related contributions that are shared by employers and employees to not-for-profit sickness funds designated for paying healthcare providers (Busse et al. 2004: 45). The SHI model is built on the principle of social solidarity. It ‘does not discriminate against those who are older or have pre-existing medical conditions’ (McKenna et al. 2017). Every insured person is entitled to the same comprehensive benefits package (Saltman 2004: 7), ‘irrespective of their socioeconomic status, ability to pay, or geographical location’ (Busse et al. 2017: 882). The SHI model has the advantages of generating stable revenues and being more efficient at pooling both income and health risks (International Labour Organization 2015; McKenna et al. 2017). But the disadvantages of this model are that payroll contribution can lead to cost escalation and reduce the competitiveness of employers and employees in a global market (International Labour Organization 2015; McKenna et al. 2017). Countries or cities using this model or variations of it include Germany, the Netherlands, Austria, Belgium, Japan, the ROK, China, and Taiwan.

Private health insurance (PHI) model

The PHI model funds healthcare through individually purchased health insurance schemes or employer-sponsored health insurance, which are often (but not always) voluntary (OECD Study on Private Health Insurance 2004). For individually purchased health insurance schemes, the level of premium charged to an individual depends on an assessment of his or her risk profile at the time of purchase. Factors considered include age, gender, lifestyle habits (e.g. tobacco use, alcohol consumption), medical history, and family history of disease. Individuals under the high-risk category are more likely to pay higher premiums. As regards employer-sponsored health insurance, the level of premium is based on ‘group risk, typically estimated across employees of a single firm or occasionally a single industry’ (McKenna et al. 2017). All members of the group pay the same premium amount for the same benefit package. The PHI model has the advantages of providing financial protection against unexpected illness or injury as well as providing more choices of hospitals, doctors, and services. But the disadvantages of the PHI model include expensive premiums for high-risk groups, such as those with pre-existing medical conditions, encouraging the tendency to over-supply and over-use healthcare due to moral hazards and incurring high administration costs for claims processing and reimbursement (Food and Health Bureau 2008: 82–3). The PHI model is the predominant health financing model in the US (Huber 1999).

The mandatory savings model

The mandatory savings model funds healthcare through medical savings accounts (MSAs). ‘MSAs are individual savings accounts that are restricted to spending on health or medical care’ (Hanvoravongchai 2002: 1). The model is built on the principles of self-reliance and self-accountability (Hsiao 1995: 261). Pooling ‘occurs across an individual’s lifetime – individuals save during economically active, healthy years and spend in elderly years when need for healthcare is increased’ (Hsu 2010: 4). The mandatory savings model has the advantages of empowering an individual and disciplining him or her to plan ahead and be aware of his or her medical needs (Scheffler and Yu 1998: 274). It can ‘prevent consumer moral hazards and create proper incentives for wise health care purchasing decisions’ (Hanvoravongchai 2002: 3). Being both the consumer and purchaser of healthcare services, the MSA holder has an incentive to reduce usage as well as compare services to obtain lower prices (Scheffler and Yu 1998: 274). But the disadvantage of the mandatory savings model is that it limits risk pooling between the rich and the poor, and between the healthy and the sick (Hanvoravongchai 2002: 3). ‘Those with chronic diseases or those persistently unemployed may not accumulate enough savings for necessary health care’ (Hanvoravongchai 2002: 3). High deductibles also deter those with limited or no savings from seeking necessary medical care (Hanvoravongchai 2002: 3). The mandatory savings model is the predominant health financing model in Singapore.

The out-of-pocket model

The out-of-pocket model funds healthcare through ‘direct payments made by individuals to health care providers at the time of service use’ (World Health Organization 2019b). Direct payments are part of the health financing landscape in all countries relying on user fees and copayments to raise additional revenue to fund services, encourage more rational and responsible use of medical services, and contain health system costs (McKenna et al. 2017; World Health Organization 2019b). But the disadvantage of the out-of-pocket model is that it has no risk pooling (Food and Health Bureau 2008: 70). Direct payments would impose a disproportionate financial burden on vulnerable populations, including chronic patients, low-income patients, the elderly, and those receiving extensive and costly treatments (Food and Health Bureau 2008: 70). Vulnerable populations may not seek medical treatment or delay seeking medical treatment, which in turn leads to deterioration in health status (McKenna et al. 2017). They may fall into poverty due to illness.

Long-term care financing

Since the 1990s, policymakers in different countries have raised serious concerns over the financial sustainability of LTC systems due to rapidly ageing populations. LTC refers to ‘the care for people needing support in many facets of living over a prolonged period of time’ (Colombo et al. 2011: 39). The need for LTC ‘is a consequence of sickness or frailty causing dependency on others’ (Joshua 2017: 9). LTC can be provided in institutional, community, and home settings (Rivers et al. 2000: 472) and encompasses a wide array of services ranging from rehabilitation and nursing care to assistance with activities of daily living (ADL), such as getting in and out of bed, walking, bathing, dressing, cooking, and managing money (Colombo et al. 2011; Rivers et al. 2000). LTC can be funded by general taxation (e.g. Sweden, Denmark, Finland, and Norway), social insurance (e.g. the Netherlands, Germany, Japan, and the ROK) and means-tested ‘safety net’ mechanisms (e.g. the UK, Medicaid in the US) (Joshua 2017). But informal care by unpaid family members and f...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Dedication
• Contents
• Acknowledgements
• List of abbreviations
• 1 Population ageing and financing health and long-term care in Asia
• 2 China: the urban health insurance reform
• 3 Hong Kong: the mandatory health insurance reform fiasco
• 4 Japan: the long-term care insurance reform
• 5 Singapore: a compulsory long-term care insurance reform
• 6 Taiwan: the National Health Insurance reform
• 7 The Republic of Korea: integration reform
• 8 Healthy ageing in Asia
• Bibliography
• Index