I recently returned from a honeymoon—no gifts please!—spent in Europe.
Because I don’t know how to stop working, I made sure during my travels to ask folks about long-term care (LTC).
Although I consider myself quite familiar with the provider and funding infrastructure here in the U.S., I’ve only read a smattering of articles and studies of eldercare abroad.
From what I’ve learned, Americans are fascinated by the lure of retiring overseas. Forbes just published the 22nd Annual Global Retirement Index for 2013, where Ecuador was named the top spot for the fifth consecutive year.
Meanwhile, life at home is comparatively miserable: According to a new study co-published by the National Research Council and Institute of Medicine (“Shorter Lives, Poorer Health”), Americans of all ages from birth to 75 die sooner and experience more illness than those in 16 other high-income countries, despite spending more on our health care.
One recent article from a national caregivers’ resource went so far as to suggest packing one’s bags and leaving the country just to avoid American nursing home care. Before renewing our passports, let’s take a closer look at how the other half lives.
The situation overseas depends, naturally, on what country you’re in. The New York Times ran a piece last year profiling the Hogeway complex, in The Netherlands.
Designed as a “humane and cost-effective” response to the burgeoning number of dementia patients, Hogeway’s innovation lies in reducing patients’ stress by surrounding them by familiar sights and sounds, and immersing them in cherished activities.
After all, said a spokeswoman, “A demented person doesn’t like to sit alone.”
Thus, Hogeway’s 240 staff members wear street clothes. Residents help with the laundry, and cooking—there’s a little supermarket on the premises. The government spotted $22 million of the $25.2 million pricetage for Hogeway, which now makes ends meet by renting out its theater, and opening its restaurant and café to the public.
According to further background on The Netherlands, the Dutch established universal long-term care insurance (LTCi) in 1968.
Today’s model consists of a pay-as-you-go system (i.e., annual revenues from taxes match claims) in which nearly every citizen over the age of 15 participates.
The average premium in 2008 was about €320 per month, which was ample for 600,000 to receive benefits. That’s 3.6 percent of the population, and the vast majority seniors.
A unique aspect of The Netherlands is that private insurance companies “manage” the LTCI program without bearing any financial risk.
Like any typical program of comprehensive “long-term services and supports” (LTSS), care is covered in the home (55 percent) or facility (45 percent), or beneficiaries can receive cash payments (75 percent of reimbursement).
A victim of its own popularity, the Dutch long-term care system has seen its costs skyrocket. The government has been forced to eliminate benefits, impose stricter needs assessments, and re-focus care on those most in need.
My travels took me to the beautiful Alsace region of France, which borders Germany.
Raising the topic of retirement with our sightseeing guide, I was told that government employees work 35 hours per week and are guaranteed 37 vacation days per year.
The minimum monthly salary is €$1,350.
The minimum retirement age used to be 60—at which point you would receive as a pension an amount equal to 60 percent of your last salary.
Ex-President Sarkozy raised the age to 62; now President Hollande has promised to lower it back down to 60.
Everyone from civil servants to farmers to private entrepreneurs is covered by the same social security system.
The French government currently taxes retirement income over €7,000, although there is talk of lowering this threshold to just €2,000.
Health care in France is provided for all, at an estimated cost of €350 million last year.
In what seems to an American like an American twist, our guide said some of the French resent immigrants who’ve only just arrived getting to take advantage of free medical care. Embarrassed, our guide mentioned the Romani — the people traditionally known as the Gypsies. There are only 30,000 Romani people in a population of 60 million.
While describing a country which is proudly socialist, the guide couldn’t fathom their intolerance of this impoverished, nomadic ethnic group.
The French solution has been to give each family €3,000 and deport them back to their home countries—but there was already evidence the deportees were returning.
Seniors represent 10 percent of the French population.
Although it costs €3,000 to “put them in a home,” our guide remarked that it was considered “shameful”—a last resort. Family members are expected to care for the elderly, by, for example, moving them in to the family members’ own homes.
The guide went on to describe an array of typical home care services which the government would also provide on a subsidized (cost-share) basis. For instance, one might pay €10 for a haircut, which would normally cost €30, with the government paying the balance to the hairdresser.
My background material informs me that France supports a hybrid system: Government support for those in need, and a well-functioning private LTCi environment penetrating 25% of the market made up of French residents over age 60, even with no tax incentives.
Private benefits pay cash, mirroring the public program.
Cash from the public program (“APA”) is paid depending on severity of need. The minimum level of “loss of autonomy” begins at an inability to perform three activities of daily living (ADL’s). Public program cash support declines steeply as income rises. Thus, all things considered, the average monthly reimbursement for home care in 2007 was just €413.
While maintaining the world’s largest publicly-funded health service (the NHS), England has also capped its home equity exemption for LTC at a paltry £23,250.
It’s notable that this is a combined cap with other capital, assets and savings.
In other words, “If you’re moving into a care home and have more than £23,250 in savings or assets (or £22,000 in Wales and £24,750 in Scotland), you’ll usually have to pay all of the care-home fees. This threshold includes your property unless your partner or another dependant still lives there.”
As here, one can be penalized for deliberate transfer of assets prior to applying for Local Authority funding assistance. In England the asset transfers are called “deliberate deprivation of capital.” While only transfers made within six months are subject to recovery, there is no official time limit on the look-back period.
Let’s recall that only within the last decade has the United States lowered its home equity exemption from “unlimited” to $525,000 in most states, and to $786,000 in a handful of states. Other forms of exempt property may still be held in unlimited amount.
Consider the ramifications of the U.S. system: For most households, our single largest concentration of net worth has for decades been our homes. This is all well and good, but when the median value of an owner-occupied American home is just $186,200, it becomes painfully obvious that Medicaid’s generous home equity exemption realistically puts almost no one at risk of having to pay for LTC services.
With no clear financial consequence for the failure to plan… few ever plan.
There are important lessons from abroad—although we are familiar with America’s “Silver Tsunami,” our own ethnocentrism tends to blind us to the age waves occurring around the world.
Worse, with elderly populations, high unemployment, and universal health care, many European governments face an economic crisis more dire than our own.
On a personal level, some will no doubt prefer a world where the burden is on the government to find you, to enroll you, to draft you, to track you from birth to death. How simple life is to plan! In the United States we live without a net. This freedom is breathtaking, but creates an enormous responsibility to assume ownership over our own lives.