Rethinking the Welfare State: The prospects for ... - e-Library

Rethinking the selfare state 118
comprise housing and other living expenses that would otherwise be borne by every
individual with no disabilities. In other words, individuals who require institutional care
will be responsible for paying the portion of the costs related to the non-service
components of the care (shelter, food, etc.) either on their own or with the assistance of
social welfare or pension benefits, rather than through the tax-based system and LTC
government assistance.
Thus, the system would operate as follows for consumers of institutional care. The
cost of the care would be divided into two amounts, representing the service components
and the non-service components. The service component would be financed in the same
way that home-based care is financed—that is, the government will subsidize a certain
percentage, and the individual will pay the remaining percentage through the tax-based
collection system. Regarding the non-service component, the individual will bear the full
costs independently of the health care system. However, low-income individuals may be
eligible for subsidization of these costs through social assistance or pension benefits.
Normatively, the justification for drawing a dividing line between the service
components and non-service components of institutional care is straightforward.
Taxpayers should not be required to pay for the basic living expenses of LTC consumers
under the guise of health care expenditures. The services that should be provided with
some level of government assistance on a needs-tested basis are limited to those that are
necessary for enabling individuals to perform daily living tasks that otherwise could not
be performed. Living expenses are properly subsidized by a means-tested social
assistance program. In Germany, for example, the federal government is responsible for
LTC services, while local governments are responsible for social assistance. Thus,
individuals who require financial assistance in addition to LTC benefits must apply to the
local government. 114 Another policy reason for this division relates to horizontal equity
among LTC consumers. Individuals receiving home-based services are required to pay
for their own living expenses, and thus subsidizing the living expenses of those using
institutional resources would create inequities in the treatment of the two groups.
Moreover, by creating a windfall for individuals utilizing institutional care, perverse
incentives would be created. LTC recipients would be encouraged to use higher-cost
institutional care, even when they are capable of remaining at home. From both a
personal autonomy standpoint and an economic perspective, this is an undesirable result.
Empirically, only two countries actually separate the medical and housing costs of
LTC—Belgium and France. 115 Both operate successfully, fiscally and socially
The successful operation of the proposed program requires that providers are able to
freely enter and exit the market. For example, Hjertqvist reports that, in Sweden,
“privatized nursing homes have reduced costs by 20–30 percent,” 116 suggesting that the
introduction of competition has increased cost-efficiency. Further, it has been found that
competition can also increase service quality. Zinn finds that when there is greater bed
availability in nursing homes (meaning that consumers have more options, and therefore
that competition between providers is increased) there are “fewer violations of nursing
home licensure code requirements.” 117 This finding suggests that, “higher quality may be
one outcome of increased competition.” 118
However, concerns regarding the health and safety of beneficiaries mandate that the
government ensure that service providers are competent. To reconcile these goals, it is
necessary to establish a baseline set of requirements that providers must meet in order to