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Yes, the Netherlands! Some time ago (almost exactly a year ago, in fact), I started researching what eldercare looks like in other countries, and had put this article together but waited to publish it until I could provide a series of such articles. At the time, my interest was in eldercare per se, and especially how it fits into broader issues of “Medicare for all”/universal health care. But, in light of Trump’s (barely thought through and soundly attacked) proposal to pay for Social Security through general tax revenues, I’m looking at this in a new light, because it really addresses bigger questions of what the right way is to fund social insurance programs in general.
The Netherlands, as it happens, ranks tops in long-term care provision among developed countries — if your metric is total spending level, where it ranks first at 3.7% of GDP or projected future spending, or total projected spending in 2070, where it comes out at 6% of GDP, second only to Norway (7.1%). But are they getting their money's worth from that spending, and are they protecting elders from the impoverishing effects of out-of-pocket spending, and their children from the burdens of caregiving? Let's do a deeper dive.
It is not hard to find articles praising the Dutch approach to eldercare. Its "Dementia Village" has received considerable press (for example, at The Atlantic in 2014) for its patient-friendly approach of creating a secure, Truman Show-style community in which residents can spend time at the town square or the grocery store as well as individual homes styled in the manner of their youth. Likewise, an expert on eldercare at Access Health International described her experiences in a visit to the country in glowing terms:
"I visited a number of different care homes, homecare organizations, academic institutions, and eHealth providers, as well as the University Medical Center in Groningen. Throughout my time in the Netherlands, I noticed that innovative groups all shared fundamental ideas upon which they centered the delivery of care. The organizations I visited focused on wellbeing, wellness, and lifestyle choices. They focused less on the medical aspects of chronic and long term care. These groups did not consider themselves to be part of the curative branch of the healthcare system. These healthcare professionals wanted to focus on patients’ individual capabilities, freedom, autonomy, and wellness.
"For example, the care homes wanted to provide a nice home environment, with home cooked meals, small groups, interior design choices, and a personalized care routine. The care homes focused on providing tasty food, the freedom to go to bed and wake up at will, and an exterior environment that feels just like the environment in any city neighborhood. The homecare organizations strove to provide assistance, but only when individuals could not manage on their own. The nurses look first at a person’s capability to care for him or herself. Next, the nurses look to the neighborhood and what help neighbors might provide. Then the nurses reach out to relatives to see if they can be of assistance. As a final step, the nurses provide care."
But it's not quite that simple.
Here's a brief overview of the FICA-equivalent taxes in the Netherlands, courtesy Social Security Programs Throughout the World, at the Social Security website.
- For old age, disability, and survivor's benefits (American Social Security-equivalent), the Dutch contribute 20% of pay up to a ceiling of EUR 33,994 (about USD 37,700). Employers pay 6.27% of pay up to EUR 54,614 (USD 60,600).
- For medical, the system is a hybrid one and workers purchase private insurance. Employers pay 6.90% of covered payroll (no ceiling), and the government subsidizes benefits.
- And for long-term care, workers pay 9.65% of earnings up to EUR 33,994 (about USD 37,700).
(Yes, that ceiling puts the American debates about the unfairness of the Social Security ceiling into perspective.)
Are you ready to pay nearly 10% of your paycheck up to a ceiling, to fund long-term care?
World Bank consultant Laurie Joshua provides a more detailed review of the Dutch system in her 2017 paper "Aging and Long Term Care Systems: A Review of Finance and Governance Arrangements in Europe, North America and Asia-Pacific" (yes, that's a mouthful, and a handy source for information on other countries, too). The first social insurance benefit for long-term care, the Exceptional Medical Expenses Act (or AWBZ in its Dutch initialism) was implemented in 1968 and, in 2014, 5% of Dutch people received benefits through the program. However, the cost of the system had escalated, which the government initially attempted to control with budget caps until a 1999 ruling prohibited these, and costs grew from EUR 15.9 billion in 2001 to EUR 27.8 in 2014, despite cost-control efforts such as increases in copays required from middle- and upper-income families and tightening of eligibility criteria.
In 2015, the government wholly reformed the system through the Long-term Care Act (WLZ in its Dutch initialism), with a new administrative structure, shifts in which levels of government pay for which services, a move to home support rather than nursing homes wherever possible, and general cuts/freezes in reimbursement rates. One consequence? The English-language site Dutch News reported in 2017 that
"At least 40% of Dutch nursing homes and home nursing organisations are making a loss and overall profitability across the healthcare sector has more than halved, according to accountancy group EY,"
as reimbursement rates drop and (since the less-frail elderly are more often being cared for at home) nursing home residents need more help.
Separately, municipalities are required to provide care services, either directly or through a "personal budget" as well as providing support and coordination.
Finally, elder care is not free of charge, though its rates are based on income and, at a maximum, still considerably lower than American private-pay nursing home or home care costs, at EUR 2,301.40 (USD 2,500) per month. As a result, copayments by families amount to 8.7% of total spending.
So, on the one hand, taxes are higher but the direct out-of-pocket costs of care in the Netherlands are substantially lower than in the United States, and its systematized provision of home care and the efforts put into home-like nursing homes are appealing. On the other hand, the jury is still out whether its 2015 reform has managed to control costs to ensure its programs are sustainable in the long run — and the very fact that this reform was needed confirms that an expansive government program isn’t as simple as its proponents would like it to be.
As always, you’re invited to comment at JaneTheActuary.com!
