Tax-based comprehensive LTC allowance

Why was this example implemented?

The introduction of a comprehensive LTC allowance was a fundamental political signal by the Austrian authorities for acknowledging long-term care as a social risk that calls for solidarity by all citizens. The stated objectives of this reform were

• to increase opportunities for independent living of people with LTC needs,
• to provide opportunities for choice between different forms of care and to improve coordination between health and social care,
• to support family care and to create opportunities for care at home, rather than to incentivise institutional care, and
• to create employment opportunities. 

The drivers for the introduction of the scheme (Pflegegeld) were threefold:

• Firstly, it was a response to concerns and claims by interest organisations of people with disabilities about inconsistencies in treatment of different groups and gaps in coverage due to a fragmented system of allowances that had existed hitherto.
• Secondly, the relatively harsh divide between ‘cure’ that is comprehensively covered for almost all citizens by the federal social health insurance system, and ‘care’ that had been covered by the nine different regional social assistance laws, called for a remedy: due to the rising demand for means-tested social assistance payments, regional governments were keen to get their increasing expenditures for care covered by federal resources.
• Third, this political constellation led to a relatively broad consensus about a comprehensive solution that was complemented by a state treaty between the federal state and the regions. This treaty gave way to a harmonisation of the existing schemes in terms of access and extent of benefits in all social assistance laws and in the federal social security schemes. It also stipulated that regional governments remained responsible for the development of a decent infrastructure of home care services and residential care, including quality improvement in terms of an enhanced coordination between health and social care.

Description

In Austria, a comprehensive, non means-tested but needs-tested benefit scheme for people with long-term care needs of all ages was introduced in 1993. Austrian residents of all ages (and Austrians living in another EU country) are since then eligible for the LTC allowance if they are assessed as needing permanent care, expected to last at least six months, for more than 50 hours per month. Care needs (ADL, IADL) are assessed by specialised medical doctors or nurses in terms of time needed for care.

The scheme is considered to ‘contribute to additional expenses due to LTC needs’ and thus stipulates cash benefits in 7 levels from about €150 to €1,650 as a non means-tested lump-sum paid to the beneficiary who may then decide how to spend the money. Indeed, as the average contribution per assessed hour of care needed is about €3.50, beneficiaries have to invent their own personal arrangements: if the beneficiary lives at home, s/he may use the allowance to pay for (subsidised) services (about 80-100 service hours per month are subsidised by the regional governments), for a family carer or to legally employ a personal assistant (or pay ‘illegally’ for moonlighting).

As the allowance is not earmarked it may also just contribute to the general family income. If the beneficiary lives in a care home, the allowance will be paid to the provider, together with the resident’s pension, except for €44.4 of the monthly allowance and 10% of his/her pension. If this sum will not suffice to cover the costs, means-tested social assistance will step in.

Today, about 430,000 Austrians (5.3% of the population) receive the LTC allowance, more than 80% of them are above the age of 65. The reform was not aimed at touching upon the health and social care divide – health insurance funds only contribute a small lump sum to fund ‘hospital-avoiding home nursing’ prescribed by GPs.

However, the scheme has further ‘blurred’ the boundaries between formal and informal care by the way in which shortages in supply have been resolved by civil society. Over the past 15 years a ‘grey market’ of care has developed by families paying for undocumented informal carers, mainly from neighbouring Central and East European countries. Even though the purchasing power of the allowance was constantly reduced as no automatic indexation was stipulated, more than 20,000 families have set up such arrangements. Eventually, the Austrian government thus adopted in 2007 the so-called Home Assistance Act (Hausbetreuungsgesetz) to amend the regulatory gap concerning labour market, social insurance and professional regulations. Furthermore, means-tested subsidies were introduced for families employing migrant carers and/or other informal carers, including family members. Most migrant carers, however, prefer to register as self-employed 24-hours assistants – and so do families for whom this arrangement is still cheaper.

As the scheme is also ‘blurring’ the traditional division between the federal, contribution-based social insurance system and the regionally organised, means-tested and tax-funded social assistance schemes, it has contributed to a proper identity of LTC. The necessary state treaty by which the federal state guaranteed the general funding of the allowance while the nine regions agreed to set up developmental plans to increase the provision of social services and to improve the quality of the LTC infrastructures, including education and training systems, has been a further step towards coordination. These plans were prepared between 1995 and 1998, however with relatively vague objectives that were partially implemented till 2010, mainly by expanding the number of home care services, by harmonising education schemes and by modernising care homes.

In the meantime, most of these plans are out-dated, while in particular co-ordination between health and social care facilities remains an issue to be tackled. Recent reforms have eventually led to a partial indexation of the allowance, but at the same time the threshold for accessing the scheme has risen to a minimum of 60 hours of care needs per month.

What are/were the effects?

Compared against its objectives, the performance of the LTC attendance scheme has been assessed positively with a view to issues of independence, the development of supplementary community care services and the creation of employment. An evaluation (Badelt et al., 1997) found that the system’s objectives had been met and that care allowances had helped promote care in the community and reduce admissions to care homes. LTC services in the community have increased in terms of hours provided (about +23% between 2000 and 2007) and in terms of additional employment: for instance, between 2003 and 2006 employment in home care services has increased by about 36% and in residential care by 7%. In some regions supply of home care has more than doubled, though from a very low level. Given the proportional Austrian tax system, financing of the LTC allowance proves no redistribution effects, but the scheme contributes to a large extent to reduce the risk of poverty and improves the beneficiaries’ position in the income hierarchy as it is of much higher relative importance in the lower half of income distribution than in the upper quartiles (Mühlberger et al., 2008: 13).

However, the availability (or scarcity) of services and the level of user contributions still determines the use of services, rather than professional assessment procedures. The key problem with formal home care services that provide the full range of home help, home nursing and meals on wheels in Austria remains the gap between a maximum of more or less 3 hours per day they may cover in most regions and the real needs for care and attendance of many beneficiaries. This gap, together with relatively costly out-of-pocket contributions, was the main reason for the development of 24-hours assistance by migrant carers.

What are the strengths and limitations?

Strengths

• Acknowledgement of LTC by social security policies, national and regional authorities as a social risk that calls for solidarity by all citizens (tax-based financing, equal access rights)
• Indirect acknowledgement of informal carers
• Freedom of choice for beneficiaries and their families to use the money according to individual needs and preferences
• The increased purchasing power of beneficiaries and accompanying measures contributed to a significant extension of services and employment in home care

Weaknesses

• The allowance contributed to the emergence of a ‘grey’ or ‘black’ market of care, in particular as the vicinity of low-income countries offered an opportunity to reach out for migrant carers ready to provide 24-hours care in the home of the beneficiary at favourable prices (€800-€1,500 per month) – this phenomenon has partly been amended by respective reforms of the labour law, organisational support and financial incentives to ‘legalise’ the employment of migrant carers. 
• There is a repeated and ongoing debate, whether the right to cash benefits should be transformed in a right to services in kind to better target expenditures for LTC, rather than to “fund the Harley-Davidson bike of the grandchildren”. However, with labour shortages already felt by the sector, and a ‘budget’ of €3.50 per hour, there are doubts that services would compensate for care costs to the same extent as cash benefits.
• In some cases the allowance has been an incentive for (female) informal carers to leave the labour market.
• The allowance had not been valorised between 1996 and 2007 so that the ‘purchasing power’ of beneficiaries decreased consistently during that period.
• The allowance and ensuing reform steps had only very limited effects with respect to the persisting social and health care divide – while home care services as such became more integrated, their links with the health care sector (GPs, hospitals) remained restricted. 

Opportunities

• “Cash does not care”, but financial resources at the disposal of people in need of LTC may provide a basis for the development of a care culture that is based on rights rather than on charity. This has to be complemented by decent information and incentives for beneficiaries to be guided through the system, e.g. care counselling (Schober et al., 2007). 
• The allowance improved the visibility of social care for older adults and contributed to the growth and professionalisation of the sector. This development could contribute to a more confident confrontation with the health sector. 

Threats

• The scheme has increased LTC expenditures to about 1.4% of the Austrian GDP. During the past decade, rising costs have been compensated by a devaluation of the allowance. In the future, a significant increase in the number of beneficiaries and in spending can be expected so that it will be a political decision which part of the GDP will be ‘sustainable’ to be spent on LTC.
• With the overarching policy objective of cost-containment, targeting will be a future strategy, as Austria has one of the highest rates of LTC scheme’s beneficiaries. First steps towards reducing access to the system have been taken in 2010 by increasing the threshold for eligibility from 50 to 60 hours of care needs per month. Thus, an even larger amount of people with care needs between 1 and 60 hours per month will be excluded.

Credits

External Links and References

• http://www.bmsk.gv.at/cms/site/liste.html?channel=CH0061
• Badelt, C./Holzmann-Jenkins, A./Matul, C. & A. Österle (1997) Analyse der Auswirkungen des Pflegevorsorgesystems. Forschungsbericht im Auftrag des Bundesministeriums für Arbeit, Gesundheit und Soziales. Wien: BMAGS. 
• Leichsenring, K./Ruppe, G./Rodrigues, R. & M. Huber (2009) Long-term care and social services in Austria. Background Paper to the Workshop and Study Tour “Long-term Care and Social Services”. Vienna/Washington: European Centre for Social Welfare Policy and Research/World Bank.
• Mühlberger, U./Knittler, K. & A. Guger (2008) Mittel- und langfristige Finanzierung der Pflegevorsorge [Mid- and long-term financing of long-term care]. Studie des Österreichischen Instituts für Wirtschaftsforschung im Auftrag des Bundesministeriums für Soziales und Konsumentenschutz. Vienna: WIFO. 
• Österle, A. (2001) Equity Choices and Long-Term Care Policies in Europe. Allocating Resources and Burdens in Austria, Italy, the Netherlands and the United Kingdom. Aldershot: Ashgate. 
• Pochobradsky, E./Bergmann, F./Brix-Samoylenko, E./Erfkamp, H. & R. Laub (2005) Situation pflegender Angehöriger. Studie im Auftrag des Bundesministeriums für soziale Sicherheit, Generationen und Konsumentenschutz. Wien: ÖBIG. 
• Schober, D./Schober, C. & J. Kabas (2007) Evaluierungsstudie über das Pilotprojekt „Beratungsscheck – Fachliche Erstberatung für Pflegebedürftige und ihre Angehörigen“. Wien: NPO Institut.