Financing Long-Term Services and Supports: Ideas From Singapore

Abstract

Policy Points:

1. In Singapore, long‐term services and supports (LTSS) are financed through a mix of public and private sources comprising tiered means‐tested public subsidies and government grants to care providers, charitable donations, voluntary long‐term care insurance, and other private resources.

2. Singapore's high take‐up rate of voluntary long‐term care insurance is explained by plans offering partial coverage, medical underwriting, early automatic enrollment, direct debit of insurance premiums, and defined cash benefits.

3. Singapore's experience in long‐term care financing is relevant to the US debate, as it provides policy ideas that may be transferable to the American context.

4. We recommend maximizing the population's total contribution to voluntary long‐term care insurance by striking the right balance between coverage adequacy and take‐up rate while targeting subsidies to low‐income individuals.

Context: Financing long‐term services and supports (LTSS) for the elderly is a pressing issue in the United States with reforms of long‐term care insurance (LTCI) presently being explored. Singapore, with 65% of residents aged 40 to 83 covered by basic LTCI, including 22% with supplementary LTCI plans, has the highest voluntary LTCI rate in the world. This article contributes to the discourse by presenting the case of LTSS financing in Singapore.

Methods: We first reviewed Singapore's LTSS policies through a comprehensive search of academic papers, governmental reports, parliamentary debate transcripts, print media, and official websites of LTSS providers. We then estimated the LTSS financing mix, conducted an in‐depth analysis of the main policies, and illustrated the financial protection they procure for the elderly using realistic hypothetical scenarios.

Findings: The main principles governing Singapore's LTSS policies are shared responsibility for long‐term care financing, targeted assistance for the poor, centralized governance and administration, separation from other income and housing policies, and limited intergenerational cross‐subsidizing. We estimate the financing mix to consist of out‐of‐pocket spending (40%), government spending (42%), long‐term care insurance (9%), and charitable donations (9%). Assuming a monthly LTSS bill of US$1,545 to US$2,575, between 11% and 19% of LTSS expense is offset by LTCI for severely disabled individuals with basic coverage. Overall, 63% of care recipients are eligible for public subsidies that amount to 20% to 80% of their expenses.

Conclusions: The high take‐up of voluntary LTCI in Singapore is explained by the high prevalence of plans offering partial coverage, medical underwriting, early automatic enrollment, direct debit of insurance premiums, and defined cash benefits. We recommend setting the coverage of voluntary long‐term care insurance plans at levels that maximize the population's total contribution by striking the right balance between coverage adequacy and take‐up rate while targeting subsidies to low‐income individuals.

Keywords: aging; long-term care financing; long-term care insurance; long-term services and support.

Figure 1

Estimated LTSS Financing Mix in Singapore, by Funding Source Authors’ calculations based on projected and reported figures for 2015. The composition of LTSS spending in 2015 was estimated using the projected LTSS needs of elderly people (aged 65 and over with at least one activity of daily living limitation needing human assistance) generated by a Singapore‐specific long‐term care system dynamics model.39 We included estimated expenditures for home‐ and community‐based care, nursing home care, and care by foreign domestic workers. Using estimated proportions of the elderly who are eligible for different levels of means‐tested government subsidies and estimated fees for LTSS, we calculated the total out‐of‐pocket spending and the share of LTSS spending composed of means‐tested government subsidies. With the latter as the base, we estimated the relative sizes of charitable donations and of government subventions to support the operation of LTSS providers. Last, we calculated the share of LTSS spending paid for by long‐term care insurance using an estimated number of elderly claimants.