The market potential for privately financed long term care products in the UK

This paper considers the market potential for privately financed long term care products in the UK. It finds that since the present market is undeveloped there is scope to increase the range of products available to suit people with different means and circumstances. Currently the UK spends about £19 billion on long term care (LTC) of which around a third is privately funded and two thirds publicly funded. The cost of informal care for older people is estimated to be worth £58 billion a year making a total of £77 billion. The paper finds that very few people can afford to pay for LTC out of their own pockets from income alone, but that this number is increased if savings are taken into account and significantly increased if housing wealth is included as well. Insurance for LTC is normally considered to be part of the product mix usually associated with the private funding of LTC. However, as the US market demonstrates, LTC insurance products can be complex and difficult to understand and yet still not meet all needs, whilst US research suggests that policies are also over priced and unaffordable for many. In this paper the case is made for other kinds of products which produce an income at the point of need and therefore make a contribution towards LTC costs. These products include equity release, ‘top up insurance’, disability linked annuities, and immediate needs annuities. Although they may not cover all possible risks, and therefore all needs, they would bring much needed new money into LTC as well as lead to an increase in personal responsibility. With large numbers of older people on very low incomes not everybody would be able to afford these products and so the concept of LTC bonds is considered. These would work like premium bonds and pay prizes but would only be cashable at the point of need. Taken together all of the products considered would extend choice and there would be something to meet most circumstances. The government’s role would be five fold: (1) to facilitate the introduction of the LTC products and provide regulation; (2) to provide appropriate incentives for people to take them up; (3) to clarify the role of the state in terms of the minimum entitlement people can expect; (4) to make it easier to get advice and direction at points of initial contact, for example with social and health care services; and (5) to cover risks that the market cannot handle

Whither human survival and longevity or the shape of things to come

With the continuing increases in life expectancy, populations are ageing rapidly. Governments are concerned for the future of pensions and health care for which population forecasts are an important component for planning purposes. In this paper we focus on human survival rather than mortality rates which are the more usual starting point when estimating future populations. Using a simple model we link basic measures of life expectancy to the shape of the human survival function and consider its various forms. We then use the simple model as the basis for investigating actual survival in England and Wales from 1841 onwards and investigate the concept of a ‘maximum age’. We show how the model can be used in a predictive sense and demonstrate in two tests that show our model would have given more accurate results than comparable government forecasts using the same base information. We then go on to show that, based on trends in life expectancy, official population forecasts could undershoot the population at age 50+ by 0.6m, with consequent financial implications for pensions, health and social care

Re-thinking households - using administrative data to count and classify households with some application

Households rather than individuals are being increasingly used for research and to target and evaluate public policy. As a result accurate and timely household level statistics have become an increasing necessity especially at local level. However, present sources of information on households are fragmented with significant gaps and inaccuracies that limit their usefulness. This paper reviews present statistical arrangements and then describes a new approach to data collection and household classification based on local administrative sources. The result is a more integrated and flexible system. The utility and advantages are demonstrated using recent examples from the six Olympic London Boroughs

The 100-year family Longer lives, fewer children

This paper investigates how the role and resilience of the family in the UK has changed over time, and explores how it is coming under increasing pressure from external demographic and economic forces. We investigate these effects using a novel approach based on survivorship. We also propose a new way to define ‘family,’ using a framework flexible enough to model a range of family structures and situations: by centring analysis on the ‘focal woman.’ Survivorship is the probability of living to a given age (see section 2 for more detail); we take this data from the UK Office for National Statistics (ONS) life tables for England and Wales. These are constructed using mortality data and are available from the mid-nineteenth century onwards. We construct the joint survivorship of typical families based on the number of births. We also employ novel ‘family accounting’ methods to quantify and analyse the potential overlapping of care responsibilities that face today’s families. Our work is informed by the effects of two broad transitions, widely recognised by demographers as occurring across many societies: The first is the progression from high to low mortality and from high to low fertility rates (the average number of children born to each woman in any given population). These two changes combine to produce a surge in population and economic growth, accompanied by rapid increases in life expectancy. In the UK this period lasted from around the mid-nineteenth to the mid-twentieth century or later. The nature of the second transition is not universally accepted among demographers, but broadly it refers to the societal changes in any given population that have taken place since the 1970s; these include changes in family structures, and a shift towards women choosing to have fewer children, later in life. The arrival of protected rights and wider access to education for women during this period have been key factors in driving these shifts. We posit that the economic benefits of the first transition are in danger of being reversed by the second, and that our social, political and economic structures are not aligned to support the families in which we now live. We explore this possibility through analysis of family structures in a context of increasingly stretched welfare systems, widening inequalities and ageing populations. This context raises questions: Whether our population can continue to replace itself given that families are having fewer children, later in life: our analysis indicates that, at a family level, our increased longevity does not offset the decline in fertility rates. How to address the additional strain on our underfunded social, health and state pension systems, with more older people living alone, and a greater need within today’s smaller, older families for external support. How to address the likelihood that the tendency towards older families leads to each family’s main carer being responsible for multiple generations at once. Whether the additional burdens of juggling work and caring responsibilities will have a further stagnating effect on the wider economy. How to address the inheritance gap that delays the passing of wealth to the next generation as we all live longer. We believe that society must adjust itself to the new reality, by taking steps to move into a third transition. This will require action to enable more of us to spend our additional years in good health and in decent housing, with the capacity to undertake paid work, to care for our families, or to do both. We suggest that as part of this transition there may be a need for: Reformulated personal financial services to address the current gaps in provision at the family level. A new approach to social protection that focuses on families as well as individuals. Our analysis shows that the changes occurring during the second transition have put society on a demographic escalator to economic stagnation, and that matters can only get worse. We believe it will take conscious action by the UK’s decision-makers to make a third transition reality and step off the escalator

Using queuing theory to analyse completion times in accident and emergency departments in the light of the government 4-hour target

This paper uses a queuing model to evaluate completion times in accident and emergency (A&E) departments in the light of the Government target of completing and discharging 98% of patients inside 4 hours. It illustrates how flows though an A&E can be very accurately represented as a queuing process, how the outputs of a queuing model can be used to visualise and interpret the 4-hour hours Government target in a simple way and how queuing models can be used to assess the practical achievability of A&E targets in the future. The paper finds that A&E targets have resulted in significant improvements in completion times and thus deal with a major source of complaint by users of the National Health Service. It finds that whilst some of this improvement is attributable to better management, some is also due to the way some patients in A&E are designated and therefore counted. It finds for example that the current target would not have been possible without some form of patient re-designation or re-labelling taking place. Further it finds that the current target is so demanding that the integrity of reported performance is open to question and that a different approach is needed. Related incentives and demand management issues resulting from this Government target are also briefly discussed

Gender convergence in human survival and the postponement of death

It has been a long accepted demographic maxim that females outlive males. Using data for England and Wales, we show that life expectancy at age 30 is converging and continuation of this long-term trend suggests it could reach parity in 2030. Key among the reasons identified for the narrowing of the gap are differences in smoking prevalence between males and females which have narrowed considerably. Using data from 30 comparator countries gender differences in smoking prevalence are found to explain over 75% of the variance in the life expectancy gap, but other factors such as female emancipation and better health care are also considered. The paper presents a model which considers differences in male and female longevity in greater detail using novel methods for analysing life tables. It considers the ages from which death is being postponed to the ages at which people now die; the relative speed at which these changes are taking place between genders; how the changes observed are affecting survival prospects at different ages up to 2030. It finds that as life expectancy continues to rise there is evidence for convergence in the oldest ages to which either gender will live

In sickness and in Health? Dynamics of health and cohabitation in the United Kingdom

The purpose of this paper is to analyse the dynamics of cohabitation and functional impairments among older people. Our research has three main aims. Firstly, we want to analyse the effects of cohabitation on disability. Secondly, we want to study time trends in disability and cohabitation jointly to explore relationships between the two. Thirdly, we examine socioeconomic differences -- as captured by educational attainment -- in disability. These issues are of great interest from several points of view. Firstly, they address an emerging theoretical debate concerning the effects of cohabitation on health and contribute to a sparse empirical literature on the topic. Secondly, our findings are highly policy relevant. Concerning long-term care for older people, for example, cohabitation is of double importance: firstly, since people who cohabit tend to be healthier, and secondly, since a partner is the typical provider of informal care. In a time where family structures among the old are likely to change (due to changes in life expectancy and divorce rates), our research will be useful for planning purposes. Finally, the model can be used to simulate populations of certain characteristics. Hence, it can be used to derive insurance premiums in order to reduce the problem of selection effects in the market for long-term care insurance. Using the British Household Panel Survey dataset, we apply panel data and simulation techniques to exploit the longitudinal characteristic of the panel. We estimate the two dependent variables -- cohabitation status and disability -- jointly, and allow for time trends, age effects and unobserved heterogeneity. We find that there are systematic differences between single and cohabiting people so that a cross sectional analysis would overestimate the causal relationship; nevertheless, cohabitation has a strong and positive effect on health. Furthermore, we find that bereavement of a partner has a significant negative impact on health

Investigating the market potential for customised long term care insurance products

Previous economic research into long-term care (LTC) has mainly been focussed on one issue: the reasons why the LTC insurance market has not been successful. In this contribution, we analyse the prospects for a new type of insurance policy, which offers a top-up on the resources already available to the individual. We abstract from most problems inherent in LTC insurance markets and derive premium rates for various types of insurance policies. Generally, we find that the top-up option reduces premium rates considerably, to the point where it might be expected that a substantial number of people would take up policies, were they available

The decomposition of disease and disability life expectancies in England 1992-2004

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