Financing institutional long-term care for the elderly in China: a policy evaluation of new models

A rapid ageing population coupled with changes in family structure has brought about profound implications to social policy in China. Although the past decade has seen a steady increase in public funding to long-term care (LTC), the narrow financing base and vast population have created significant unmet demand, calling for reforms in financing. This paper focuses on the financing of institutional LTC care by examining new models that have emerged from local policy experiments against two policy goals: equity and efficiency. Three emerging models are explored: Social Health Insurance (SHI) in Shanghai, LTC Nursing Insurance (LTCNI) in Qingdao and a means-tested model in Nanjing. A focused systematic narrative review of academic and grey literature is conducted to identify and assess these models, supplemented with qualitative interviews with government officials from relevant departments, care home staff and service users. This paper argues that, although SHI appears to be a convenient solution to fund LTC, this model has led to systematic bias in affordable access among participants of different insurance schemes, and has created a powerful incentive for the over-provision of unnecessary services. The means-tested method has been remarkably constrained by narrow eligibility and insufficiency of funding resources. The LTCNI model is by far the most desirable policy option among the three studied here, but the narrow definition of eligibility has substantively excluded a large proportion of elders in need from access to care, which needs to be addressed in future reforms. This paper proposes three lines of LTC financing reforms for policy-makers: (1) the establishment of a prepaid financing mechanism pooled specifically for LTC costs; (2) the incorporation of more stringent eligibility rules and needs assessment; and (3) reforming the dominant fee-for-service methods in paying LTC service providers.