The economic consequences for households of co-payments in long term care. Evidence from Spain after the 2012 reform

presenter(s) Isabel Pardo-García | University of Castilla-La Mancha


Objective: The objective of this paper is to estimate the contribution of users to the financing of long term care after the passing of the 2012 Dependence Law and to analyze the economic consequences that this modification has had on Spanish households in terms of impoverishment and catastrophism. Data and methods: The data base which was used is the 2008 Disabilities, Personal Autonomy and Dependency Situations Survey since it provides information on the types and degrees of disability, impairments and limitations as well as information on income and the tax revenues of people with disabilities. First, people with disabilities were classified according to the different types and degrees of dependency defined by the Dependence Law (DL) and according to the level of support required to carry out basic personal and instrumental activities of daily living which are considered in the rating scale of the DL. The copayment was estimated from the income of dependents and the distribution of social benefits which were made according to each type and degree and regional community. The calculation of the copayment for each type of payment was made in line with its legislative definition. To analyze whether the copayment had contributed to the impoverishment of households, the methodology proposed by Wagstaff and Van Doordlaer (2003) was followed and poor households were compared before and after copayment. At the same time the extent to which copayment had led to catastrophism was analyzed using different thresholds. Results: The results show that following the 2012 reform, the contribution of dependent people to the financing of the services they receive exceeds by 50% the costs of these services. In terms of revenue, this contribution entails a third of their revenue for moderate dependency (Grade I) 32.35%, almost a half for severe dependency (Grade II) 45.38%, and almost two thirds for major dependency (Grade III) 65.89%. This expenditure entails an increase in the number of households that live below the poverty line by 17.86% for Grade I, by 21.10% for Grade II and by 24.40% for Grade III. The average monthly poverty gap for new poor households as a consequence of copayment ascends to 326.9€; while households which were already poor, have seen this gap increased by an average of 444.20€. In terms of catastrophism, more than 80% of households dedicate more than 10% of their income to dependency copayments. Households which dedicate more than 40% of their income to financing dependency on care allowances represent 29.77%, 56.00% and 71.39% for Grades I, II and III, respectively. Policy implications: The 2012 reform has increased the financial commitment of Spanish households to financing long term care. This distribution is unequal according to degrees of dependence, where Grade III is the one which has increased the most. In this sense, the authorities should think about the reduction of copayment for the poorest households and/or according to degrees, since demand is more inelastic the greater the level of dependency is.

date 7 September 2016

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