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The Future Co$t
of Long-Term
Care in Canada
Bonnie-Jeanne MacDonald, PhD, FSA, ACIA, National Institute on Ageing, Ryerson University
Michael Wolfson, PhD, FCAHS, University of Ottawa
John P. Hirdes, PhD, FCAHS, School of Public Health and Health Systems, University of Waterloo
$
October 2019Table of
Contents
02 04
About the National Institute on Acknowledgments
Ageing and Future of Long-Term
Care Series
05 10
Executive Background
Summary
16 21
Analytical Methods Projected Costs of
Long-Term Care
32 35
Strengths, Limitations Conclusion
and Future Research
36 38
Endnotes ReferencesThe Future Co$t of Long-Term Care in Canada
National Institute on Ageing
Policy Series on Long-Term
Care in Canada
Suggested Citation:
MacDonald, B.J., Wolfson, M., and Hirdes,
J. (2019). The Future Co$t of Long-Term
Care in Canada. National Institute on
Ageing, Ryerson University.
This paper builds on Statistics Canada’s
population microsimulation model to
project the future costs of long-term care
in Canada to the public purse, as well as
the unpaid care provided to Canadian
seniors by their families. We quantify the
economic costs and personal impacts that
Canada can expect by following its current
path. This information is intended to
promote informed and targeted
discussion among governments,
long-term care providers and individual
Canadians on this pressing national
concern.
Mailing Address:
National Institute on Ageing
Ted Rogers School of Management
350 Victoria St.
Toronto, Ontario
M5B 2K3
CanadaThe Future Co$t of Long-Term Care in Canada
About the National Institute on Ageing
and the Future of Long-Term Care
Series
The National Institute on Ageing (NIA) is a stakeholder organizations from across
public policy and research centre based at Canada and first published in 2014. The
Ryerson University in Toronto. The NIA is NSS outlines four pillars that guide the
dedicated to enhancing successful ageing NIA's work to advance knowledge and
across the life course. It is unique in its inform policies through evidence-based
mandate to consider ageing issues from a research around ageing in Canada:
broad range of perspectives, including Independent, Productive and Engaged
those of financial, physical, psychological, Citizens; Healthy and Active Lives; Care
and social well-being. Closer to Home; and Support for
Caregivers.
The NIA is focused on leading
cross-disciplinary, evidence-based, and The Future Co$t of Long-Term Care in
actionable research to provide a blueprint Canada is the second paper in the NIA's
for better public policy and practices Policy Series on The Future of Long-Term
needed to address the multiple Care in Canada. The first report, Enabling
challenges and opportunities presented the Future Provision of Long-Term Care in
by Canada’s ageing population. The NIA is Canada, by Dr. Samir Sinha can be found
committed to providing national at www.nia-ryerson.ca.
leadership and public education to
productively and collaboratively work The NIA’s 2019 Policy Series on the Future
with all levels of government, private and of Long-Term Care has been sponsored by
public sector partners, academic and produced in collaboration with
institutions, ageing-related organizations, AdvantAge Ontario, the Canadian
and Canadians. Institute of Actuaries (CIA), the Canadian
Medical Association (CMA), Essity, and
The NIA further serves as the academic Home Instead Senior Care.
home for the National Seniors Strategy
(NSS), an evolving evidence-based policy
document co-authored by a group of
leading researchers, policy experts and
About the National Institute on Ageing and its Future of Long-Term Care Series 02The Future Co$t of Long-Term Care in Canada
NIA Policy
Series Sponsors
AdvantAge Ontario Since
has been the trusted 1867, the
voice for senior care Canadian Medical Association has been
for close to 100 years. the national voice of Canada’s medical
It represents profession. The CMA works with
community-based, not-for-profit physicians, residents and medical
organizations dedicated to supporting the students on issues that matter to the
best possible aging experience. It profession and the health of Canadians.
represents not-for profit, charitable, and The CMA advocates for policy and
municipal long-term care homes, seniors’ programs that drive meaningful change
housing, and seniors’ community services. for physicians and their patients.
Essity is a leading
global hygiene &
The Canadian Institute of Actuaries (CIA) health company dedicated to improving
is the national, bilingual organization and well-being through products and
voice of the actuarial profession in solutions. Essentials for everyday life.
Canada. Our members are dedicated to Essity’s sustainable business model
providing actuarial services and advice of creates value for people and nature. Essity
the highest quality. The Institute holds sells in approximately 150 countries under
the duty of the profession to the public leading global brands TENA, Jobst,
above the needs of the profession and Leukoplast, Tork, and others.
its members.
Home Instead
Senior Care
was founded in
1994 to
respond to a need for person-centred,
relationship-based senior care. Today,
with over 1,100 operations in a dozen
countries around the world, including
Canada, Home Instead is relied upon to
provide an estimated 75 million hours of
service per year.
About the National Institute on Ageing and its Future of Long-Term Care Series 03The Future Co$t of Long-Term Care in Canada
Acknowledgements
The underlying modeling for this study was Many thanks to Kevin Moore, whose
made possible by a large-scale continuing insight and support was
pan-Canadian long-term care project, critical to developing the necessary code
funded by the Canadian Institute of Health in the LifePaths modeling tool to carry out
Research (CIHR) Partnerships for Health the analyses of this project. The authors
System Improvement (PHSI) 2016–2017: alone remain responsible for any errors or
“Long term worries: Testing new policy omissions.
options for financing long term care.” Under
Research Council
the leadership of Colleen Flood, FCAH FRSC Canadian Institute of Actuaries
(Professor in the Faculty of Law at the
University of Ottawa and University Research Lee Anne Davies, PhD, MBA
CEO, Agenomics
Chair in Health Law and Policy, as well as
Director of the University of Ottawa Centre Colleen Flood, FCAH FRSC
for Health Law, Policy and Ethics), this Faculty of Law, University of Ottawa
extensive initiative brings together
Alyssa Hodder
provincial health officials and Senior Communications Consultant,
interdisciplinary researchers across Canada – Eckler Ltd.
as well as from Germany and the
Dee-Jay King, MBA
Netherlands – to investigate long-term care
Executive Director, Health Economics and
policy reforms from legal and quantitative Funding, Alberta Health
analysis perspectives.
Michael Nicin, MA, MPP
Executive Director, NIA
This report was written by Bonnie-Jeanne
MacDonald, PhD, FSA, ACIA, National Dr. Samir Sinha, MD, DPhil, FRCPC
Institute on Ageing, Ryerson University; Director of Health Policy Research, NIA;
Director of Geriatrics, Sinai Health System
Michael Wolfson, PhD, FCAHS, University of
and University Health Network
Ottawa; and John Hirdes, PhD, FCAHS,
School of Public Health and Health Systems, Arthur Sweetman, PhD,
University of Waterloo. Department of Economics, McMaster
University
The authors gratefully acknowledge the Ellen Whelan, FSA, FCIA
following contributors, as well as several Principal, Eckler Ltd.
anonymous reviewers, for their valuable
Joan Yudelson, VP Professional Practice,
feedback that greatly improved the paper. FP Canada, Executive Director, FP Canada
Research Foundation
Acknowledgements 04The Future Co$t of Long-Term Care in Canada
Executive
Summary
As attention turns to Canada’s baby comparison with concerns about its future
boomers moving into retirement, public sustainability. Over the next 30 years, the
policy debates focusing on income number of Canadians over age 85 is
security and primary healthcare – and the expected to more than triple. Along with
corresponding Canada and Quebec this inevitable increase in the number of
Pension Plans (CPP/QPP), Old Age Security older people, Canada is also facing lower
(OAS) and medicare programs – neglect a fertility rates and socio-economic shifts
significant strain that will emerge as a that will decrease the availability of
result of Canada’s ageing population: support from family members acting as
providing long-term care to seniors. unpaid caregivers – a primary care source
for Canada’s older population today. If
The National Institute on Ageing (NIA) current health and social care policies and
broadly defines “long-term care” as a practices continue, these factors point to
range of preventive and responsive care a future in which there will be significant
and supports, primarily for older adults, increases in the amount of support
provided by not-for-profit and for-profit needed from family caregivers and
providers or unpaid caregivers in settings substantially larger costs to the public
that are not location-specific, including purse.
designated buildings like nursing homes
or in-home and community-based
settings (NIA, 2019). These services are Purpose
delivered by the provinces and territories
through a mixture of publicly-funded The objective of this paper is to better
programs, which seniors can supplement understand the challenges Canada faces
with privately-paid services, and care over the next three decades in providing
provided by close relatives and friends long-term care – both from a public cost
serving as unpaid caregivers. 1 perspective, and from the personal lens of
older Canadians and their families –
There are legitimate concerns around the thereby promoting informed and targeted
quality and delivery of long-term care in discussion on how best to move forward.
Canada today – but they pale in
Executive Summary 05The Future Co$t of Long-Term Care in Canada
Our analysis is made possible by Looking out to 2050, we first capture
extending Statistics Canada’s LifePaths long-term care costs from a public policy
Model – a longstanding, large-scale, lens, in terms of the publicly-funded paid
policy-oriented micro-simulation care provided in nursing homes and
modeling system of the Canadian within the homes of seniors, according to
population. Using a micro-analytic current delivery trends. We also examine
approach, we project the future Canadian the personal cost of care for seniors in
population by modeling one person at a terms of the unpaid care hours provided
time, and tracking all relevant information by personal support networks – most
as they make their way through life. We often, spouses and adult children. This
further draw on Canadian interRAI home analysis does not include day services
care assessment data – as well as a (e.g. “community-based” long-term care),
number of Statistics Canada resources or seniors who end up in hospital beds
(surveys, population census, and with no other place to go.
demographic projections) – to describe
the home care needs for Canada’s A note of caution: Projections are a critical
projected future population. part of policy analysis, but they are not
predictions. The results of this paper are
By building on this population and best considered as a reasonable view of
socio-economic projection tool while the future, based on what is known today.
Projections depend on a range of
consolidating various data sources,
assumptions. To the best of our abilities,
this paper brings together both the
our projection assumptions reflect
public and personal costs of care for
consensus views. They do not anticipate
seniors, recognizing that – whether various potential policy changes,
paid from the public purse or provided exceptional medical advances or changes
for “free” through the willingness of in disease treatments that may arise in the
family members – these services have future, resulting in more fundamental
value, and require time, energy and shifts in the Canadian population’s health
resources. With changes in family or age structure.
structures and the growing population
of older Canadians, it is important to
consider the entire “cost” so we can
appreciate the full magnitude of the
challenges we are facing.
Executive Summary 06The Future Co$t of Long-Term Care in Canada
Key Findings Putting it all together: Family
members (unpaid caregivers) will need
Between 2019 and 2050, our baseline to increase their efforts by 40% - and
projection indicates the cost of public
some much more than others - to keep
care in nursing homes and private homes
up with care needs, on account of
will more than triple, growing from $22
fewer children per senior. Unpaid
billion to $71 billion annually (in constant
2019 dollars). These costs will roughly
caregiving will increasingly become
double relative to the macro economy, the reality of many more Canadians,
increasing from 9% of personal income as the number of seniors needing
tax in 2019 to 19% by 2050, and from 2% support more than doubles (growing
to 4.3% of aggregate wages. ( We have not by 120% by 2050).
projected GDP, so it is not possible to
show these costs as a percentage of GDP). The Bigger Picture
But sizable increased costs for the public From a public policy perspective, the
purse are only part of the picture. projected increase in government
Pressure on unpaid care provided by expenditures related to long-term care is
families will also increase as the baby concerning. The greater challenge,
boomers get older and family sizes however, could well be increased pressure
decline, largely due to reductions in on Canadians who are providing unpaid
Canadian fertility rates. Our baseline care. The emotional, physical and financial
projection shows that, by 2050, there will stress reported by unpaid caregivers
be approximately 120% more older adults carries a cost – one that is often poorly
using home care support. Over this same understood until it’s faced directly.
period, our projections indicate there will Numerous studies have shown that
be approximately 30% fewer close family unpaid caregiving is already a strain on
members – namely, spouses and adult Canadian families (NIA, 2018), and our
children - who would potentially be projections show the pressures will
available to provide unpaid care. increase.
Executive Summary 07The Future Co$t of Long-Term Care in Canada
What are the implications if these qualifications – may well further drive up
increased levels of unpaid care aren’t the baseline cost projections.
sustainable? If all unpaid hours of care
inside the home were instead paid Continued emphasis on the valuable role
publicly, this would add $27 billion to of unpaid caregivers is not only important
public sector costs by 2050. for maintaining a comfortable
environment consistent with the
At the extreme, rather than increasing preferences of older Canadians, but also
from $22 billion to $71 billion for controlling costs to the public purse.
between 2019 and 2050, as our It’s an issue we cannot afford to ignore.
baseline projection shows, the cost
Overall
would actually grow from $71 billion
in 2050 to $98 billion! Economy wide,
There is a pressing need for deeper
these costs would represent over one research, as well as more citizen, policy
quarter of all projected personal and decision-maker engagement on
income tax revenue and 6% of alternative approaches and financing
aggregate wages, nearly matching models capable of achieving sustainable
OAS benefit expenditures. and adequate long-term care coverage for
Canada’s seniors.
And, in fact, these cost projections may be
conservative. Long-term care is a highly Looking at the cost for the public purse,
labour-intensive sector, generally as well as the unpaid personal roles of
comprising support workers whose jobs families, the sustainability of long-term
are low-paying, physically and care poses serious challenges. While there
emotionally exhausting, and rarely are sizable costs ahead for the public
structured for career advancement. These sector, the findings from this paper
roles are almost always filled by women, suggest that a major concern is the
and a substantial proportion are sustainability of unpaid care provision –
foreign-born. Given that there is already a without which there would be major
shortage of long-term care workers, impacts on public sector costs and/or a
additional demand for paid services significant increase in unmet care needs.
would put great upward pressures on the
wages of long-term care workers. These
and other factors – such as potential
demand for better training and
Executive Summary 08The Future Co$t of Long-Term Care in Canada
It is a complex challenge, with no simple Echoing the long-standing call of
solution. Most Canadians are likely to long-term care experts across Canada,
remain healthy well into older ages, but a proactive and concerted measures – as
minority will face care needs that could well as better data – are needed to guide
potentially be expensive and long-lasting. our efforts. Failure to act now risks leaving
Private savings will not be an adequate the state of long-term care to future
solution for most people. In Canada, generations, increasing the likelihood of
private long-term care insurance has not short-term reactive decisions that could
worked historically as intended and is ultimately be more expensive and
unlikely to work in the future. produce poorer outcomes.
This challenge suggests the need for a Baby boomers are strongly advised to
collective response from a public policy take a long, hard look at their own
lens. But, it also reinforces the individual
personal circumstances and plan
responsibility of Canadians to appreciate
ahead, to the extent that they have the
and plan for their (potentially long) lives
health and financial means to better
in older age – including expectations
around the cost of care and family
protect their future and possibly more
support. vulnerable selves. At the public policy
level, effective reforms require long
There is little more than a decade before lead times, so developing long-term
the first cohorts of baby boomers reach care options should be an immediate
the ages when they will begin to need and high national priority.
(and use) higher levels of care. As
pressure on public long-term care services
mounts, there will likely also be spillover
to other, more expensive, publicly-funded
health services, such as the already
problematic “alternative level of care”
beds in hospitals.
Executive Summary 09The Future Co$t of Long-Term Care in Canada
1. Background
1.1 Gaps in Long-Term Care in Canada vary considerably across Canada in their
levels of funding and range of services.
Developing a disabling health condition is These services are often supplemented
a primary financial concern when ageing. 2 with privately-paid services – either from
But it is difficult for individuals to plan out-of-pocket, long-term insurance plans
financially for their own long-term care or workplace health plans – and even
needs, with the unknown, potentially high more often, with unpaid care from family
associated costs that can persist (typically members. This has led to a fragmented
until death). In a 2012 survey, the patchwork of services where cost, access
Canadian Life and Health Insurance and provision of care varies across
Association (CLHIA) found that three provinces and territories. Long-term care
quarters of Canadians admit to having no in Canada is best characterized as a
financial plan in place to pay for “targeted,” means-tested collection of
long-term care if they need it (CLHIA, programs and regulations.
2014).
Many Canadians are surprised to uncover
the gaps within the current
publicly-funded long-term care programs
when they, or their family members,
require care. Being primarily under
provincial and territorial jurisdiction,
public long-term care services
NIA definition of Long-Term Care Long-term care is the range of preventive
and responsive care and supports,
primarily for older adults, that may include assistance with Activities of Daily
Living (ADLs) and Instrumental Activities of Daily Living (IADLs) provided by
either not-for-profit and for-profit providers, or unpaid caregivers in settings
that are not location specific and thus include designated buildings, or in
home and community-based settings (Sinha, 2019, p. 7).
Background 10The Future Co$t of Long-Term Care in Canada
In the European Union’s (EU) “Ageing A first major source of doubt regarding
Report” – an examination of government the future sustainability of long-term care
expenditures related to population ageing is the age profile of baby boomers who
conducted every three years – the EU will begin turning age 75 by 2020,
Directorate General for Economic and culminating in a tripling of the number of
Financial Affairs wrote: Canadians over age 85 by 2050. 3 In the
absence of other health care policy
Due to historical and organizational changes, population ageing will increase
reasons, public financing of LTC tends to be aggregate health care costs. Other
highly fragmented, with different associated factors – such as the increased
government authorities being in charge of intensification of medical care for
different strands. This leads to great age-related health conditions and
difficulties in ascertaining exactly such heightened public expectations for
basic facts as how much is spent on LTC, advanced medical technologies – are
how many dependents are covered by LTC expected to substantially magnify the
and what amount of LTC benefits is impact of population ageing (Kingsley,
provided to each of them (EU 2018, p.132). 2015).
Clearly, Canada is not unique in its A second major source of concern is the
complex, fragmented collection of anticipated decline in availability of
publicly-funded long-term care services unpaid caregivers. Family has traditionally
and programs. acted as a form of long-term care
insurance for older Canadians, providing
1.2 Historical Background and Today’s much-needed care when their health
Challenges deteriorates to the point where they can
no longer function independently. Care
Canada’s universal health care was supplied at home currently exceeds care
adopted in the 1960s when the provided by the health care sector by a
population was young and the major ratio of over three to one, at little or no
costs were doctors and hospitals, with the direct cost to the public purse. 4 The
focus narrowly on acute care. But with immense economic value of unpaid
population ageing, more attention is caregivers in offsetting public costs has
increasingly being paid to care for chronic been well understood both in Canada and
debilitating conditions. beyond (NIA, 2018; AARP, 2015).
Background 11The Future Co$t of Long-Term Care in Canada
As outlined in the following section, an Privately-paid formal care will continue to
increase in the need for paid services is provide a supplement for long-term care,
inevitable, with the growing pressures and Canadians are advised to plan
being put on unpaid care by trends such financially for their later years. However,
as smaller families, higher divorce rates, from a public policy lens, most Canadians
greater participation of women in the will not have the necessary savings to
workforce, reduced co-residency of older cover the full costs of long-term care from
Canadians with their adult children, and their own pockets – at least, not for very
greater expectations on the government long. For example, a third of Canadian
to provide care services. Lack of proximity seniors receive the Guaranteed Income
of adult children to ageing parents due to Supplement (GIS), which is targeted for
a more geographically mobile population those with low incomes. Further, nearly
makes unpaid care and support half of Canadian families are nearing
impractical for many Canadians 5 – retirement without any workplace
particularly those ageing in rural settings, pension plan and with a mere $3,000 in
given the increased urbanization of median retirement savings (Shillington,
younger Canadians. 2016).
All this means Canada’s long-term care This is why public long-term care
sector is facing the triple challenge of a programs are so important. Not only do
greater number of seniors needing care, a they protect more vulnerable seniors, but
decline in availability of unpaid long-term they also provide a means to reduce this
care services (hence a higher reliance on financial risk for everyone. The costs
paid services) 6 and a shortage of qualified associated with long-term care are
long-term care workers in Canada unpredictable, relatively uncommon and,
(Colombo et al., 2011; Scheil-Adlung, potentially, large and ongoing. The
2015). distribution of these costs associated with
long-term care is highly skewed: most
Privately-paid solutions currently play a households have low or no long-term care
minor role for most Canadians needing needs, either due to lack of critical need
long-term care and are unlikely to fill the or exclusive reliance on unpaid care, while
entire gap. In Ontario, for example, these a minority face significant ongoing and
services currently make up less than 8% of growing costs relative to their income. In
delivered home care hours for seniors the absence of publicly-funded long-term
receiving paid long-term care. 7 care programs, most individuals would
Background 12The Future Co$t of Long-Term Care in Canada
end up saving too much, while those with expect to be, living independently or with
the greatest needs would ultimately find only mild disabilities (represented by the
they had saved too little. 8 solid blue bars closer to the centres of the
pyramids). However, when burdened by
With the expected ageing of the serious chronic disease and disability, the
population, the numbers of individuals full costs of appropriate care in a nursing
living with more severe disabilities will home (excluding room and board) is
grow but will remain a minority. The approximately $175/day – well beyond
population pyramids in Figure 1 show that the ability of most Canadians to pay for
large proportions of Canada’s seniors – out of pocket.
even into their 90s – are now, and can
Figure 1 – Seniors’ Population Pyramids
by Disability Severity, 2020 and 2050
95–max
90–95
Females 2020
Males 2020
85–90
80–85
75–80
70–75
65–70
500,000 500,000 1,000,000 1,500,000
1,500,000 1,000,000
95–max
Males 2050 Females 2050
90–95
85–90
80–85
75–80
70–75
65–70
1,500,000 1,000,000 500,000 500,000 1,000,000 1,500,000
None Mild Moderate Severe Nursing Home
Source: Authors’ LifePaths projections (see section “Analytical Methods” for details).
Background 13The Future Co$t of Long-Term Care in Canada
Rather than paying for long-term care What’s more, this option is increasingly
services directly out of pocket when unavailable, as Canadian insurers are
needed, Canadians have had the option to simply getting out of the business of
purchase private long-term care offering long-term care insurance. 10 The
insurance. Theoretically, this could be an enormous financial losses and continuing
effective vehicle to pool, and therefore exit of the major insurance players from
mitigate, this potentially costly risk. But in this market “underscore how policies
practice, private long-term care insurance meant to pay for nursing homes and
has not worked well in Canada. Few prescription costs have become one of
people purchase long-term care insurance the most unpredictable segments of the
– a phenomenon known by researchers as insurance industry” (Shumsky and Minaya,
the “long-term care insurance puzzle.” 9 2018).
One possibility is that Canadians do not
buy long-term care insurance because of a For these reasons – as well as widespread
false expectation that this care, like concerns about the sustainability of
physician and hospital care, is fully public long-term care and future unpaid
funded and provided by government. But support – there are calls for more
a more likely explanation is that since integrated funding solutions in which the
purchasing this kind of insurance is risks associated with long-term care costs
voluntary, there is a tendency for only are shared, and therefore mitigated,
those people who believe they will need it across Canadians [for discussion, see CIHR
to buy it. Known as “moral hazard” or (2013); Adams and Vanin (2016) 11]. This is
“adverse selection”, this phenomenon not only a consistent theme from health
drives up the price for insurers, as they policy advocates in Canada, but also
must cover higher costs and claim among experts in less likely corners. For
frequencies – which, in turn, makes the example, in an American research survey
premium cost too high for most of the report sponsored by the Society of
general population. Actuaries, 45 out of 50 long-term care
expert panelists (including insurance
Owing to its low uptake in Canada, industry executives) agreed that the U.S.
voluntary private long-term care government needs to take an active role
insurance is not sufficient to fill the gap. in developing and implementing
long-term care financing solutions
(O’Leary, 2014).
Background 14The Future Co$t of Long-Term Care in Canada
Other countries with long-term care Better coordination is important not only
pressures similar to Canada’s, such as for controlling costs, but also for
Germany and Japan, have established improving the quality of, and access to,
various forms of national long-term care care – another major issue, considering
insurance, avoiding the problem of the already high volume of unmet needs
adverse selection. 12 Whether long-term of Canadian seniors (estimated in 2018 to
care continues to be publicly-funded in be approximately one-third of all seniors)
Canada from general taxation or through (Gilmour, 2018).
a new social insurance program, some
additional form of revenue will be Overall, the provision of long-term care in
needed. These choices will determine how Canada is facing a range of issues and
much the baby boomers or succeeding challenges that will only be magnified
generations will have to pay. with the continued ageing of Canada’s
population, combined with reductions in
In addition to funding the costs, availability of unpaid caregiver support.
controlling the costs has been a focus
over recent years. A number of best
practices for improving health and
containing costs have been identified,
such as those reviewed in a report on
senior care by the Health Council of
Canada (Health Council of Canada, 2012).
Many best practices explored in that
study focus on addressing the lack of
integration across the health care
continuum for individuals with long-term
care needs, including requiring much
better coordination among hospitals,
primary care and long-term care.
Background 15The Future Co$t of Long-Term Care in Canada
2. Analytical Methods
Public policy concern regarding long-term population by age group and sex but also
care needs in coming decades is driven on the proportions with disabilities of
mainly by population projections showing varying levels of severity, the types of
a substantial increase in the population of long-term care needs, the extent to which
Canadian seniors, both in overall numbers these needs can be met from various
and relative to the size of the non-senior sources (including unpaid care from
population. This increase will most likely relatives), the programs and services
be accompanied by a corresponding offered, and the costs of those services.
increase in those who need long-term Further, these factors – which are complex
care. and likely to unfold differently in the
future than they have in the past – will
A common method for projecting national interact.
costs is to take a “macro” approach, which
uses broad aggregate figures representing These considerations point to the need
population groups and general averages. for careful and sufficiently detailed
For example, in the case of long-term projection modeling that can adequately
care, macro approaches may build on capture the dynamic nature of change
projections of the population by age Canada will experience in the coming
group and then apply the current decades, as well as the interaction of the
proportions who are receiving care in relevant factors for a diverse population
private homes or institutions by age that will also change over time. In other
group and sex. The projected population words, understanding the aggregate
is then multiplied by these current implications of all these moving pieces
proportions to produce the desired requires a more richly detailed and
projection. disaggregated methodology than the
usual approaches.
But these averaged results paint a picture
of the future that is too simplistic, offering Instead of the macro approach, therefore,
limited scope in understanding the we have taken a micro-analytic approach.
dynamics and ways to improve outcomes. With this approach, the projections are
The numbers of Canadians needing based on the life course trajectories of a
long-term care in the future will depend large sample of individuals representing
not only on the size of the senior the entire Canadian population – in other
Analytical Methods 16The Future Co$t of Long-Term Care in Canada
words, projecting the future Canadian LifePaths is a long-standing model for
population by modeling one person at a public policy analysis – particularly in
time, and tracking all relevant information relation to Canada’s retirement income
as they make their way through life. systems. 14 We have built on its capacities
to simulate individuals’ disability onset
To do this, we have drawn on the very and progression, and then added
detailed Statistics Canada LifePaths utilization of publicly-funded and unpaid
model. 13 LifePaths is a microsimulation home care and nursing home services,
model, operating at the level of conditional on disability status. Owing to
individuals rather than groups of people generally poor quality data on long-term
or aggregates. Millions of individuals have care in Canada, particularly on the cost
their complete life paths or biographies and funding side, we have triangulated
synthesized via simulation. These our micro “bottom-up” approach with the
synthetic individuals, by construction, limited macro “top-down” information
collectively form a representative sample available to produce parameters for the
of the Canadian population. Individually, fairly detailed modules we have added to
each biography is intended to be as LifePaths to simulate and project
realistic as possible – at each point in time long-term care utilization and costs in
over the projection period (to enable Canada over the next three decades.
valid cross-sectional population results),
as well as at the individual level over time
(i.e., longitudinally). The model captures
this realism by building on the wide range
of data available at Statistics Canada.
Microsimulation is significantly more
complex and detailed than a macro
approach, enabling more realistic
projections when various factors change
and interact, such as disability severity in
relation to long-term care utilization. With
microsimulation, we can also start asking
and analyzing the answers to questions
around the impact of trends or public
policy reforms.
Analytical Methods 17The Future Co$t of Long-Term Care in Canada
History of LifePaths
Imagine being able to track the fortunes of every Canadian over their lifetime. Some will die
young and some will live to 100. Some will have high-paying jobs and some will have sporadic
employment. Some will save regularly for retirement or participate in workplace pension plans
and some will not. This is essentially what LifePaths does: track a representative sample of all
Canadians in order to understand their past and project where they will be at a future date.
Developed by Statistics Canada over 25 years, LifePaths brings together Statistics Canada’s vast
amount of data to shed light on the socio-economic experiences of Canadians. This
microsimulation tool has to make some simplifying assumptions, especially where data are not
available. Still, the end result is a powerful projection tool.
Adapted from Vettese and MacDonald (2016, p. 6)
For 25 years, Canada invested some of its But in the budget climate after 2010,
best resources in a large-scale, Statistics Canada discontinued funding
policy-oriented population for LifePaths and the model was archived,
microsimulation model: Statistics Canada’s though it is still available to interested
LifePaths. Developed by some of the parties
world’s best microsimulation modeling
experts, LifePaths has enabled a diverse Microsimulation population models are
and growing number of analysts to test considered the gold standard for
“what-if ” scenarios based on actual understanding population trends and
projected “life paths” for large informing public policies. 15 For the
representative samples of current and purpose of this project, we have built on
future Canadian individuals and families, LifePaths’ capacities to simulate
providing a comprehensive, integrated individuals’ disability onset and
perspective on the entire Canadian progression, and then added, conditional
population. on disability status, utilization of
publicly-funded and unpaid home care
Over the years, LifePaths has been used to and nursing home services.
provide critical support and analysis on a
diverse range of Canadian public policy The federal Department of Employment
issues – such as retirement income and Skills Development Canada, Canada
security, taxation, financial markets, Ministry, in collaboration with Statistics
disability and caregivers, divorce and Canada, has recently provided a
parenthood, social indicators, multi-year contract and earmarked
unemployment insurance, immigration funding for the development of a
and student loans. successor to LifePaths. However, it will be
some years until this new model becomes
available.
Analytical Methods 18The Future Co$t of Long-Term Care in Canada
Technical Snapshot of Long-term Care
Utilization and Cost Projection Modeling
This study uses a microanalytic single, detached or multiple units), those
approach, projecting the Canadian living in retirement residences (like
population over the next 30 years, and apartment buildings but with congregate
multiplying long-term care service dining, considered “collective dwellings”
utilization by unit costs. Unpaid care is by the population census) and nursing
valued at the replacement cost of care. homes.
In our population projection model, each To produce dwelling estimates for the
future Canadian senior’s disability status entire population, we have combined
(none, mild, moderate, and severe household disability prevalence estimates
disability) is imputed at each moment in with census data. Nursing homes are
time, based on detailed analysis of the designated buildings for individuals with
National Population Health Survey the most acute care needs. Within private
(Canada’s best longitudinal health survey home and retirement residences,
to date). Our baseline projection assumes long-term care takes the form of “home
Canadians’ lifespans increase in line with care” services – predominately provided
the middle range of Statistics Canada’s by personal support workers (PSWs). Both
official demographic projections. We formal (publicly-funded and
further assume that age-specific disability privately-paid) and unpaid hours of home
prevalence (disaggregated by mild / care are imputed based on the detailed
moderate / severe) will decline in a clinical interRAI data for home care
manner so that the ratio of utilization in Ontario (the most complete
health-adjusted life expectancy to overall data source on home care use) (Hirdes et
life expectancy remains generally al., 2011; Carpenter and Hirdes, 2013). To
constant (Bushnik et al., 2018). 16 capture “long-term” care (rather than
short-term care following hospital
Conditional on disability levels, age group procedures, for example), the study
and sex, utilization of long-term care has focuses on interRAI’s long-stay home care
been divided into three main areas: home clients: seniors expected to receive
care provided to individuals living in their services for 60 days or more. Note that
own private “home” (rented or owned estimates of unpaid home care hours were
therefore derived from
Analytical Methods 19The Future Co$t of Long-Term Care in Canada
only those seniors receiving publicly- jurisdictions. Based on publicly available
funded home care. Although not ideal, it sources, as well as consultations with
is reasonable to expect that Canadians health officials and long-term care
who require long periods of home care stakeholders across Canada, these are
from family will also attempt to receive plausible amounts on average (although
free public home care. (Further, aggregate actual unit costs vary considerably across
national-wide unpaid home care hours the country). They also align with recent
were consistent with data from the unpublished data (Sweetman, 2019) from
General Social Survey). For further details the Labour Force Survey, indicating that
on the interRAI data source, see Sinn the average salary of PSWs is about
(2019). $18/hour. These unit costs of care are
projected to keep pace with average
Long-term care costs per person at each wages in Canada.
period over his or her lifetime are
determined by multiplying the long-term Wages are assumed to grow at a real rate
care unit costs (per bed-day for nursing of 1.1% per annum, and inflation at 2%
homes, and per person-hour for home per annum, in line with the most recent
care) by the imputed long-term care CPP actuarial report to Parliament (2016a,
utilization (in physical units of nursing 2016b, 2017). While the Old Age Security
home days or formal/unpaid home care (OAS) pension and individual income tax
hours). The publicly-funded cost of care system legislation specify that their key
for nursing homes is set at $175/day. This values increase over time in line with the
figure is net of typical co-payments inflation rate (i.e., these major programs
generally intended to cover “hotel costs” are price indexed), historical evidence
(i.e., room and board), which are viewed finds there are periodic ad hoc changes
as covering regular costs of living that all that are tantamount to being indexed in
Canadians pay and, therefore, not part of line with average wages. As a result, we
the “cost of care”. Publicly-funded home have assumed they are wage indexed to
care costs, focusing on PSWs who provide 2050. Further technical details are
the vast majority of home care services available in a supplementary information
(Poss et al., 2008), are set at $30/hour ($18 report (forthcoming).
for salary, and $12 for overhead costs).
This hourly figure is intended to be a
representative net cost to the
government reflecting the home care
co-payments that exist in some
Analytical Methods 20The Future Co$t of Long-Term Care in Canada
3. Projected Costs of Long-term Care
This section presents the projected costs formal care within nursing homes, private
of long-term care for Canadian seniors – homes, and retirement residences.
both in the home (private home or
retirement residence) and in nursing Figure 2a provides our baseline projection
homes. for the dwelling status of seniors between
2019 and 2050. Figure 2b shows the
3.1 Public Government Costs corresponding aggregate amounts of
publicly-funded, privately-paid and
This study defines “public long-term care unpaid home care hours.
expenditures” as the cost of public
Figure 2a: Dwelling status of seniors across
Canada between 2019 and 2050
12
10
Number of Seniors (000,000)
8
Seniors in Nursing Homes
Seniors in Private Homes
6
Seniors in Retirement Residences
4
2
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
2047
2049
Source: Authors’ LifePaths projections.
Projected Costs of Long-term Care 21The Future Co$t of Long-Term Care in Canada
In 2019, approximately 93% of seniors are Overall, home care hours provided by all
in private homes, 2% are in retirement three sources are projected to more than
residences and 5% are in nursing homes. By double by 2050 – from approximately
2050, our projections show that there will 300,000 unpaid, 70,000 publicly-funded
be 75% more seniors, with 90% living in and 30,000 privately-paid hours in 2019,
private homes, 3% in retirement residences to approximately 645,0000 unpaid,
and 7% in nursing homes. While the 150,000 publicly-funded and 75,000
average age of the senior population is privately-paid hours in 2050.
increasing, the expected change in Publicly-funded home care hours amount
dwelling status is relatively small, due to to approximately 18% of all home care
the expectation that seniors will have hours, with privately-paid hours at 7%,
longer and healthier lives than previous and unpaid hours at 75%, relatively
cohorts (see “Analytical Methods” above). constant over the projection period
(Section 3.2 discusses the availability
Figure 2b: Total annual number of
publicly-funded, privately-paid, and unpaid home care hours
700
600
Annual Number of Hours (000,000)
500
400
Total Annual # of Unpaid Home Care Hours
300
Total Annual # of Publicly-Funded Home Care Hours
Total Annual # of Privately-Paid Home Care Hours
200
100
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
2047
2049
Source: Authors’ LifePaths projections.
Projected Costs of Long-term Care 22The Future Co$t of Long-Term Care in Canada
of family to continue supporting this level For the public to continue covering the
of unpaid care). same proportions of home care hours (by
age, sex, disability status and residence),
In Figure 3a, the public costs for nursing as well as the cost of care in nursing
home and publicly-funded home care are homes, the cost is projected to grow to
calculated to cost $22 billion in 2019, $71 billion by 2050 (in 2019 constant
which translates into 9% of total annual dollars) – equating to 19% of total
personal income tax revenue (federal + personal income tax revenue and 4.3% of
provincial) and 2.1% of aggregate wages. aggregate wages at that time (right axis).
Figure 3a: Public long-term care As shown in Figure 3b, most long-term
cost to maintain current coverage care costs are incurred on behalf of
80 Public Home Care Costs 20%
Public Nursing Home Costs
18%
70 Public Long-Term Care Cost as % of Total Wages
Public Long-Term Care Cost as % of 16%
Total Annual Costs ($000,000,000)
60 Provincial/Federal Personal Income
Tax Revenue 14%
50
12%
40 10%
8%
30
6%
20
4%
10
2%
0%
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
2047
2049
Notes: Publicly-funded long-term care cost to maintain current coverage (nursing home/home care aggregate
by the blue/green and left axis) and publicly-funded long-term care cost as percentage of (1) total personal
income tax revenue (provincial and federal; dotted purple line and right axis) and (2) total wages (dashed purple
line and right axis). 2019 constant dollars.
Source: Authors’ LifePaths projections
Projected Costs of Long-term Care 23The Future Co$t of Long-Term Care in Canada
women – 72% of total nursing home costs, structured for career advancement.
and 69% of home care costs. The Analysis by Scheil-Adlung (2015)
proportions are higher in nursing homes, concluded there are significant shortfalls
as these populations tend to be older and of formal long-term care workers in many
men have shorter life expectancies than countries, including Canada.
women. Still, both proportions are
expected to decline by several percentage The projected growth in demand for
points over the coming decades, given long-term care workers will mean a
the projected faster increase in life significant increase in the share of the
expectancy for men than for women. total Canadian workforce employed in the
long-term care sector. Targeted
Rising costs are clearly a concern, but the immigration could help to fill this gap, but
elephant in the room is, who will provide to attract and retain more people in this
these services? Long-term care is a line of work, wage rates would likely need
labour-intensive sector, comprised mainly to rise more rapidly than has been
of female, often foreign-born personal assumed, in order to balance low supply
support workers (PSWs) 17 whose jobs are and high demand for trained workers.
generally low-paying, physically and Such wage increases would substantially
emotionally exhausting, and rarely increase the projected costs.
Figure 3b: Publicly-funded home care and nursing
home care for women as percentage of annual public costs.
73
Nursing Homes
72
Percentage of Annual Public Cost
Home Care
71
70
69
68
67
66
65
2048
2050
2042
2044
2046
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
Source: Authors’ LifePaths projections
Projected Costs of Long-term Care 24The Future Co$t of Long-Term Care in Canada
3.2 Personal Costs for Seniors and their after the mid-1960s, such that the
Families projected senior population have fewer
adult children than has historically been
As discussed, our aggregate projection the case. Additionally, higher divorce and
estimates that about 75% of total home separation rates, along with a greater
care hours are currently being met by likelihood of never marrying compared to
unpaid caregivers. However, Canadian previous generations of seniors, is
fertility rates declined significantly reducing the potential for unpaid support
from spouses.
Figure 4: Unpaid Home
Care Utilization
900 800
800 700
700
600
600
Number of Seniors (000)
Average Annual Hours of Care
500
500
400
400
300
300 Average Hours of Unpaid Home Care per
Close Family Member (Left Axis)
200
200 Average Hours of Unpaid Home Care per
Senior (Left Axis)
100 Number of Seniors Using Unpaid
100
Home Care in Private Homes (Right Axis)
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
2047
2049
Notes: Average annual hours of unpaid home care per senior receiving care (top solid green line and left axis),
average annual hours of unpaid home care per potential unpaid caregiver (adult children and spouses; bottom
dashed blue line and left axis) and number of seniors using unpaid home care in private home (dotted purple
line and right axis).
Source: Authors’ LifePaths projections
Projected Costs of Long-term Care 25The Future Co$t of Long-Term Care in Canada
Figure 4 (left axis) shows demands on And although we have projected the
seniors’ potential unpaid caregivers (adult number of children, we have not
children and spouses) will grow by 43%, considered their geographic proximity to
on average (125 hours/unpaid their parents, which plays a major role in
caregiver/year) – from 290 hours/unpaid their capacity to provide daily care. 18
caregiver/year in 2019, to 415 Higher female participation in the formal
hours/unpaid caregiver/year in 2050. The labour market and greater expectations of
left axis also shows this growth is despite the government to provide care are also
a projected 3% decline in average hours likely to contribute to a decline in
of unpaid care per senior receiving home availability of unpaid caregivers (although
care (from an average of 850 hours/year this anticipated trend may be somewhat
to 825 hours/year) on account of seniors offset by greater levels of care provided
living both longer and healthier lives than by spouses, given their higher co-survival
previous generations. rate). It is also worth noting that spouses
(or caregivers who co-reside) are more
Not only will the average number of willing and able to take on more care
needed hours increase per potential responsibilities than adult children living
unpaid caregiver, many more Canadians separately (Mitchell et al., 2015; Betini,
will find themselves in this situation. The 2017).
number of seniors requiring unpaid care is
projected to increase by 120% between Absent an increase in care hours provided
2019 and 2050, from 345,000 to 770,000 by unpaid family caregivers, future seniors
(see dotted purple line, right axis, in who are unable to pay out of pocket for
Figure 4). long-term care services are at risk of
greater unmet care needs.
Despite careful modeling of these social
trends, this baseline projection may be 3.3 The Economic Value of Unpaid Care
conservative. For one, our projection in Canada
estimates the number of close family
members, but the availability of those There are a variety of approaches to
caregivers could be a much different valuing unpaid caregiving support [see,
story. We can project how many there will for example, Hollander et al. (2009) and
be, but not whether they will actually Poss et al. (2008)]. One approach is to ask,
provide support. what would be the cost for government to
replace unpaid care with formalized paid
Projected Costs of Long-term Care 26The Future Co$t of Long-Term Care in Canada
care? The “replacement cost” is set in this at replacement costs (dotted green line)
study as $30/hour: $18/hour for salary and and valued at the direct hourly wage costs
$12/hour for overhead (including of unpaid care (dashed purple line), as
administration and travel times between well as the cost of publicly-funded paid
visits) (see “Analytical Methods”). care (solid blue line). The aggregate
public sector cost to replace unpaid care
The magnitudes of unpaid care valued with public care in 2019 (at an assumed
from this perspective are shown in Figure $30/hour) is just under $9 billion. Based
5: aggregate costs for unpaid care valued on direct salary alone (at an assumed
$18/hour), this cost would be $5.4 billion.
Figure 5: Annual aggregate
value of home care
30
Value of Unpaid Home Care (Replacement Cost)
Value of Unpaid Home Care (Hourly Market Salary)
25
Publicly-Funded Home Care Costs
Annual Costs ($000,000,000)
20
15
10
5
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2041
2043
2045
2047
2049
2039
Notes: Annual aggregate cost of publicly-funded home care, unpaid care at replacement cost and unpaid care at
hourly market salary (note: lines are not stacked). 2019 constant dollars.
Source: Authors’ LifePaths projections
Projected Costs of Long-term Care 27The Future Co$t of Long-Term Care in Canada
Previous literature has reinforced the The growing spread between the dotted
important economic value of unpaid care green line (unpaid care) and the blue line
[see, for example, Hollander et al. (2009) (publicly-funded care) highlights the
and AARP(2015)], and the trajectory of value of unpaid caregivers to Canada’s
Figure 5’s top two lines indicate this value senior population, and how much more
is projected to grow threefold between important it will be in the future.
2019 and 2050. Figure 5 also compares
the value of unpaid care services to
publicly-funded care.
Figure 6: Annual aggregate
cost of long-term care
120
Publicly-Funded Nursing Home Costs
Publicly-Funded Home Care Costs
100
Annual Costs ($000,000,000)
Unpaid Caregiving (Replacement Cost)
Public OAS Expenditure
80
60
40
20
2019
2021
2023
2025
2029
2031
2033
2035
2037
2039
2041
2043
2045
2047
2049
2027
Notes: Annual aggregate cost of publicly-funded home care and nursing home care, in addition to the
replacement cost of unpaid care across Canada. (Old Age Security expenditure projections also
tracked). 2019 constant dollars.
Source: Authors’ LifePaths projections
Projected Costs of Long-term Care 28The Future Co$t of Long-Term Care in Canada
3.4 Putting Together the Public and curves for the long-term care components
Personal Costs of Long-term Care increase. The reason is that OAS costs
depend primarily on the size of the age 65
What if unpaid care is not sustained at its plus population, whose growth peaks in
historical path? Figure 6 shows the the 2030s, while long-term care costs
aggregate publicly-funded long-term care depend more on the size of the age 85 plus
costs as projected in our baseline scenario, population, which peaks further into the
to which we’ve added the replacement cost future.
of unpaid care. It also tracks OAS
expenditures over the same period, under As already discussed, these projections
the assumption that OAS benefits are could well be underestimating the costs of
updated to stay in line with average wages. long-term care labour in the future.
Increased demand for paid services may
Figure 6 shows that if all unpaid hours of put upward pressures on PSW wages, due
home care were fully publicly-paid – using to the decline in availability of unpaid
an assumed $30/hour (in 2019, and care. Moreover, if baby boomers expect
growing in line with average wages at better quality and more responsive
assumed 1.1% (real) per annum) – this long-term care than the status quo, such
would add $27 billion to public costs by pressures may exacerbate the challenges
2050. In this case, rather than moving from of containing public expenditures in this
$22 billion to $71 billion between 2019 area.
and 2050 (in constant dollars), the public
sector cost would grow instead to $98 At present, the Ontario interRAI data show
billion – representing nearly a quarter of that less than 8% of total home care hours,
all projected personal income tax revenue including unpaid hours, are paid for
(provincial and federal) and 6% of privately. If the supply of long-term care
aggregate wages, and approaching the size (both in terms of long-term care workers
of OAS benefit expenditures over time. and unpaid caregivers) does not keep up
with needs, another potential repercussion
Interestingly, over the projection period, is a growing divide in access between
the steepness of the slope of the curve for Canadians who have the financial capacity
OAS costs declines, while the slopes of the to pay privately for care versus those who
do not.
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