Planning and financing the home and facility-based care using the multiple decrement approach

The number of older Europeans 80+ is projected to increase from 27.7 million in 2016 to 65.2 million in 2070. The goal of these cohorts is to stay independent and autonomous in the community as long as possible, but a large share of this population resides in improperly built dwellings. They face a dangerous environment in surrounding of their dwelling which influences their decision to prematurely move to nursing home, which is decreasing their quality of life and increasing public expenditures. To prevent premature departure to a nursing home and make long-term care system, more sustainable Member States need to develop a proper Health and Social Infrastructure including long-term care services and assisted living facilities suitable for older adults with declining functional capacities that are dependent on the help of others. For the development of this infrastructure, the financial sources should be structured properly. Therefore, the objective of this paper is to introduce the decision model for planning and financing of Health and Social Infrastructure including long-term care services and dwelling units suitable for the older population. The model is based on a multiple decrement approach. As a novelty, we have developed a scheme of long-term care insurance where disbursement of benefits depends on functional capacities of older adults and type of dwelling, where they are living. Actuarial present value of long-term care LTCax is subject of criterion function of suitability of the social infrastructure. Local authorities can use the model for supporting decisions regarding investment in social infrastructure for elderly.