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Long Term Care Policies for Older Populations in new EU Member States and Croatia

Long Term Care Policies for Older Populations in new EU Member States and Croatia

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BULGARIAN SUMMARY Long Term Care Policies for Older Populations in new EU Member States and Croatia: Challenges and Opportunities
BULGARIAN SUMMARY Long Term Care Policies for Older Populations in new EU Member States and Croatia: Challenges and Opportunities

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Published by: worldbankbulgaria on Jan 25, 2011
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11/13/2011

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INTRODUCTION

Poland is located in Central Europe. It is bordered by Belarus, Czech Republic, Germany,
Lithuania, Russia, Slovakia, Ukraine and the Baltic Sea to the north. Poland is a relatively large
country with 312,685 square kilometers of territory. The country is administratively divided into
16 provinces. The country’s current population is estimated at 38,463,689. Life expectancy at
birth for the entire population is 75.85 years; with 71.88 years for a male 80.06 years for a
female. The currency in Poland is the zloty (PLZ)34
.

Poland is a former Soviet satellite state. In 1990, a democratically elected government replaced
the communism led government. Around this time, the centrally planned economy was altered
into a free-market economy, and the constitution was re-designed. The current government is
made up of a President who is the head of State (country) and the Prime Minister who is head of
the government. The legislative branch is made up a bicameral house with a lower and upper
house35

. In 1999, Poland became a member of NATO. Five years later in 2004, Poland joined the
European Union. From 1996 through 2007, Poland had continuous economic growth with an
average annual real GDP growth of 4.6 percent. Upon joining the EU, Poland has maintained its
growth. In fact, in 2009, Poland was the only EU country to sustain positive growth despite the
recent Global Financial Crisis. Poland’s resiliency to withstand the Global Financial Crisis has
been attributed to its stable initial macroeconomic situation, the large size of its domestic market,
a flexible exchange rate, and appropriate policy measures. Economic indicators as of 2008
include a GDP of $528 billion, GDP growth of 4.89 percent, a GNI of 447 billion (Atlas
method), and an inflation rate of 4 percent. The unemployment rate as of 2008 was 7 percent36

.
The labor force is estimated at 16.99 million people or approximately 44 percent of the
population37
.

Currently, Poland spends less on long-term care (LTC) benefits compared to other OECD
countries, but recent increases in public spending raise concerns about the fiscal implications of
future spending.38

When compared to high-income OECD countries, Poland currently spends
considerably less of its GDP on LTC services. As in many other countries, LTC benefits in
Poland are fragmented across various parts of the social protection and health system. Overall,
benefits reach only a relatively small fraction of the Polish population, with the notable exception
of cash benefits, which are paid to everyone above the age of 75.39

In-kind formal LTC services,
on the other hand, are not readily available in Poland, and a large share of Poland’s dependent
population receives no or only informal LTC. Recent increases in public expenditure for in-kind
LTC benefits, though, suggest that Poland might quickly catch up with its Western European
peers and substantially increase the availability and quality of formal LTC services.

34

CIA World Factbook (2010)

35

U.S. Department of State (2010)

36

World Bank Country Brief (2010)

37

CIA World Factbook (2010)

38

For the purpose of this paper, long-term care benefits are defined as benefit (cash and in-kind) provided to dependent persons who are unable to
perform activities of daily living (ADLs).

39

See, Więckowska (2008).

112

The question that then arises is if Poland—given that it is a middle-income country—can afford
the same breadth and depth of LTC services that high-income countries provide to their
populations? In answering this question, one has to keep in mind that Poland—although an
emerging economy—is aging quickly, and, as various literatures have pointed out, will grow old
before it grows rich.40

The objective of this chapter is to investigate the potential fiscal implications of future public
spending on LTC benefits in the context of an aging society. Like other Eastern European
countries, Poland’s population will age considerably over the next 50 years. This demographic
trend will challenge the fiscal sustainability of the LTC sector; on the one hand, the contribution
base of the tax and social security system will decrease over the coming years while the demand
for LTC services is bound to increase due to a growing number of dependent, elderly population
and a decreasing number of potential informal care providers.

This chapter finds that Poland faces a considerable fiscal challenge if it wants to provide
appropriate LTC services for its aging population. If Poland continues its current pattern of
strong annual expenditure growth, combined with a pronounced increase in the number of
expected beneficiaries, public expenditures on LTC will quickly become fiscally unsustainable.
The increasing old-age dependency ratio raises serious concerns about the financing of LTC
through pay-as-you-go mechanisms.41

A disproportionate care dependency ratio could lead to
further increases in demand for formal LTC. At the same time, substantially increased wages for
formal LTC due to labor shortages can put public LTC expenditures under considerable upward
pressure.42

It is therefore critical for the Polish government to think about ways i) to finance
future LTC expenditures through means other than a pay-as-you-go mechanism, like for
example, through private savings; (ii) to control demand for formal LTC services and channel
demand into the right types of LTC services, like outpatient care; and (iii) to control costs of in-
kind benefits and reform the cash benefit.

Five sections present these findings in more detail. Section 4.1 discusses the demographic
prospect of Poland, with a focus on the dependent population. Section 4.2 presents an overview
of the LTC system. Section 4.3 follows with findings on expenditures of the various types of
LTC benefits over the last three years. Section 4.4 presents various projections on how current
public expenditures might evolve in the future. Section 4.5 offers policy implications.

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