Financing long-term care through housing in europe

Abstract

To what extent older European would be able to pay for their long-term care needs if they had no access to informal care nor public or private insurance for long-term care? To answer this question, we build a microsimulation model and estimate the disability trajectories of the elderly in 9 European countries using SHARE data. According to the simulations, 57% of the current 65+ will experience disability (defined as being restricted in 2 or plus basic activities of daily living). Conditional on need, care will be required for 4.3 years on average.

7% of dependent individuals with no partner could pay for their long-term care out of their sole income, 23% if they used all their savings except their home. The proportion would double to 50% if they took out reverse mortgages on their main residence. Reverse mortgages could play an important role in Spain and Italy. However, one fifth of individuals could finance less than 5% of their long-term care needs.