1. Introduction
The aging population provides a challenge to countries in terms of meeting the needs of the aging population and by creating a policy environment [
1], especially in China. China’s aging population exhibits three key features: “aging before wealthy” (aging degree exceeds the carrying capacity of the current economic development), aging fast and large rural-urban differences, and the aging population increasing the proportion of the elderly population [
2]. At the end of 2018, the number of disabled elderly aged 60 and over had risen to 249 million, according to the National Bureau of Statistics of China [
3]. The number of disabled elderlies exceeded 44 million, accounting for 19.1% of the total elderly population [
4]. Previous research has shown that more than 60% of the elderly’s long-term care (LTC) was mainly provided by their families, while the proportion of disabled elderly will be more than 80% [
5]. This illustrates that the elderly’s ability to resist financial risks in China is extremely limited, and the LTC of the disabled elderly places economic and care burden on individuals and their families.
1.1. LTCI in China
The experience and practice in various countries have proven that long-term care insurance (LTCI) is one of the most effective policy tools to deal with the care risks of disabled elderly [
6,
7]. Against the background of a population with a rapidly increasing percentage of those with disabilities, rising medical costs, and weakening family functions, it is critical to establish an LTCI system that suits China’s national conditions [
8,
9]. Therefore, the National Health and Family Planning Commission and other ministries and departments jointly issued the 13th Healthy Aging Five-Year Plan (2016–2020), which advances improving health services for the elderly, strengthens the medical security system, and increases the health level of the elderly [
10]. In 2016, the Chinese government published the “Guidance on Pilot Cities to Launch Long-Term Care Insurance” [
11]. The LTCI scheme has been piloted in 15 cities, covering more than 57 million people and benefiting 184,500 people at the end of June 2018 [
12,
13]. It aims to establish and improve the policy framework of social LTCI system until 2020 in China [
14]. Although the implementation of LTCI has a good policy basis, due to the differences in the level of economic development, the degree of aging of the population, and the supply of care services, China has not yet formed a unified national LTCI system [
15].
1.2. Previous Research
The development of LTCI in foreign countries is earlier than that in China, and foreign scholars focus on analyzing LTCI from a quantitative perspective. With the acceleration of the global aging process, foreign scholars have begun to pay closer attention to how to design sustainable financing policies for LTCI as the level of payment directly affects the sustainability of the system. Therefore, foreign studies on commercial LTCI contribution rates are relatively early. In 1930, James D. Craig used Manchester Unity Approach to calculate and evaluate the contribution rate of disability insurance [
16]. Steven Haberman used the Decrement tables to predict the contribution rate of health insurance in his research report [
17]. Jim Robinson was likely the first researcher to use Markov model to predict the contribution rate of LTCI [
18].
At present, some domestic scholars focus on analyzing and summarizing the LTCI financing in OECD countries and domestic pilot cities, qualitatively discussing the ways of funding for LTCI and have proposed related policies [
19]. Scholars believe that there are four types of LTCI in foreign countries: subsidy model (e.g., Britain, Sweden, and Austria), social insurance model (e.g., Germany, Japan, and Korea), commercial insurance model (e.g., the United States), and mixed model (e.g., France) [
20]. At the same time, based on the analysis of the financing mechanism of domestic pilot cities, scholars basically reached an agreement that China should eventually establish a social LTCI system [
19]. The quantitative research of LTCI in China is still in the primary stage. The research content mainly includes the demand analysis and contribution rate of LTCI. A number of studies used microdata combined with health status transfer and multi-state life table to predict the care needs [
21,
22]. The results show that the demand for LTC will increase rapidly in the future. In order to analyze the contribute rate of LTCI, some scholars introduced foreign methods to simulate the contribution rate of LTCI in China. A number of previous studies used Manchester Unity Approach, Decrement tables, and multi-state Markov model to calculate the contribution rate of LTCI [
23,
24]. Other studies used life insurance actuarial techniques to build a balanced rate of vertical model. The results show that in the economically developed areas, LTCI system is financially viable [
25].
In general, the research abroad in similar studies has an early start in which theoretical research and empirical studies have achieved fruitful results. At the same time, scholars believe that China has a large potential demand for LTCI for disabled elderly [
26,
27], and it is urgent to establish an LTCI system to resolve the financial risks caused by disability. Besides, one of the biggest challenges for China’s LTCI development is raising sufficient funds [
28,
29]. The reason why China has not yet established a unified LTCI system is the lack of funds and the unclear financing mechanism [
30], and the ability of payment by policyholders directly affects the feasibility of the system. Therefore, this study aims to predict the financial demands of disabled elderly in China from 2020 to 2050, estimate the contribution rate of LTCI based on the balance of supply and demand, and clarify the key links of the LTCI financing mechanism to provide evidence for building a unified and sustainable LTCI system.
4. Discussion
In this study, an overall simulation model and a Monte Carlo simulation are used to predict the contribution rates of LTCI for the disabled elderly from 2020 to 2050 in China. We estimate that the overall contribution rate of LTCI in China from 2020 to 2050 will increase from 1.46% in 2020 to 5.14% in 2050, an increase of about 3.5 times. Therefore, the payment burden of policyholders will increase year by year. As can be seen, like other social insurance (such as medical insurance), how to control the rapidly rising premium will become the focus of policymakers in the future.
From the analysis of the financial demands and supply of the LTCI system, this study summarizes the factors of the increase of the LTCI contribution rate mainly related to the following aspects: a) Rapid aging of population: the elderly population in urban and rural areas continues to rise and the number of elderly disabled people has increased significantly [
43]. b) Increasing care costs: consistent with previous research results, the cost of LTC for disabled elderly is mainly composed of labor costs [
44]. The labor cost is affected by the number of employment-population and their average wages. With the development of the economy and society, the cost of care will increase as average wages increase [
45]. c) Diversified choices of care types: due to differences in the cost of community home and institutional care, the level of LTCI benefits varies. Compared with traditional community home care, the cost of institutional care is higher [
46]. With the change of care concept, the development of professional pension institutions and the improvement of the quality of care services will also have an impact on the growth of insurance premiums. d) Decrease in the number of employment-population and an increase in the dependency ratio: in order to achieve the balance between financial supply and need for LTCI, the financial demands should be based on the financial supply. Among them, the financial supply ability of the employment-population is an important factor that affects insurance premiums. Theoretically, under the condition that the average wage income and financial demands of the employment-population are constant, the more the employment population, the lower the insurance premium [
47]. We also find that the decline in urban and rural employment-population after 2020 is one of the reasons for the increase of LTCI premiums.
With the rapid aging of the population, the number of disabled elderlies has increased, the cost of formal and informal care for the disabled has continued to rise [
48], and the decline in the employment-population has led to an annual increase in contribution rates. The predicted results show that the financial demands of LTC for disabled elderly in China face an increasing trend from 2020 to 2050. The total financial demands will increase from 538.0 billion yuan in 2020 to 8530.8 billion yuan in 2050, an increase of about 15.9 times. The rapidly increasing cost of LTC will become one of the great challenges to establish a sustainable LTCI system in the future. At present, the two main financing channels of social insurance (enterprises and governments) are under great pressure to raise funds, which will be detrimental to the long-term economic development. Therefore, it is urgent to establish a sustainable financing mechanism for multiple financial supplies [
49,
50]. Developing LTCI in China should consider China’s actual situations rather than merely implant the foreign models. By referring to the financing mechanisms of different institutional models in typical countries and regions [
51], policymakers should consider our national conditions and take the following measures: a) establishing a sustainable financing policy including the government, employers, and employees; b) encouraging the private LTCI as a supplement [
52]; c) making full use of medical insurance balance funds to provide favorable conditions for the initial development of LTCI; d) reallocating the profits of state-owned enterprises and investing some of the profits into the construction of LTCI; and e) issuing of the welfare lottery to raise funds [
42].
From 2020 to 2050, the financial demands of LTC for disabled elderly in China will become stronger, especially in urban areas, and the burden of per capita care costs in rural areas will increase. It is worth noting that the economic development of rural areas is relatively low, but the ratio of elderly people in the rural population is higher than in urban areas. The aging population problem is more serious in rural areas [
53]. With the further development of the aging population, the number of disabled, demented, and empty-nest elderly in rural areas will increase dramatically, and the need for an LTCI system is even more urgent [
54]. Lacking funds is a key factor restricting the development of LTCI systems in rural areas [
55]. Due to the heavy burden of current social security payment on enterprises, the income gap between urban and rural elderly and the ability to pay insurance premiums for rural elderly are limited. Policymakers should take into account many factors, including the differences between urban and rural areas, division of responsibility among three major payers (government, enterprises, and residents), coverage, and different care types in order to maintain the sustainable development of LTC in the future [
30,
56].
At present, China has not established a unified LTCI system. Our study predicts the contribution rate of LTCI for the elderly based on the balance of supply and demand, enriches the quantitative research of the LTCI system, and the ability to provide evidence for establishing a unified and sustainable LTCI system. However, there are still some limitations to our study. Firstly, due to the lack of relevant micro-data data, the rationality and feasibility of the calculation of the LTCI contribution rate need to be further studied. Secondly, as the employment rates in urban and rural areas are unlikely to be the same, it may not be practical to assume that the ratio of the total employed population in the urban and rural is equal to the ratio of the population’s labor force aged 16 to 65 years old in the urban and rural areas. Thirdly, due to the calculation of the LTCI contribution rate being based on the prediction of future related data and the prediction model is optimized, it may be biased to some extent. In addition, this study will focus on the overall performance and compression effect of the model in the future to increase the accuracy of the simulation.