Assesing the Implications of Long Term Care Policies in Italy: a Microsimulation Approach

This paper projects the characteristics of the long-term disabled in Italy and the evolution of total public expenditure for long-term care (LTC) over the next four decades. The future dynamics of LTC expenditure in Italy is of particular relevance for two reasons: the limited, insufficient level of public spending on the disabled, and the prospect, over the next few decades, of one of the most rapidly ageing populations in the world. Our analysis is based upon a dynamic microsimulation model (CAPP_DYN) that estimates the socio-economic evolution of the Italian population over the period 2005-2050. A disability module is built under two different hypotheses concerning the process generating the probability of being disabled: a pure ageing scenario where the probability of becoming disabled is fixed for each age, and an alternative scenario whereby the risk of disability depends on a set of characteristics such as changes in life expectancy, the composition of the household and the level of education. After projecting the future structure of the disabled population, the paper studies the dynamics of public LTC expenditure.