1. ¹CAEPS & Department de Teoria Econòmica, Universitat de Barcelona, Spain; LSE Health and Social Care, London School of Economics, U.K.
2. ²Departament de Teoria Econòmica, Universitat de Barcelona, Spain

Correspondence: Joan Costa-Font, Department de Teoria Econòmica, Universitat de Barcelona. Diagonal 690, 08034 Barcelona.; E-mail: j.costa-font@lse.ac.uk

^*We wish to thank David Casado, Adelina Comas, two anonymous referees and the participants at the IHEA meeting in San Francisco 2003 and the 4th European Conference on Health Economics, Paris 2002 for their helpful comments. Financial help was received from CICYT under the project SEC2002-00019.

Abstract

This paper examines the financial sustainability of long-term care funding options in Spain. We employ the generational accounting ("GA") methodology to evaluate the intertemporal impact of funding policies for long-term care services in the face of demographic change. Our findings suggest first that, although at present the system seems actuarially fair, the resources currently employed will be clearly insufficient to fund future needs, due to the demographic dependency of expenditures; second, that the specific tax instrument used to fund long-term care plays a less significant role. Conversely, the role of co-payment turns out to be key in offsetting the adverse effect of demography on the finances of the system.