Distributive Implications of Long Term Care Policies: An International Comparison

Using a microsimulation model for Italy, we discuss the effects on the distribution of income of a Long Term Care (LTC) scheme. We consider eight alternative options for financing the scheme taken from the most relevant international experiences (Germany, Luxembourg and Japan) and from the current Italian debate: these options include general taxation, a new tax proportional to income (with or without a ceiling), a tax on income for people older than 40, a tax proportional to a broader measure of the economic conditions of the family and indirect taxation. In particular, we show that by including wealth in a means testing we get important intergenerational distributive effects. We also discuss the implications of two alternative choices for the distribution of beneficiaries: both the current distribution in the major Italian LTC program and that of the current German scheme turn out to have a powerful distributive impact.