In 2018, the Austrian authorities abolished the asset-based out-of-pocket payments (OPP) required from users of residential care for the elderly, also known as Pflegeregress. These asset-based OPPs were intended to regulate the demand for residential care and to adjust users' contributions to costs according to their ability to pay. The present study provides evidence on the distributional impact of the abolition of Pflegeregress as well as on possible alternative financing options for residential care in Austria.
Our findings suggest that older people belonging to the 1st income quintile paid a disproportionate share of the Pflegeregress. The abolition of Pflegeregress can thus be classified as a progressive measure, in that it adjusted the total OPP for residential care to the income distribution and mainly benefited people from the 1st income quintile. There are two reasons for this apparent poor targeting of Pflegeregress. Firstly, the distribution of wealth among older people in Austria differs significantly from the income distribution, which means that some people with low incomes have sufficient assets to make them liable to Pflegeregress. Second, older people from the 1st income quintile are much more likely to need institutional care due to poorer health and to have insufficient income to pay for it without tapping their assets (i.e. paying Pflegeregress).
These results broadly confirm the evidence from other studies, particularly in England, on the impact of the abolition of asset-based OPP for residential care. However, the large effect found for those in the 1st income quintile is somewhat specific to the Austrian case. The results of this study contribute to the broader discussion on the financing of long-term care in Austria by highlighting the need to consider the distributional effects of different policy options in addition to their impact on financial sustainability.
