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.