Why Health and Long-Term Care Systems Are Destined to Merge

Population ageing is quietly dismantling one of the last great separations in modern welfare states: the dividing line between health care and long-term care. In an opinion article published in PLOS Aging and Health, economist Joan Costa-Font of the London School of Economics argues that the fusion of these two systems is not merely desirable but, in his words, inevitable. His analysis, grounded in comparative evidence from the United States, Europe, and East Asia, lays bare a structural flaw at the heart of how wealthy societies pay for care in old age, and points toward a unified solution that few countries have yet achieved.

The scale of the problem stems from demographics colliding with institutional design. Long-term care, the day-to-day assistance people need when dementia, disability, or frailty erodes their independence, was never part of the original blueprint of welfare states in most high-income countries. Those systems were built around acute medical treatment and pensions, assuming families would absorb caregiving duties. But the availability of traditional family caregivers is shrinking as labour markets change, and the costs of care remain deeply uncertain in both onset and duration, shaped by dementia trajectories, disability, lifestyles, and preventive action. Compounding the challenge, severe care needs are highly concentrated among a relatively small share of individuals, making the financial risk both rare and potentially catastrophic.

From an economic standpoint, long-term care financing is a textbook case of an incomplete insurance market. The sheer magnitude and unpredictability of care needs complicates planning for individuals and insurers alike. Cognitive biases make matters worse: people systematically underestimate both the likelihood and the financial consequences of needing care in old age, wrongly assume that their health insurance already covers it, and place disproportionate weight on present consumption. Insurers, in turn, struggle to price long-term care coverage accurately, which restricts availability and narrows coverage. The result is a private market that remains underdeveloped and unable to provide effective risk pooling against what can be ruinous costs.

The consequences of this market failure are visible in the fragmented funding landscape that prevails across most economies. In the United States, public funding falls mainly on Medicaid, a means-tested program that was never originally designed to finance long-term care, and it is complemented by a shrinking private insurance market that leaves most households exposed to substantial out-of-pocket risk. Comparative evidence shows that although institutional arrangements differ widely, all systems rely on broad-based public funding across different levels of government, and in almost all cases long-term care and health systems remain stubbornly unintegrated.

The exceptions are instructive. Japan and South Korea stand out as the only countries that have created a continuum of care spanning prevention, community services, and institutional care within a unified framework. In Europe, countries that expanded insurance entitlements, such as Germany and the Netherlands, rely on mandatory contribution-based systems that have evolved over time but remain separate from health care. Tax-funded models such as Spain’s SAAD, Scotland’s free personal care, and the Slovenian system also operate outside the health system; they tend to provide universal access but combine it with significant co-payments or out-of-pocket charges to cover food and accommodation. Australia has no long-term care insurance scheme at all, only a tax-funded program that exhibits institutional integration in service delivery but not in financing.

Other nations occupy a middle ground of partial universalism. France and Italy rely on universal but fragmented cash allowances paid directly to individuals based on assessed care needs, which can be used flexibly and vary by income and region. England and Wales, by contrast, have long operated a residual means-tested system managed by local authorities, broadly similar to the United States, where public coverage is restricted to individuals who have exhausted most of their own resources, with thresholds that differ by state. Unlike the United Kingdom, the United States also sustains a private long-term care insurance market that increasingly depends on partnership arrangements with Medicaid to extend coverage and manage risk. Yet all of these systems, even the most generous, are either incomplete or in financial crisis and in need of redefinition.

Costa-Font identifies two dominant reform pathways across Europe and the United States. The first is to integrate long-term care into existing health insurance systems, notably Medicare in the United States or the National Health Service in the United Kingdom, potentially evolving toward a future National Care System. The second is to expand standalone long-term care programs funding primarily home care. While both approaches imply an expansion of insurance to address the same underlying market failure, only the former ensures genuine integration of long-term care within the health system itself, and in his assessment that distinction is decisive.

Integration also accommodates a powerful ongoing trend: the shift toward home- and community-based services, driven both by individual preferences and by cost-containment considerations. Under an integrated model, the costs of accommodation and daily living would still be borne by individuals, and residential nursing home care would be reserved primarily for those with the most severe needs. The core advantage lies in care coordination and efficiency gains for health systems. Evidence cited in the article suggests that subsidizing long-term care can reduce hospital admissions and utilization, meaning savings generated through fewer hospitalizations and delayed institutionalization could be reinvested in the care sector rather than absorbed elsewhere in the system.

Obstacles remain formidable. Adult care in most Western countries continues to rely on separate funding streams and administrative structures from health care, producing fragmented service delivery that resists coordination. The challenge, Costa-Font stresses, is therefore twofold: to expand long-term care coverage, which remains an unattained goal in countries such as the United Kingdom and the United States, and simultaneously to integrate it effectively with existing health care programs. Preventive investment in healthy ageing, through early interventions and chronic disease management, could delay or reduce future care demand, though the scope of such strategies to offset the scale of coming needs remains uncertain.

What emerges from the analysis is a clear-eyed vision of where ageing societies must go. Expanding coverage alone would address one market failure while leaving the systemic fragmentation intact; integration alone would not guarantee universality. The two must proceed together. As populations age and family caregiving capacity contracts, the argument concludes, long-term care will be folded into the health system as a core component of it rather than left as a fragmented service operating at the margins, a transformation that will define the next chapter of the welfare state.

Subject of Research: Financing and integration of long-term care with health systems in ageing populations

Article Title: The inevitable integration of health and long-term care systems

Article References: Costa-Font, J. (2026). The inevitable integration of health and long-term care systems. PLOS Aging and Health, 1(1), e0000021. https://doi.org/10.1371/journal.page.0000021

Image Credits: AI Generated

DOI: 10.1371/journal.page.0000021

Keywords: long-term care, population ageing, health systems, insurance markets, Medicaid, healthy ageing, care integration, dementia, home care, welfare state, health economics, public policy