Containing or shifting? Health expenditure decomposition for the aging Dutch population after a major reform

Aging populations add to pressure on health budgets, notably in long-term care (LTC). This development is particularly significant in the Netherlands, because of its relatively large, publicly financed LTC sector. The recent LTC reform aimed to substitute institutional care with aging-in-place, and thus reduce LTC expenditure. We investigate whether the reform actually went beyond shifting institutional care expenditure to other healthcare domains. We use individual health insurance and social care claims for the entire Dutch population aged 65 years and above over the period 2012-2016 to gain an insight into total healthcare utilization by individuals. Based on this information, individuals are allocated into subgroups - care steps - according to their dependence on assistance and nursing care. We analyze the changes within and between these steps over time in order to demonstrate the substitution of care provision after the reform was implemented. The results show that as the population share in institutional care decreased, the average health expenditure on the individuals receiving this care increased. By contrast, the average expenditure in the district nursing care steps fell, partly due to reallocation of individuals between care steps. Due to the reallocation from the institutional care to aging-in-place, the reform has contributed to a slowdown in the growth of total health expenditure on those aged 65 years and over, at least in the short term.