Impact analysis by the Center for Applied Research (CentAR) and the think tank Praxis examined the care reform that came into force three years ago in the summer, which aimed to reduce the financial burden on people and improve access to general care services. To this end, the state increased funding for local governments and introduced an additional benefit for people in need with lower incomes.

The analysis, presented on Wednesday, showed that the financial accessibility of nursing homes had indeed improved as a result of the reform. CentAR director Epp Kallaste said that the number of care places had increased to 12,000 by last year, compared with 10,000 in 2021.

"An important side effect that was not planned but emerged as a result of implementing the reform was a relatively large increase in the administrative burden on local governments," Kallaste said. According to her, previously, local governments only got involved in cases where a person had difficulty paying for general care; however now they are required to assess everyone entering the service.

One issue is the prices published on nursing home websites, which do not allow a comparison of the cost of services at various institutions. The sums of money people have to pay vary, as do the rationale and basis of payment.

"Some nursing homes have a single fee for everyone, while others have differentiated prices depending on the room or other factors," Kallaste explained.

The Ministry of Social Affairs says it plans to improve the situation. Sirli Sõmer-Kull, the ministry's head of welfare services policy, said there are plans to update the standard for publishing service prices to make prices listed on nursing home websites comparable. The nursing home market is diverse, and the minimum cost of a place rose by nearly 19 percent following the reform.

Finding a place more difficult for people requiring greater care

According to local governments, it is possible to find a care place within a couple of weeks for a person with ordinary care needs, provided they are willing to make some compromises regarding the location of the nursing home. However, this does not apply to people with greater or more specific care needs, for whom there is a severe shortage of places.

Sõmer-Kull said it is difficult to find places for people with severe and complex dementia, but the ministry is training service providers at the dementia competence center.

The reform did not provide a boost to the development of services supporting people living at home. According to Kallaste, the number of people receiving home care services rose, but the average volume of services per person decreased.

"Local governments used the additional state funding to pay general care subsidies, leaving no money for development activities," she said.

The authors of the analysis recommend developing home care and services that precede general care, increasing funding for long-term care and improving access to local government counseling at an earlier stage, as people currently seek such assistance only when there is no longer an alternative to general care.

Sõmer-Kull noted that while the situation with round-the-clock care is generally quite good, the same cannot be said of services supporting people living at home. This provides an opportunity to undertake the second part of the care reform, focusing specifically on home- and community-based services.

"In the future, we should also be able to do more in terms of prevention and supporting people to live at home," the head of welfare services policy said. "People want to have the option of staying in their own homes and receiving more help there than they do today, when the average volume of home care services is two hours a week."

According to Sõmer-Kull, the situation of family caregivers, including leave and guarantees, also needs reviewing.

Reform increased nursing homes' profit margins

As a result of the reform, nursing homes' labor costs increased, but so did their operating profit margin, which rose from 6 percent in 2022 to 15 percent, above the Estonian average. However, according to Kallaste, there is reason to believe that if competition functions properly, price and profit growth should normalize in the future.

The care reform brought many additional workers into the sector. While 40 percent of nursing homes met staffing requirements in 2022, that figure had risen to 72 percent by last year.

At the same time, the analysis recommends applying staffing requirements more flexibly and paying greater attention to the everyday lives of nursing home residents, as people need a homely and humane environment and want to feel looked after and cared for.

As the population ages, the need for care will increase in the future, meaning that long-term care will require increased funding for general care services and a more comprehensive structure of services.

Sirli Sõmer-Kull said the care reform had achieved its main objective, as the share of costs paid by clients fell from 78 percent in 2022 to 53 percent last year. The public sector's contribution increased from €29.7 million to €103.1 million over the same period.

New care places were created mainly by the private sector, and according to Sõmer-Kull, local governments have created almost no new places.

The Ministry of Social Affairs is currently working on establishing assisted living facilities, which are intended to serve as an intermediate stage before round-the-clock care. Such facilities are being established in 11 municipalities, with €33 million in external funding secured for the purpose.

The Estonian Center for Applied Research (CentAR) is a private research organization based in Tallinn, Estonia, that specializes in public policy and applied economic studies.

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