Frontiers in Business, Economics and Management 
ISSN: 2766-824X | Vol. 8, No. 1, 2023 

 

8 

Analysis of Demand for Long-Term Care Insurance in 
Wenzhou 

Pan Lin1, Siyu Sun2, * 

1 Department of Wealth Management, Wenzhou Polytechnic, Wenzhou, Zhejiang, 325300, China  
2 Department of Big Data and Accounting, Wenzhou Polytechnic, Wenzhou, Zhejiang 325300, China 

* Corresponding author: Siyu Sun (Email: sunsiyu731@163.com) 

 

Abstract: In the context of the accelerated aging of Chinese society and the requirements of the Central Economic Work 
Conference to prevent major risks, this paper explores the long-term care insurance system of Wenzhou based on the data of the 
seventh census of Wenzhou in 2020, and analyzes the scale of the disabled elderly in Wenzhou, and thus derives the future 

demand for long-term care, and designs the corresponding contribution scheme while predicting the future cost of long -term 
care. 

Keywords: Long-Term Care Insurance, Disability, Contribution Mechanism. 

 

1. Introduction 

Wenzhou seventh census data show that the proportion of 
the population aged 65 years or older is 11.71%, according to 
the World Health Organization for aging society subdivision 
standards, Wenzhou has entered the first stage of aging society, 
and the speed of aging continues to accelerate, of which the 

number of unhealthy and unable to take care of themselves 65 
years of age or older is 30,960, accounting for 2.91% of the 
elderly population. According to the 2020 health-related 
monitoring data announced by Wenzhou Center for Disease 
Control and Prevention, the per capita life expectancy of 
Wenzhou residents reaches 81.72 years in 2020, which is 0.01 

years higher compared to 2019, and along with the continuous 
improvement of the medical and health system, it can be 
expected that the per capita life expectancy will be further 
improved. Aging and longevity of the population 
development pattern characterized by multi-health status 
gradually appear, the number of disabled elderly people who 

need long-term care will only increase in a long period of time. 
The economic situation of "aging before wealth" poses a 
serious challenge to the scale and structure of demand for 
long-term care resources. 

Since Wenzhou has been exploring the establishment of 
long-term care insurance system since 2019, although there 

are specific policy guidelines, but there is still a need to fully 
justify the overall institutional arrangements for the operation 
of long-term care insurance, human resource allocation, etc., 
in which the cost of future long-term care for the disabled  
elderly is measured and the corresponding design is made. 
This is of great practical significance to the long-term and 

comprehensive roll-out of long-term care insurance in 
Wenzhou, and to enhance the sense of security and well-being 
of Wenzhou people. 

2. Long-Term Care Insurance Costs 

2.1. Prediction of the Size of Disabled Elderly 

In order to predict the size of the disabled elderly, it is 

necessary to set up a life table and a disablement incidence 
table first. In this paper, the life table is CL10 -13 Protection. 
The incidence of disability table is prepared by using the data 

of the 7th Wenzhou census for a 10% sample of the elderly 
population aged 65 and above by age, sex and health status, 
and the elderly are classified into four states: healthy, 
basically healthy, unhealthy but able to take care of 
themselves, unhealthy and unable to take care of themselves, 
and the unhealthy and unable to take care of themselves are 

defined as The elderly aged 65 and above were defined as 
disabled elderly and it was assumed that the health transfer 
status would not change in the predicted year, and the 
incidence table of disability by age and sex was predicted. 
Then, using the seventh census of Wenzhou city as the base 
data, we used the population age shift algorithm to project the 

future population of Wenzhou city by age and sex, and 

predicted the scale of disabled elderly by age and sex. 

Defined metrics. 

The age of x and the maximum age is ω The x the age 
mortality rate is qx  The number of survivors at age x is lx;  
The number of survivors aged  x  in i  state is lx,i ; The 
probability that a person at the age of x survives for another t 
year is pxt

  , and the proportion of people in i state is ωi of 
which i  there are 2 states, healthy for a , disabled for 
b , ∑ ωi =i 1 

 

lx = lx−1 × (1 − qx−1 )             (1) 

 

lx,i = lx × ωi                 (2) 

 

From Table 1, we can see that the number of disabled 
elderly population in Wenzhou is increasing, and the growth 
rate becomes faster, up to 37,458 people in 2040, accounting 
for 1.83% of the total elderly population. The elderly who are 
unhealthy but can take care of themselves have a great 

probability of generating care needs in the future. If this group 
is included in the range of potential disabled people, the 
number of disabled elderly will be as high as 181,672 in 2040, 
accounting for 8.88% of the total elderly population, with a 

large scale of disabled elderly and a strong demand for care. 

 



 

9 

Table 1. Number of disabled people in 2020-2040 

Year Number Year Number Year Number 

2020 17239 2027 22699 2034 31002 

2021 17806 2028 24033 2035 32098 

2022 18533 2029 25287 2036 33141 

2023 19377 2030 26385 2037 34002 

2024 20127 2031 27620 2038 35157 

2025 20992 2032 28758 2039 36430 

2026 21630 2033 29925 2040 37458 

 

Under the influence of traditional thinking such as raising 
children for the elderly, the elderly tend to age at home, while 
in recent years the family structure in China tends to be 

simpler and the labor participation rate of women is 
increasing, the human resources for family care are 
insufficient and the care function of family is weakened; in 
addition, with the increasing price of living and care 
equipment, the care cost of the disabled elderly is high. The 
supply of long-term care for the disabled elderly is 

insufficient. 

Long-term care insurance, on the other hand, effectively 
alleviates the conflict between the demand side and the supply 
side of disability care. Instead of simply giving cash to the 
disabled, it provides professional long -term care services to 
the participants by purchasing services. Care services are 

provided by designated care service providers, and 
professional caregivers can come to the home to provide 
services for the disabled at home or in institutions, greatly 

reducing the pressure of care for disabled families. 

2.2. Cost Forecast of Care for Disabled Elderly 

In a study of the cost of care in rehabilitation and nursing 
homes in Beijing, Xie Hong et al. (2011) [8] found that the 

cost of care for people with mild disability was 1800 
RMB/month and 2200 RMB/month for those with severe 
disability; Chen Lu's (2013) [5]study concluded that the cost 
of half care in 20 nursing homes in Beijing was 1000 
RMB/month and the cost of full care was 1500 RMB/month, 
with people with mild disability in general receiving half care, 

while the severely disabled people received full care. Mi 
Hong et al. (2020) [9]predicted that the average long-term 
care spending per person in Zhejiang Province was 20,000 
RMB/year; Qingdao was one of the first cities in China to 
explore long-term care insurance, and the life care treatment 
for disabled level 5 insured workers was set at the standard 

1500 RMB/month (50 RMB/day). 

Wenzhou City stipulates that the treatment of long-term 
care insurance in the pilot phase is the care method times the 
average monthly salary of the on-the-job workers in Zhejiang 
Province in the previous year times the level of disability, and 
the treatment payment ratio is different for the participants 

who choose different care methods. If you choose home care, 
the reimbursement rate is 40%. The higher the level of 
disability, the higher the protection treatment. The maximum 
limit of long-term care insurance for severe level 1, level 2 
and level 3 is 50%, 40% and 30% of the average monthly 
salary of the workers on duty in the province respectively. 

Taking into account, this paper sets the average treatment of 
long-term care insurance in Wenzhou in 2020 at 1900 
RMB/month, and the average treatment growth rate refers to 
the average growth rate of the average wage of the on -the-job 

workers in Zhejiang Province in the past 5 years. Combined 

with the scale of the disabled elderly predicted in the previous 
paper, the cost of care required to be spent on long-term care 

insurance for each year from 2020 to 2040 can be predicted. 

 

Table 2. Cost of disability care in 2020-2040 

Year Number Year Number Year Number 

2020 3.93 2027 7.78 2034 15.98 

2021 4.30 2028 8.73 2035 17.54 

2022 4.75 2029 9.74 2036 19.20 

2023 5.26 2030 10.77 2037 20.88 

2024 5.79 2031 11.95 2038 22.88 

2025 6.40 2032 13.19 2039 25.13 

2026 7.00 2033 14.55 2040 27.39 

 

According to the estimation in Table 2, it can be seen that 
the cost of care for the disabled elderly in 2020 -2040 shows a 
continuous rising trend, and the cost of care in 2020 is RMB 
393 million, and as the scale of the disabled elderly continues 

to expand, the cost of care continues to increase, and the rate 
of increase continues to accelerate, and by 2040, the cost of 
care in that year reaches RMB 2.739 billion, and the 
accumulated cost of care is as high as RMB 26.316 billion. 
The huge treatment expenditure of long-term care insurance 

poses a great challenge to its funding mechanism. 

2.3. Revenues of Long-Term Care Insurance 
Fund 

According to the "Wenzhou long-term care insurance pilot 
expansion and quality implementation plan", it is clear that 
the long-term care insurance is paid by the employer and the 
individual, and the equal proportion is shared, the standard is 
RMB 100 per person per year. In order to reduce the burden 
on enterprises and individuals, the unit's contribution is 

transferred from the employee medical insurance premium it 
pays; the individual contribution can be withheld from the 
employee medical insurance personal account. Those who do 
not have a medical insurance personal account or have 
insufficient funds in their personal account can use their 
family members' personal accounts for employee medical 

insurance or pay by themselves in a lump sum every year; 
retirees will pay by themselves in a lump sum every year or 
choose to have their pension insurance (retirement pension) 
withheld and paid on their behalf. In this paper, the 
contribution age is set at 20-82 years old, from which the 
income of the long-term care fund can be calculated for the 

calendar years 2020-2040. 

 

Table 3. Revenues of Long-term care fund in 2020-2040  

Year Number Year Number Year Number 

2020 7.51 2027 7.64 2034 7.70 

2021 7.52 2028 7.66 2035 7.68 

2022 7.53 2029 7.67 2036 7.67 

2023 7.55 2030 7.68 2037 7.66 

2024 7.57 2031 7.69 2038 7.63 

2025 7.60 2032 7.71 2039 7.58 

2026 7.62 2033 7.71 2040 7.52 

According to the estimation in Table 3, it can be seen that 

the long-term care fund income from 2020 to 2040 shows a 



 

10 

trend of rising and then decreasing, and the fund income can 

reach a maximum of RMB 770 million in 2034, and then the 
annual income of the fund keeps decreasing to RMB 752 
million in 2040, and the accumulated fund income reaches 
RMB 16,009 million in 2040. As the fertility rate decreases 
and the labor force population further decreases, the annual 
revenue of the Fund will further decrease and  the Fund will 

be under financial pressure. 

2.4. Long-Term Care Insurance Fund Gape 

 
Figure 1. Long-term care fund gap in 2020-2040 

 

The current year balance of the long-term care insurance 
Fund declines continuously from 2020 to 2040, and in 2027 
the current year balance is in deficit for the first time and 
shows an expanding trend; the cumulative balance of the fund 
increases continuously from 2020 to 2026, with a maximum 

accumulation of RMB 1.545 billion, and then the cumulative 
balance decreases, and by 2032 the cumulative balance is in 
deficit and expanding, making the long-term care fund 
financially unsustainable and future The hug e treatment 
expenses of long-term care insurance bring great challenges 

to the design of its contribution funding mechanism approach.. 

2.5. Long-Term Care Insurance Contribution 
Scheme Design 

In order to design a reasonable contribution financing 
mechanism, this paper constructs an actuarial model to set a 
reasonable contribution level for the sustainable development 
of the long-term care fund, taking the balance of income and 

expenditure as the starting point. 

Suppose an individual aged m starts contributing to the 

long-term care insurance at the beginning of the year and pays 
RMB A per year until the appointed time m + k  ,If the 
insured person becomes disabled during the contribution 
period, the later contributions will be waived. If a disabled 

person becomes disabled at the age of m + k + 1 and keeps 
in the same statues every year thereafter, he/she will receive 

a long-term care insurance benefit of RMB B per year. r is 
the discounted rate, from m to  m + k  years, the actuarial 
present value of the long-term care fund pool accumulation is  

 

 A × ∑
lx+t ,a
(1+r)t

k
t=0                (3) 

The actuarial present value of benefits paid to a disabled 

person at m + k + 1  age to death is the actuarial present 
value of 

B × ∑
lx+t,b
(1+r)t

ω
t+1                (4) 

 

Based on the principle of actuarial balance, the amount of 

the participant's contribution can be calculated as follows. 

 

A × ∑
lx+t, a

(1+r)t
k
t=0 = B × ∑

lx+t,b
(1+r)t

ω
t+1         (5) 

 

                 A =
B×∑

lx+t,b

(1+r) t
ω
t+1

∑
lx+t,a

(1+r)t
k
t=0

              (6) 

 

In designing the contribution scheme, following the 
Wenzhou long-term care insurance funding mechanism, 

active employees and retirees aged 20-82 are uniformly 
included in the long-term care insurance contribution, and the 
disabled elderly aged 65-82 receive a fixed monthly fee. 
Discount rate set at a fixed interest rate of 4%, it is estimated 
that to break even in 2020-2040, the long-term care insurance 
fund will need to increase the contributions of long-term care 

insurance participants to at least RMB 144/year. 

If the potentially disabled population among the elderly 
who are unhealthy but can basically take care of themselves 
is taken into account, the rate of disability at all ages will 
increase faster, and with the deepening of social aging and 
further increase in life expectancy, the number of disabled 

elderly will increase significantly and the fund's expenditure 
will increase. At the same time, due to the shortage of 
contributors, the expenditure of the long-term care insurance 
fund will be larger than the income, and the trend of fund 

accumulation will still be decreasing. 

3. Conclusion  

This paper examines the financial sustainability of the 
long-term care insurance fund within the framework of the 
Wenzhou long-term care insurance system and makes the 
following recommendations, taking into account the 
experience of other long-term care insurance pilots. 

First, Population growth is an important factor affecting the 
operation of the fund. In order to increase the future income 
of the fund to cope with the increasing expenses of long-term 
care for the disabled elderly and to reduce the burden of fund 
operation and financial expenditure, the government should 
encourage childbirth and increase the future working 
population to increase the income of the fund in order to 

ensure the stability of the fund income. 
Second, in designing the contribution scheme, the long-

term care insurance financing mechanism should consider 
establishing actuarial models for different time horizons and 
conducting stress tests on factors such as the cost of stage 
disability care and changes in the situation of the contributing 

population, with a view to designing a scientific and 
reasonable contribution scheme that can withstand certain 
risks while maintaining the fund can operate smoothly in the 
long run. 

Third, the proportion of long-term care insurance treatment 
benefit should be considered to gradually increase. In this 

paper, the treatment covers people who are unhealthy and 

-120.00

-100.00

-80.00

-60.00

-40.00

-20.00

0.00

20.00

40.00

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

5.00

2
0
2
0

2
0
2
2

2
0
2
4

2
0
2
6

2
0
2
8

2
0
3
0

2
0
3
2

2
0
3
4

2
0
3
6

2
0
3
8

2
0
4
0

Fund balance for the year (billion yuan)

Accumulated fund balance (billion yuan)



 

11 

unable to take care of themselves, but not all of them are in a 

state of severe disability, which can moderately reduce the 
care items and reduce the care expenses. In addition, there are 
some people whose families are more affluent and do not need 
to rely on the help of the long-term care system, and can fully 
afford it themselves. Therefore, this paper argues that the 
long-term care treatment mechanism can be considered to 

establish a gradual, stepwise approach, such as covering 40% 
of the cost expenditure at the beginning stage, 60% of the 
expenditure in about 20 years, and finally reaching 80% or 
even a higher level of coverage. This will help to save 
resources and also prioritize care for the more severely 
disabled group, optimizing resource allocation. 

Fourth, the population covered by long-term care insurance 
treatment should be considered for gradual expansion. In 
addition to the elderly aged 65 and above who are at risk of 
disability, there are some young and middle-aged people 
under 65 who are also at risk of disability. In addition to 
disability, there are also people with dementia, and these two 

groups of people also need long-term care services. From the 
perspective of social equity, it is necessary to grad ually 
include them in the scope of long -term care insurance 
coverage, allowing them to make full contributions and enjoy 
long-term care services and benefits in accordance with the 
system. The government should also introduce dementia 

rating standards as soon as possible, and make reference to 
internationally popular dementia scales, such as the 
Hasegawa Dementia Scale (HDS) or the HDS-R scale, the 
MMSE scale, and the BDS scale, to develop an appropriate 
unified dementia scale. 

Acknowledgment 

This work was supported by Wenzhou Basic Research 
Programs of Wenzhou Science and Technology Bureau.  

Fund project: "Research on the Financing Mechanism of 
Long-term Care Insurance Benefits in Wenzhou Based on 

Financial Sustainability. " 

Project(NO.S20220022). 

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