Long-term care insurance is an important part of the German social security system. It was introduced in 1995 as the fifth pillar of the social security system to cover the risks associated with the need for long-term care. Since then, it has undergone a number of changes in order to adapt to social and demographic challenges.
German long-term care insurance in international comparison
The countries with the most comprehensive and user-friendly long-term care systems are Denmark, Sweden and the Netherlands. Germany follows closely behind with good care services.
However, the German system is limited to benefits for significant care needs (care levels) and, unlike other countries, involves considerable co-payments – up to 50% of the costs can be borne by the person in need of care.
Compulsory insurance
In Germany, people with statutory health insurance (GKV) are automatically obliged to take out statutory long-term care insurance.
Those with private health insurance must take out private long-term care insurance. Here, too, both systems are compulsory. The benefits of private long-term care insurance are not very different from those of statutory long-term care insurance, but they can of course vary somewhat, as the policyholder decides on the benefits to be covered.
Financing
Long-term care insurance is financed by contributions from employers and employees (on an equal basis), and is a pay-as-you-go system. This means that the current contributions of the insured are used directly to finance benefits for those in need of long-term care. As the population ages and the need for long-term care increases, this type of financing is becoming a problem. There are fewer and fewer contributors and more and more recipients.
Contributions and rates
Insured persons’ contributions (employer’s and employee’s share) are paid monthly to the statutory health insurance funds. The health insurance funds then transfer these contributions to the long-term care insurance fund, which is part of the statutory health insurance system.
The contribution rate for long-term care insurance was 1.0% when it was introduced in 1995. The current contribution rate distinguishes between contributors with and without children. The contribution rate for those without children is currently 4.0%. The normal contribution rate is 3.4% (min. 1 child).
From 1 January 2023, a new contribution scale based on the number of children will apply. Insured persons with one child will pay the standard contribution of 3.4%. For two or more children, the contribution is reduced by 0.25 percentage points per child. The aim is to reward families for their educational achievements and to make the financing of long-term care insurance more equitable.
The benefits
Long-term care insurance distinguishes between outpatient and inpatient benefits.In the case of outpatient care, a care allowance is paid for self-procured care aids or care services provided by professional care services.The amount of the benefit was initially based on the level of care (1-3), and from 2017 on the level of care (1-5).In the case of inpatient care, long-term care insurance covers part of the costs of care in a nursing home.The long-term care insurance fund is also responsible for the so-called care allowance. This is a wage replacement benefit for employees who can be released from work without pay for up to 10 days per calendar year to care for a close relative.
Previous changes
2008: Introduction of care-giving level 0 for people with severely limited everyday abilities
2015: Introduction of Caregiver Support Act I with improved benefits
2017: Introduction of Care Act II with new definition of care needs and care levels 1-5
2019: Introduction of Care Act III with extended benefits and increased contribution rates
Planned changes in 2025
From 2025, the contribution rate for long-term care insurance will continue to rise as the current financing is not secure. In addition, a long-term care fund will be introduced to better cushion the effects of demographic change.An increase of up to 6% of gross income could be possible.
Conclusion
Not only is the issue of long-term care becoming increasingly explosive in financial terms, but employers must also prepare themselves for an increase in the use of care time and the associated downtime.
Long-term care insurance is massively underfunded. It remains to be seen whether the measures planned for 2025 will be sufficient to guarantee good and affordable care for all citizens and to solve the financial problems of the long-term care insurance funds.
In my view, a steady increase in contributions from employees and employers cannot be the solution.
