Germany’s statutory long-term care insurance currently covers some 70m Germans against at least part of the financial risk of requiring long-term nursing. Members of the compulsory insurance scheme who become dependent on long-term care receive cash benefits based on the degree of nursing required.
The scheme is financed on a pay-as-you-go basis, which means that current contribution revenues are immediately used for current benefit expenditures. The consequence is that, with a shrinking and ageing population, the system faces looming financial difficulties. The number of those needing care is expected to have approximately doubled by 2050, leading to a drastic increase in the number of nurses and nursing home places required. If policymakers fail to take corrective action, by mid-century the contribution rates will have to be raised to 5% of gross pay.
However, instead of securing the long-term care insurance against demographic change, the government has saddled it with new benefit entitlements. The long-term care reform of 2008 led to a rise particularly in benefits for home nursing. One way out of the dilemma presented by the prospect of soaring contribution rates for later generations would be to change the method of financing to a funded system. This would oblige people to make provision for their own nursing care.