You pay between 1.7 and 2.8 percent of your gross salary to the nursing care insurance every month. Nevertheless, the insurance company records billions in losses every year. Experts believe that only a comprehensive reform can save the system.
Nursing care insurance is the youngest link in the German social insurance system. When it was introduced in 1995, it was the first new insurance in the statutory system since unemployment insurance was introduced in 1927. It is intended to cover the costs of people’s need for care. Before 1995 there were only a few private insurance companies. Often, people who require care due to accidents or illnesses simply end up on social welfare. Because their costs continued to rise due to this and the ongoing aging of our society, the government of Helmut Kohl (CDU) introduced long-term care insurance in 1995 on the initiative of Baden-Württemberg.
Since then, employers and employees have been paying a contribution, which in turn goes to the nursing care funds. Because their tasks are thematically similar to the health insurance companies, they are usually the same companies that receive the contributions. Like all other social insurances, long-term care insurance is financed on a pay-as-you-go basis, which means that the payments made by employed people are used directly to cover the expenses of those in need of care.
Since 1995, nursing care insurance has been supplemented and modified several times by additional laws, but nothing has changed in the basic system.
The most important income for the nursing care funds are the contributions from the insured. The contribution rate has been 3.4 percent since July 1, 2023, half split between the employer and the employee. There is also an additional contribution of 0.6 percent for those insured without children, which is borne solely by the employee. From the second child onwards, the contribution per child drops by 0.25 percent up to a maximum of 1.0 percent from the fifth child onwards. There is an exception in Saxony: Because the day of repentance and prayer is still a public holiday there, Saxons pay a higher nursing care fund contribution of 2.2 instead of 1.7 percent for employees, while employers only pay 1.2 percent. The additional contribution for those without children is not affected. The same contribution assessment limit applies to long-term care insurance as to health insurance, i.e. from an annual gross income of 62,100 euros, the contributions do not increase any further.
In this way, the nursing care funds collected around 57.8 billion euros in 2022. This also included a federal subsidy from the budget of one billion euros. Since contributions were increased in mid-2023, income is likely to have been higher in the previous year, but there is no financial report yet. Starting this year, the federal subsidy will be canceled. Compared to other social insurance companies, the nursing care funds are small: the health insurance companies had income of 289 billion euros in around the same year.
According to their mandate, the nursing care funds are supposed to intervene when someone can no longer cope with their everyday life without external, professional help. For this purpose, people are sorted into five levels of care depending on their remaining independence, in which services are paid between 125 and 2,095 euros per month. Care level 1, for example, involves help with shopping, washing or dressing. At care level 5, this increases to people who are bedridden and can no longer eat alone, for example. Most of the time this also involves inpatient care in nursing homes. Professional helpers do not have to be hired for every level of care. Relatives can also provide care, for example, and the care insurance fund then reimburses benefits in kind, but also pays the carers a care allowance. The number of people in need of care is recorded every two years. At the end of 2021 it was 4.96 million people.
The biggest enemy of long-term care insurance is the rapid aging of our society. Young people can also need care, but almost 80 percent of them are at least 65 years old, and a third are even over 80. Due to demographic change and better medical care, the number of people of this age is increasing every year and with it the number of people in need of care. In 1999 there were 2.02 million people, now there are almost three times as many.
The costs are also rising accordingly: in 1997, the expenditure of the nursing care funds was the equivalent of 15.14 billion euros, in 2010 it was already 21.45 billion euros, and in 2022 it would be around 60 billion euros. The trend continues: According to the Federal Statistical Office, the number of people in need of care is expected to rise to 5.6 million people in 2035, with the peak reaching 6.8 million in 2055. That would be an increase of 37 percent compared to 2021.
With the expenses, the nursing care insurance contribution has risen from the original 1.0 to 4.0 percent, but the money is not enough. The nursing care funds have been making losses for years. In 2021, 1.4 billion euros were missing, in 2022 it was 2.25 billion euros. In 2023 there could have been a small increase due to the increase in contributions, but this year there will be a shortfall of one billion euros due to the elimination of the federal subsidy. The board member of the umbrella association of company health insurance companies (BKK), Anne-Kathrin Klemm, recently said that she expected a loss of 4.4 billion euros for 2025. This would mean that the insurance company’s reserves would be used up and it would be on the verge of bankruptcy.
No. Although caring for more and more people in need of care will cost us more money in the future than it does today, the attentive reader will not have missed the fact that costs have almost tripled since 2010, while the number of people in need of care has only doubled. Or to put it another way: While a person in need of care cost the nursing care funds 8,827 euros a year in 2010, the per capita average is now 12,121 euros, almost 37 percent higher.
On the one hand, this is due to the fact that more and more very old people are being cared for, and care for them in an inpatient setting is more expensive. But it is also because there are simply not enough professional carers and nursing homes, whose costs continue to rise – most recently due to salary increases, rents and energy costs. And then there is the paradox that health care costs increase with the quality of services. Modern measures are highly effective, but also cost significantly more than before.
Nursing care insurance therefore not only has a purely financial problem, but also a structural one.
The financial deficits could be reduced through higher contributions. But all government parties reject this. The SPD proposes to abolish private nursing care insurance, in which mainly high-earning people with high contributions are insured, and to force everyone into statutory insurance. A second suggestion is to raise the contribution assessment limit, for example to the level of the pension insurance. The limit is 90,600 euros in the west and 89,400 euros in the east.
There are also a few cosmetic suggestions. The Greens, for example, want to raise more tax money. The nursing care funds themselves are demanding that they no longer pay for services that are not covered by insurance. Specifically, this concerns the pension insurance contributions of caring relatives, which amount to around eight billion euros per year. If these were paid for with tax revenue, the balance of nursing care insurance would improve, but that of the federal budget would deteriorate to the same extent – in the end it would be a zero-sum game.
But the nursing care insurance companies also advocate reducing costs. This does not have to be at the expense of the insured. Two things are more important: Firstly, the nursing staff must be better distributed. In smaller towns and rural areas there is often a lack of outpatient services, while in large cities there are a lot of them. This makes care in rural areas more complex and therefore more expensive. The federal government should also invest more money in prevention and rehabilitation measures. The health insurance companies argue that this would prevent many people from becoming needy in the first place. That would not only be good for the balance sheet, but also for people.
In addition, like social associations, they argue for a second reform step: Up to now, care has been a partial insurance policy, and insured persons always have to pay their own contribution. Due to rising home costs, this leads to ever higher costs, especially for those in need of hospital care. According to social associations and unions, a third of all nursing home residents are now dependent on social assistance again – this is exactly what nursing care insurance should actually prevent. The solution would be full nursing care insurance, in which the nursing care funds cover all nursing costs and the state uses tax revenue to cover additional benefits such as the pension contributions and training costs mentioned above. In their opinion, this could be financed with the measures demanded by the SPD, although the contribution rate would only have to increase by a further 0.1 to 0.2 percent.
The CDU and FDP are opponents of such full insurance. Although they both once introduced nursing care insurance as part of a coalition so that people would not have to cover the costs privately, they are now calling for more private provision for nursing care. Only people with low incomes should be supported by the state.
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