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Determinants looking back: 25 years of the German social insurance system

2018 Conference Presentation

Policy developments Germany

12 September 2018

Determinants looking back: 25 years of the German social insurance system

Heinz Rothgang, Bremen University, Germany


Almost a quarter of a century ago, the German Long-term Care Insurance Act was passed. It introduced a Social Insurance System, which also influenced the introduction of LTCI systems in Luxembourg, Japan and South Korea. While reform attempts have been moderate for the first twenty years, the last legislative period saw the biggest reform since the introduction of the system leading to an increase in expenditure of about one quarter in 2017. Moreover, additional major reforms are underway.

This contribution, first, describes the reform in detail. It, second, quantifies the consequences of the reform in terms of spending, benefits and beneficiaries respectively with data from 2017, which have become available recently, and, third, tries to explain why – after 20 years – such a generous reform took place.

At the core of the reform is a new definition of long-term care need based on a new assessment and thus new entitlement rules. The shift from three levels of dependency to five grades of dependency has been accommodated by new amounts of lump-sum or capped benefits and transition rules for beneficiaries and nursing homes.

As a result, Social LTCI expenditures have increased by more than 7 billion Euros in 2017 as compared to 2016. Almost half of this extra money has been spent on cash benefits and about 2 billion Euros on nursing home care. For nursing home residents, however, co-payments have only decreased temporarily and are by now already higher than they have been before the reform. This is one reason, why new reform discussions focusing on nursing home care are underway just now.

Using Kingdom’s multiple streams approach, it is shown why the Reform Act was passed three years ago. Considering the policy process leading to the reform in details, furthermore, helps to explain why the reform had to be that generous and – on the other hand – so expensive. A major reason for the generosity is that in 2006, government installed an Expert Commission dealing with the fundamental issue of the new definition of need of long-term care. As this process took some time, ad hoc improvements of benefits were introduced twice towards the end of the legislative term to demonstrate the government of the day’s willingness to act. When the reform was finalized politicians did not have the courage to cut back these extra benefits. The new amount of benefits was set quite high in order to make sure that nobody would get less after the reform.