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Limiting co-payments for nursing home residents in Germany’s long-term insurance scheme

2022 Conference Presentation

8 September 2022

Limiting co-payments for nursing home residents in Germany’s long-term insurance scheme

Heinz Rothgang , University of Bremen , Germany

Thomas Kalwitzki
University of Bremen


Background: The basic thrust of a conservative welfare state is to ensure that social risks such as illness, disability or the need for long-term care do not endanger the social status a person has achieved during their lifetime. In Germany, the rationale for introducing a mandatory long-term care insurance in the 1990s was therefore to ensure status preservation for the insured. For care-dependent people in nursing homes the insurance was meant to cover care costs while room and board has to be covered by the residents, while investment costs for building homes were supposed to be publicly funded. However, by the end of 2021 residents had to pay on average about 2.300 Euro out of pocket, including about 900 Euro for care costs. As a consequence, about one third of residents with an upward tendency now depend on social assistance. In order to reverse this trend, an inversion of? the financing arrangements was proposed, replacing capped benefits and unlimited co-payments with a system of capped co-payments and unlimited insurance benefit. Though the Minister in charge took up this proposal and suggested a reform to this effect, in July 2021 a different scheme was adopted.

Objectives: The objective of this contribution is to evaluate the original plan and the adopted reform against the target of limiting the share of residents dependent on social assistance, and to calculate the respective costs.

Methods: A micro-simulation was conducted using data from the G-SOEP on income and wealth and a distribution of nursing home rates.

Findings: According to the simulation the original plan would have been able to reduce both the expenditure on social assistance for nursing home residents and the share of residents relying on social assistance considerably and sustainably. The adopted scheme reduced dependence on social assistance much less and only temporarily. Once all elements of the reforms will be in place, i.e. by the middle of this decade, out-of-pocket payments will be as high as they were before the reform.

Conclusions: The adopted reform is insufficient to solve the problem, while the original plan would have been capable of doing so. However, the issue will pop up again within the next few years and a new round of reforms will be necessary. This is particularly likely as the new government announced that it will observe the development closely and take action if the out-of-pocket payments increase again considerably.