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Reform options for the funding system in Germany’s long-term care insurance

2012 Conference Presentation

Funding/purchasing Germany

7 September 2012

Reform options for the funding system in Germany’s long-term care insurance

Heinz Rothgang, University of Bremen, Germany
Robert Arnold, University of Bremen, Germany
Sebastian Sauer, University of Bremen, Germany
Katharina Wendlandt, University of Bremen
Annika Wolter, University of Bremen


Germany’s Social Long-Term Care Insurance (S-LTCI) suffers from what has been called a “structural revenue weakness” due to the fact that more than 10% of the population are not included in the system and only income from gainful employment and pensions are contributory, while contributions are not levied on capital income and income from rent and lease.

This paper will examine two of the remedies that are proposed against this weakness: (i) the transformation of S-LTCI into a citizens’ insurance and (ii) the introduction of (temporary) funding as an additional element. After discussing the conceptual implications of citizens’ insurance, projections of contribution rates for the present SLTCI and the citizens’ insurance are compared. The projections reveal an initial cut of contribution rates by 20%, which diminishes over time but even in 2060 stands at 10%, due to the introduction of citizens’ insurance. With respect to funding two variants are discussed.

Calculations show that a collective fund only shifts the burden over time for some years, but has no long-lasting effect from the middle of this century onwards. The current proposal of the government to financially support voluntary additional funded LTC insurance, however, will hardly have any effect at all.