The Social Long-term Care Insurance in Germany: Origin, Situation, Threats, and Perspectives

This paper gives an overview of the German Social Long-term Care Insurance (Soziale Pflegeversicherung, SLTCI). In the current state, Germany provides a universal, non meanstested contribution-financed social insurance for long-term care. This insurance should partially cover the care needs of the benefit claimants. Similar to the other social insurances in Germany, it is organized as a pay-as-you-go system. The benefit scheme allows for some flexibility in the provision of services due to recognition of different levels of care dependency and there are different types of benefits available; types of benefits comprise, e.g., cash allowances and benefits in-kind for home care, and financial support for institutional care. Today, most claimants apply for cash allowances which enable to maintain home care arrangements with the help of informal caregivers. The ageing of society will increase the number of persons in care dependency and will reduce the number of potential informal caregivers. Both developments challenge the sustainability of German SLTCI. A number of reform options have been suggested by several authors and are reviewed here. Some of these reform options suggest to only slightly adjusting the status quo system to take account of the changed demands, whereas other proposals postulate a radical reform of abolishing the pay-as-you-go system in favor of a system with funding principle. Despite the availability of options and the concerns about the status quo, the German legislator introduced a first reform of the SLTCI system in 2008. Although remarkable innovations were adopted like the nominal adjustment of benefits to maintain constant real values, the reform has to be criticized as being non-sustainable already in the medium-run. Therefore, further reforms will be necessary in the near future.

Thomsen, Stephan Lothar and Katrin Heinicke (2010), The Social Long-term Care Insurance in Germany: Origin, Situation, Threats, and Perspectives , ZEW Discussion Paper No. 10-012, Mannheim.