Long-term care financing scenarios
AOK-Bundesverband
2024
Almost 90% of Germany’s population are insured through the public long-term care insurance system (Sozialen Pflegeversicherung or SPV). It is thus the keystone of the (partial) safeguarding of long-term care risk. Long-term care concerns us all: a high percentage of insured persons will one day make use of SPV benefits. In addition, the benefits of the SPV must be financed by the contributions and taxes of those insured.
In the coming years, demographic developments will lead to gradual increases in the number of people in need of long-term care. Furthermore, in the last few years, we have seen the number of long-term care dependants covered by the SPV rise (far) beyond the pure demographic effect. Reforms, such as the recent Care Support and Relief Act and the 2017 second Act to Support Long-term Care, have strengthened this development and resulted in increased expenditure on the basis of the improved benefits.
On behalf of the AOK- Bundesverband (Federal Association of the AOK, Germany’s largest public health insurance provider), Prognos conducted a review of the financial impacts of the different SPV reform options. The review does not pass judgement on the reform measures themselves. Neither does it seek to verify their legal feasibility. It does, however, provide a quantitative basis for an urgently needed public and political debate about reform with revenue and expenditure and the respective cost-covering contribution rate up to the year 2060 at its centre.
The review makes clear that long-term care will see growing costs and that this will result in increased financial requirements. We determined these financial requirements according to different scenarios that can be differentiated in terms of the assumed development of the number of persons dependent on long-term care and the base rate of pay.
Reference scenario (“middle scenario”: the number of persons dependent on long-term care increases beyond the pure demographic effect, the base rate of pay grows by 3% per year)
Positive scenario (base rate of pay increases more strongly, the number of persons dependent on long-term care is less than in the Reference scenario)
Negative scenario (Base rate of pay increases less strongly, the number of persons dependent on long-term care is higher than in the Reference scenario)
The key findings are that the financial requirements for long-term care are highly likely to significantly increase. Only in very optimistic scenarios do we see any stability in the contribution rate or even a slight potential for decrease. This does, however, presuppose a moderate increase in the need for long-term care combined with a favourable wage trend. In all other scenarios the financial requirement for the SPV increases (sometimes, greatly). In view of the aging population this comes as no real surprise.
Firstly, SPV financial requirements were determined for a legislative status quo up to the year 2060. Next, the impacts of the selected reform options were modelled and quantified.
These calculations were based on Prognos’ very own social insurance model OCCUR. This was established on the basis of various assumptions that define a corridor of potential developments. Two factors in particular were varied: the development of the number of persons dependent on SPV long-term care and the development of the base rate of pay.
About the study (PDF in German, AOK website)
Project team: Dr Oliver Ehrentraut, Gwendolyn Huschik, Dr Stefan Moog
Latest update: 05.09.2024
Partner, Director, Head of Economics Division
Project Manager
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