Long-term care insurance is reaching a critical threshold because expenditures are growing faster than the funding base. The average out-of-pocket cost for nursing home care already exceeds €3,000 per month, while at the same time, the insurance funds are accumulating deficits. This is precisely the scenario that critics warned about before 1995: A partial-benefit system is being subjected to demographic pressure and experiencing a cost dynamic that can hardly be stemmed without political resistance. (nzz: 02.01.26)
Long-Term Care Insurance: Warnings from 1995 Become Reality
Even before its launch in 1995, critics predicted a clear chain reaction, because a partial-benefit system can never cover the full costs. They anticipated rising out-of-pocket expenses as wages, prices, and the need for care increased. Furthermore, they warned of the demographic impact, as more and more benefit recipients are facing a relatively smaller pool of contributors. What sounded like theory back then now seems like a user manual for the present. The long-term care insurance fund pays, but the bill often still falls on those affected.
The figures provide the evidence, while politicians are still grappling with guidelines. Around 5.7 million people already require care, and this number is expected to exceed 6.3 million by 2035. This increases the financial pressure, and the gap between flat-rate payments and actual costs is widening. Health insurance funds are reporting deficits, and the federal government has already had to intervene. This isn’t done out of convenience, but out of necessity, because without sufficient liquidity, benefit payments cease.
Out-of-pocket expenses and prevention: Where the burden arises
Out-of-pocket expenses directly impact households because they are due month after month. Many families finance these payments from savings, and these reserves dwindle rapidly. At the same time, rising nursing home costs exacerbate the gap, even though formal coverage exists. This dynamic also fuels the political conflict, as any cap on out-of-pocket expenses shifts the burden to contributors or the state. Prevention could relieve the system, but it is only effective if it begins early and is reliably available. Prevention remains insufficient in many regions, meaning that avoidable deteriorations more frequently lead to expensive long-term care.
Within the coalition, differing approaches are clashing as time dwindles until 2027. The SPD wants to limit out-of-pocket expenses, but the CDU/CSU considers a cap without offsetting funding unsustainable. At the same time, expectations are mounting because the coalition agreement promises a far-reaching long-term care reform. In practice, however, a common model is lacking, resulting in a lack of planning certainty for health insurance funds, care facilities, and families alike. This is driving the debate into a tough question of distribution, as someone has to fill the gap.
Long-Term Care Reform and Loans: Politics Buys Time
The federal government is using loans to close acute funding gaps, preventing immediate increases in contributions. After €0.5 billion last year, another €3.2 billion is slated to flow in 2026. This allows the state to bridge the next phase, but this instrument does not replace a structural solution. A loan merely postpones the problem, and the future is approaching faster than the reform. This is precisely why long-term care insurance currently resembles a system struggling against its own inherent instability.
A sustainable long-term care reform therefore requires more than just a problem analysis, because otherwise the cost dynamics will continue unabated. Policymakers must align benefits more closely with needs and expand preventative measures to measurably delay the need for long-term care. Simultaneously, a broader financing structure is needed so that long-term care insurance is not permanently dependent on loans. This requires a reform package that stabilizes revenues and limits out-of-pocket expenses without creating new injustices. If this fails, then what critics warned about urgently before 1995 will continue: The cost explosion will eat up the reserves and in the end those affected will pay ever higher co-payments.