Employers' associations | Long-term care insurance: Mortgage or sell your house if necessary

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Anyone who has to go to the hospital does not have to pay for the treatment themselves; that is covered by health insurance. Those who need care, on the other hand, often have to bear considerable costs themselves; for inpatient care, the average cost is €3,100 a month. This is because long-term care insurance only covers part of the necessary care. Many elderly people therefore fall into financial hardship , and their family caregivers are also particularly at risk of poverty and often forgo professional support because of the co-payments. But from the perspective of the umbrella association of German employers, social protection is still far too generous: the Confederation of German Employers' Associations (BDA) is demanding that politicians radically cut the benefits of social long-term care insurance. If necessary, people in need of care should even mortgage or sell their home to be able to pay for their care. The black-red coalition has already taken up key demands from the employers and is now considering cutting financial aid completely.

The coalition government has agreed that a federal and state working group should present proposals for nursing care reform. The working group began its work in July. The Federation of German Employers (BDA) took this opportunity to present its demands in a twelve-page paper . The employers' overarching goal is to reduce the total social security contributions paid by employees and companies from the current level of just under 42 percent to below 40 percent of gross wages. They should then be permanently capped at this level. To achieve this, the umbrella association of employers is demanding drastic cuts in nursing care support for elderly people. Four examples:

– In the first year of needing care, long-term care insurance should not yet provide "graduated benefits based on the level of care required," according to the BDA. During this "waiting period," people should therefore pay for their care themselves. Those unable to do so can take out private insurance or apply for social assistance, according to the BDA. When asked, the BDA did not answer what the graduating benefits mean, for example, whether particularly vulnerable people should be denied assistance for less than a year.

– Those in need of care and living at home are currently entitled to a "relief allowance" of €131 per month. This can be used, for example, to pay for household help to relieve the burden on family members. The BDA is calling for this amount to be abolished.

– People in need of care living in a nursing home currently have to pay an average of around €3,100 per month out of their own pocket, including around €1,580 for care. According to the Federation of German Associations (BDA), they will have to bear even higher costs in the future: The long-term care insurance "benefit supplement" is to be "concentrated" on people who have lived in the nursing home for more than two years. When asked, the BDA also declined to comment on whether this subsidy will be completely eliminated or reduced in the first two years. Currently, the subsidy in the second year averages €528 per month.

A "sustainability factor" is intended to limit insurance benefits if the number of people in need of care increases faster than the number of contributors – which will be the case. This would definitely lead to significant cuts, says health economist Heinz Rothgang of the University of Bremen in "nd.DieWoche." The arguably most knowledgeable nursing expert therefore calls the BDA's positions a "frontal attack" on nursing care insurance.

Already, one-third of nursing home residents rely on social assistance. If the BDA's proposal prevails, this number would continue to rise, Rothgang emphasizes. "Long-term care insurance was introduced to prevent care-related impoverishment—the BDA proposal achieves the exact opposite," he criticizes. Furthermore, the waiting period would require family members to provide even more care, which would increase the burden. Ultimately, the BDA's demands amount to a policy oriented toward the Anglo-Saxon welfare state model in care provision, which only guarantees a minimum subsistence level for those affected.

In fact, the position paper points in precisely this direction. The BDA writes: To ensure that long-term care insurance remains financially viable, it can be expected that those in need of care initially use their own income and assets to pay for care. Only after some time will the insurance company step in. It explicitly requires that elderly people "if necessary" mortgage or sell their condominium or house to finance the assistance. Ultimately, they could secure a right of residence, according to the BDA. Whether this should also be granted to the partner if the husband has to go into a nursing home remains open.

And what financial resources should those in need of care and their partners have left? An indirect answer to this question is provided by a report by the employer-friendly Institute of the German Economy (IW), which the BDA refers to. It estimates how many retired households could cover current care costs from their own income and assets if a household member were to enter a nursing home. The assumptions are crucial: The study's scenario assumes that the person living at home is allowed to retain an income just above social assistance. Nursing home residents are granted "pocket money." Everything else should be available for care. In addition, a "protected asset" of €10,000 per person is assumed, which is also based on social assistance rules. All other assets are also available for care costs in the model. The authors assume that the owner-occupied home or apartment will be sold if necessary.

In its model, the IW assumes that the partner of a person in need of care should only be left with enough to just exceed the social assistance level. According to the report, under this assumption, by 2023, around 71 percent of all pensioner households would have been able to cover the costs of inpatient care for one household member for two years. The calculations were based on the amounts that those in need of care actually had to pay themselves at the time. The BDA then uses this result as an argument that people can cover even more costs themselves.

The BDA is therefore relying on a model calculation in which those in need of care and their partners are supposed to pay until they become impoverished and are only just above the subsistence level. Just above, because, according to the report, the aim is to prevent people from claiming social assistance, as that would cost the state money again.

Criticism of "protecting" income

In all of this, the BDA (Association of German Professionals) is trying to portray social protection for the elderly as insubordinate. It criticizes the fact that the long-term care insurance benefit supplement for nursing home residents currently "primarily serves to protect the income and assets of those affected, and thus their inheritance." This statement is noteworthy in two respects:

First, employers who otherwise advocate protecting high incomes and assets speak here: They oppose a wealth tax, higher taxation of large inheritances, the abolition of the solidarity tax for higher earners, and lower corporate taxes. Large incomes and assets should be protected, but not grandma's house and grandpa's pension.

Secondly, employers are thus attacking a principle of the German welfare state: It is intended to protect small and medium-sized incomes against social risks, thus "protecting" them. Germany is considered the prototype of a "conservative welfare state," explains researcher Rothgang: The welfare state aims to safeguard living standards. The social position that employees have achieved should be protected against the vicissitudes of life. Governments have already weakened this idea in many ways, but it is still reflected in social benefits: Pensions and unemployment benefits are based on individual wages, health insurance covers expensive treatments, and sick pay is also wage-dependent. Long-term care insurance is already somewhat unusual because it only provides limited protection. But even this is too much for the BDA.

»Strict guidelines made unnecessarily«

The black-red coalition also wants to halt "the rising spending dynamics" in long-term care insurance, even though the number of people in need of assistance is growing. This makes benefit cuts likely. The federal-state working group is also supposed to examine "sustainability factors" in general. One example cited is the waiting period, also called for by the BDA. If the black-red coalition actually passes this, it would likely be the first time since the introduction of long-term care insurance 30 years ago that assistance is completely cut.

The coalition is already maintaining the pressure to cut costs. For example, the government has granted nursing care insurance a mere €0.5 billion this year – albeit in the form of a loan that must be repaid. It is undisputed, however, that the federal government still has to reimburse nursing care insurance for costs incurred during the pandemic that have nothing to do with care, emphasizes Rothgang. The GKV-Spitzenverband (National Association of Statutory Health Insurance Funds), which also represents the long-term care funds, estimates the amount the federal government still has to pay at €5.2 billion. That's a lot of money for nursing care insurance: it collected a total of €64 billion last year. The GKV-Spitzenverband (National Association of Statutory Health Insurance Funds) is also demanding that the federal government permanently pay the pension insurance contributions for family caregivers, which recently totaled €4.5 billion per year.

"By abolishing the debt brake, the government has given itself massive breathing room," says economist Rothgang. "Nevertheless, the Ministry of Finance has unnecessarily imposed strict requirements on long-term care insurance – especially here, where the crisis is burning. I didn't expect that."

For Rothgang, the current benefits of long-term care insurance are clearly inadequate. The high co-payments for inpatient care are just one example. He recently calculated in a study how it would be possible for long-term care insurance to cover all costs and thus offer people more protection (see info box). The study shows that there are alternatives to cuts that are detrimental to older people, who have little ability to defend themselves.

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