Who should pay for health care?: How care can be saved

Germany's federal health minister, Carsten Linnemann of the CDU, faces mounting pressure to address a deepening crisis in the country’s long-term care insurance system. The proposed Pflegeneuordnungsgesetz (PNOG), aimed at preventing further increases in contribution rates while curbing rising out-of-pocket costs for nursing home residents, has become central to the debate over how to sustain the financial viability of the social care sector. Despite initial delays in getting the reform bill to the cabinet, officials expect a vote in September. The current contribution rate for the Social Care Insurance (SPV), shared equally by employers and employees, rose from 3.05 percent of taxable income in 2020 to 3.6 percent today, a jump of 18 percent. Meanwhile, the self-pay portion for nursing home residents has surged by 63 percent since 2020, reaching 3,364 euros per month. These figures highlight a growing imbalance between contributions and expenditures, with the ministry projecting a funding gap of 7.6 billion euros by 2027, nearly ten percent of current spending levels. To stabilize the system, the PNOG proposes raising the wage threshold for contributions from 5,813 to 6,450 euros per month, meaning higher earners and their employers would pay more. Additional measures include increasing the childless supplement, which is currently borne solely by employees, from 0.6 to 0.7 percent. Employers would also begin paying into the insurance for part-time workers, while free coverage for life partners is being restricted. On the expenditure side, the government plans to reduce pension contributions for caregivers to 70 percent, complicate the assignment of care levels, and suspend the tariff loyalty rule for nursing home staff. A key component of the plan involves shifting responsibility for investment costs in nursing homes from residents to the states. Currently, these expenses fall entirely on the shoulders of those living in facilities. Under the new proposal, the states would cover these costs, potentially reducing the financial burden on individuals. At the same time, the structure of co-payments for nursing home stays is set to change. Residents will face higher upfront costs initially, as the additional payments from insurers based on length of stay will apply later than before. However, regular adjustments to care benefits according to inflation could help slow the rise in personal contributions. While the draft legislation does not include the former SPD demand to freeze co-payments at a specific level, an idea deemed too burdensome for the insurance funds, the issue has resurfaced through the efforts of Saarland’s state premier, Anke Rehlinger of the SPD. She advocates for a cap on monthly out-of-pocket expenses, suggesting that anything above 1,500 euros should be covered by the care insurance. This approach aims to prevent excessive financial strain on individuals while ensuring sustainability for the system. Opposition to such proposals comes from the Association of Private Health Insurers (PKV), which rejects several elements of the reform. According to a study submitted to the Frankfurter Allgemeine Zeitung, the PKV opposes both a care cost ceiling and regular adjustments to benefit amounts. It argues that increasing the contribution base, tax incentives, or financial equalization between public and private care insurance are not feasible and could deter service providers and increase economic costs. The association warns that the current trajectory of rising social contributions is unsustainable, particularly for younger generations. For instance, someone born in 2010, who is now 16 years old and entering the workforce, is projected to pay nearly one-third more in social contributions over their lifetime compared to someone born in 1960. The PKV emphasizes that the rapid growth of care insurance premiums must be addressed, proposing instead that the overall spending of the care insurance system remain frozen at current levels. This would require a comprehensive overhaul of the existing framework, including mechanisms to ensure long-term affordability without placing undue pressure on future taxpayers. As discussions continue, the challenge lies in balancing immediate financial relief for residents with the need to secure the stability of the entire care insurance model.