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Reform of the long-term care system

Partner Institute: 
Bertelsmann Stiftung, Gütersloh
Survey no: 
Lisac, Melanie
Health Policy Issues: 
Pflege, Finanzierung, Qualitätsverbesserung, Leistungskatalog, Zugang, Patientenbelange
Current Process Stages
Idee Pilotprojekt Strategiepapier Gesetzgebung Umsetzung Evaluation Veränderung/Richtungswechsel
Implemented in this survey? nein nein nein ja nein nein nein
Featured in half-yearly report: Health Policy Developments 10


In October 2007, the Government introduced a draft law for the reform of the German long-term care system. The main objectives of the reform include: strengthening home care; improving care for people with mental diseases; improving quality of care. Measures to reach these objectives include: establishment of local LTC support centers and case managers who help organize and coordinate care; increasing benefits; development of evidence-based care standards and regular quality inspections.

Purpose of health policy or idea

Introduction of long-term care insurance in 1995

In 1995, Germany introduced a mandatory, universal social long-term care insurance (LTCI) system, which is financed through equal employer and employee contributions. The total contribution rate is 1.7% of gross income. The system is administered by the sickness funds and provides both capped cash benefits and services to the eligible population. Beneficiaries are assigned to one of three care levels. In December 2007, almost 80 million people were covered either by social or private long-term care insurance; out of the 2.1 million beneficiaries, 1.4 million received home care benefits and 0.7 million received care in nursing homes (Federal Ministry of Health, 2007). 

Rising and changing demands require adjustments

Since its inception the German LTCI system has remained basically unchanged. Contribution rates have been the same since 1996 (ie. 1.7%), leading to a situation where expenditures have exceeded revenues. Benefits have not been increased and prices not adapted to inflation which lead to a real loss of value for beneficiaries. Moreover, with its focus on physical diseases and deficits, the system has so far not adequately recognized the needs of the growing number of people with mental diseases. Also, there have been ongoing discussions about the quality of care provided in residential and home care. The reform proposal described in this report aims to address these shortcomings of the current system. Furthermore, the government's objective is to increase responsiveness to patient wishes for a self-determined life in their own homes or communities by further promoting home care.

Main objectives of the reform proposal

The objectives and instruments of the reform proposal are multiple:

  • Strengthening home care

Local long-term care support centers are to be established for every 20,000 citizens. Ideally, all actors involved in long-term care, that is sickness/LTC funds, private long-term care insurers, municipalities, social welfare bodies and local long-term care providers should be represented in these centrally located, easy-to-reach, barrier-free centers. They are to be managed by the sickness/LTC funds and provide information on available care services, facilities and providers, as well as support with paper work and decisions to beneficiaries and their families. This is supposed to facilitate organization of care - ranging from meals on wheels, help with activities of daily living to medical care - and cooperation between involved actors. Citizens no longer need to seek assistance from a variety of providers at different locations - as is the case today - but will be offered advice, direction and available care according to the one-stop shopping principle.

So-called long-term care coordinators (case managers) working in the local support centers are to pro-actively support and advise beneficiaries and their families. Specifically, they are to set up individual care plans, coordinate with providers and arrange for services to be delivered to beneficiaries. Every LTC beneficiary would be entitled to this kind of support. This is supposed to make home care more attractive and easier accessible, and thus to decrease demand for institutional care.

Home care is also to be strengthened by promoting assisted living for the elderly and apartment-sharing communities. In the future, inhabitants can pool their benefits and jointly employ caregivers. This is supposed to increase efficiency.

  • More support for family caregivers

Employees who care for relatives are to be allowed to take six months of unpaid leave of absence while being covered by social insurance. This regulation is to apply to all companies with more than 15 employees. In acute cases, employees are to be allowed to take ten days of unpaid leave.

  • Increasing LTCI benefits

Financial benefits and benefits in kind are to be increased stepwise until 2012 (see tables 1a-c). According to the principle "home care over institutional care", home care benefits will be increased to a higher degree than institutional care benefits. From 2015 on, benefits are to be adjusted to the current pricing trend every three years. Also, benefits for the disabled and for patients with mental diseases (eg. dementia or Alzheimers) are to be increased substantially: from currently 460 Euros per year to 2400 Euros per year. Moreover, eligibility for day care for the disabled and patients with mental diseases is to be expanded.

These new and expanded benefits are to be financed through an increase in contribution rates: From July 2008, contribution rates will be raised by 0.25 percentage points, from 1.7% to 1.95%. While earlier versions of the reform bill aimed at a higher increase to ensure financial sustainability for a longer period of time, an increase above the "magic line" of 2% could not be agreed upon for political-populistic reasons.

Table 1a: Development of service benefits (in Euros) - home care sector

  2007 2008 2010 2012
Care level I 384 420 450 450
Care level II 921 980 1,040 1,100
Care level III 1,432 1,470 1,510 1,550


Table 1b: Development of service benefits (in Euros) - institutional care sector

  2007 2008 2010 2012
Care level I 1,023 no change    
Care level II 1,279 no change    
Care level III 1,432 1,470 1,510 1,550


 Table 1c: Development of cash benefits (in Euros)

  2007 2008 2010 2012
Care level I 205 215  225 235 
Care level II 410 420  430 440 
Care level III 665 675 685 700


  • Improving quality of care

The draft law proposes that all actors involved in long-term care (ie. LTC funds, providers, social welfare bodies, municipalities, self-help groups, professional organizations, independent experts) jointly develop mandatory care standards (similar to treatment guidelines in health care). Care institutions are to be examined every three years and results are to be published in a language that is understandable for the general public. The issue of long-term care quality has regained importance with the publication of the second report on quality of long-term care ( by the Medical Review Board of the umbrella organizations of sickness and long-term care funds (MDS) in August 2007. The report found substantial shortcomings in the care for 10% of nursing home residents - despite overall improvements since 2003.

  • Promoting rehabilitation

Care institutions are to be rewarded for improving the health status of their residents. If the health status of residents improves to such a degree that they can be downgraded in their care level, nursing homes will receive a one-time bonus of 1,536 Euros.

  • Promoting civic engagement

Sickness/long-term care funds, states and other stakeholders are supposed to better integrate voluntary service providers into community long-term care provision. Volunteers are to receive greater support through professional networks and trainings.

  • Promoting self-responsibility in financing of LTC

Statutory LTC funds will be allowed to advertise private LTC insurance contracts to their insured. As in private health insurance, LTCI reserves for old age are portable in case of change of insurer.

Main points

Main objectives

  • Strengthening home care
  • Providing more support for family caregivers
  • Increasing LTCI benefits
  • Improving quality of care
  • Promoting rehabilitation
  • Promoting civic engagement 
  • Promoting self-responsibility for financing of long-term care

Type of incentives

Financial incentives:

  • start up financing for the establishment of community support centers
  • lump-sum payments to nursing homes that actively promote health status of their residents
  • increase in financial benefits and benefits in kind

Non-financial incentives:

  • one-stop shop to support patients and their families 
  • unpaid leave of absence for family carers with continued social insurance coverage
  • participatory development of compulsory care standards
  • promotion of civic engagement 

Groups affected

LTCI beneficiaries, family carers, LTC funds, providers of long-term care, municipalities, social welfare authorities


Characteristics of this policy

Innovationsgrad traditionell neutral innovativ
Kontroversität unumstritten recht kontrovers kontrovers
Strukturelle Wirkung marginal recht fundamental fundamental
Medienpräsenz sehr gering neutral sehr hoch
Übertragbarkeit sehr systemabhängig neutral systemneutral

Degree of innovation - In terms of financing and the focus on home care, the current reform proposal largely follows earlier discussions. However, local support centers are innovative in that they promote coordingation of care and make organization of care for beneficiaries and family caregivers easier. Caregivers and patients can do "one-stop shopping".

Degree of controversy - Stakeholders all agree on the general need for reform of the long-term care system. However, single measures proposed in the draft law raise controversy - community support centers are seen as a new bureaucratic layer by some Christian Democrats, by the opposition parties and by single care providers. Moreover, the centers raise a lot of constitutional and contractual questions with regard to administration and management, cooperation between self-governing bodies and public bodies, financing, etc.; the unpaid leave of absence proposition is opposed by employers; and many actors criticize that the reform proposal does not solve problems related to financing of care in the long-term.

Structural/systemic impact: The structural and systemic impact of the measures proposed in the draft law is medium to somewhat fundamental. The general financing mechanism of long-term care will remain unchanged. The ongoing focus on home care (increase in home care benefits, introduction of case management, etc.) might lead to an increased demand for such services. If local support centers will be established, this could improve coordination between involved actors and thus improve care for beneficiaries.

Public visibility - The reform is being discussed in various professional and public newspapers. The issue of quality received heightened attention after the publication of the second MDS quality report which revealed substantial shortcomings in long-term care. All in all, long-term care reform does not receive the same high degree of attention as the last health care reform.

Transferability - The problems that are addressed by this reform and the respective reform measures are very much the consequence of how the German system was set up in 1994. In this respect, the reform is system-dependent. However, the underlying principles, ie. aging in place, improving care for the mentally ill, improving quality of care, promoting cooperation between various actors are also being discussed in other countries. Measures such as the development of expert standards, quality inspections, case management, etc. are not dependent on systems themselves and could be transferred to other countries.

Political and economic background

Rapidly aging population

In 2005, 15.9 million people or 19.25% of the German population were 65 years of age or older. By 2050, this group is estimated to represent more than 30% of the total population (Federal Statistical Office, 2006). In 2007, 2.1 million persons received long-term care insurance benefits (Federal Ministry of Health, 2007); by 2040, this number is expected to rise to approximately 3.4 million (von Schwanenfluegel, 2006). To be able to meet the foreseeable rising demand for long-term care and to keep the system financially sustainable, experts and politicians have long called for a reform of the existing long-term care insurance system.

Expert committee recommendations for reform of long-term care insurance

In autumn 2003, the government established an expert committee (Runder Tisch Pflege), which had the task to develop recommendations for the improvement of long-term care. The committee consisted of representatives from sickness funds, long-term care providers, patient representatives and academic researchers. In September 2005 the working groups of this advisory committee published their final reports. Some of their recommendations, such as a stronger recognition of needs and expansion of services for persons with mental diseases, the development and diffusion of evidence-based care standards in long-term care or the promotion of case management to support long-term care beneficiaries and their relatives with the organization of care have been taken up in the current reform proposal.

Change based on an overall national health policy statement

In 2005, Christian Democrats and Social Democrats included reform of the LTCI system as one of their tasks in the coalition agreement.

Purpose and process analysis

Current Process Stages

Idee Pilotprojekt Strategiepapier Gesetzgebung Umsetzung Evaluation Veränderung/Richtungswechsel
Implemented in this survey? nein nein nein ja nein nein nein

Origins of health policy idea

Against the background of a rapidly aging population, rising and changing demands, and rising expenditures, a reform of the current long-term care insurance system has been inevitable. While the general need for reform has been widely acknowledged, there have been debates about how to achieve financial sustainability, better services, higher quality and stronger patient-orientation. The main driver of the reform is the Ministry of Health. The proposal will now be discussed in parliament and other stakeholders will be invited to comment on the proposal in hearing sessions.

Generally, the new proposal follows earlier discussions about how to promote home care and how to ensure financial sustainability of the system. Since the inception of the LTCI system in 1995, home care has been successfully promoted through the provision of cash and service benefits for this kind of care. In 2002, a law was enacted that provided more funds for the improvement of home care services, especially for persons suffering from dementia, Alzheimer's and other mental diseases. Monies were spent on home and short-term care services for this group of beneficiaries, on training of volunteers and on information material.

The current proposal however seeks to further promote home care by providing better support with the organization and coordination of care (through local support centers and case managers) and by increasing financial security of caregivers through granting unpaid (10 days for organizing care for an elderly person, up to 6 months for actually taking care of a person in need) leave of absence during which caregivers will keep their social insurance.

The proposal also recognizes the growing demand for services for persons with cognitive diseases. Cash and service benefits will be raised massively and more money will be spent on pilot projects to improve care for this population group and their relatives.

Initiators of idea/main actors

  • Regierung
  • Parlament
  • Leistungserbringer
  • Kostenträger
  • Bürgergesellschaft
  • Privatwirtschaft, privater Sektor
  • Andere

Approach of idea

The approach of the idea is described as:
amended: This reform will amend Social Security Code XI, Social Long-Term Care Insurance, which was established by law in 1994.

Stakeholder positions

In their coalition agreement from November 2005, Christian Democrats and Social Democrats agreed upon the reform of the German long-term care insurance system. Main objectives put forward in the coalition agreement were ensuring sustainable and fair funding of long-term care, increasing benefits, improving care for persons with cognitive diseases, decreasing the bureaucratic burden, expanding support for family carers, promoting alternative forms of living for the elderly. 

Christian Democrats criticize certain aspects of the reform proposal such as the establishment of local support centers. They argue that the centers would lead to more bureaucracy and that financial and human resources that are needed in actual care delivery would be diverted to these care centers. Instead of local support centers and entitlement to advise from case managers, Christian Democrats vote for the introduction of counseling vouchers. Beneficiaries would use these vouchers to receive advise from accredited care providers. One voucher would cover up to four advise sessions. The Ministry of Health opposes this suggestion. It argues that the vouchers would not cover counselling needs exceeding the four sessions and that accreditation would lead to more bureaucratic work. Moreover, vouchers would prevent stronger cooperation between actors and better coordination of care.

The Greens demand more patient-orientation and provision of care according to the needs and wishes of beneficiaries. They criticize that the reform proposal does not go far enough with regard to financing - they call for a citizens insurance scheme which would cover all citizens (also privately insured persons) and draw on all types of income (wages, income from rent, capital investments, etc.) and for the creation of a so-called demographic reserve, a budget that is to be accrued to cover increasing expenditures due to demographic aging. The main point of criticism for the Liberal Party is also the financing question. They call for a revision of the current system and the introduction of a funded and premium-based financing system.

Sickness funds generally welcome the reform proposal. They support the idea to strengthen home care through case management and the cooperation of sickness funds, long-term care providers and municipalities (as planners and providers of municipal long-term care and social services). However, they question the necessity for the creation of new institutions (ie. local support centers). Sickness funds also call for a thorough and evidence-based but swift revision of the eligibility criteria and the notion "in need of care" on the basis of which sickness funds grant entitlements for LTCI benefits. Current eligibility criteria focus on somatic symptoms and deficits and thus disadvantage persons with cognitive diseases such as dementia. A government advisory council is to work out recommendations for a revision until November 2008.

The Medical Service Departments of sickness funds who are responsible for assessment of long-term care beneficiaries and quality in long-term care provision welcome the measures regarding quality improvement, ie. external quality assessments, development of care standards, etc.   

Providers and their interest groups such as associations of public and private welfare organisations also generally support the ideas and principles put forward in the reform proposal. However, their criticism hinges on issues of responsibility (for example concerning management of care centers which is supposed to sit with sickness/LTC funds but which, according to welfare and provider organisations, should be independent of payers), feasibility of proposed measures (financing of local support centers and case managers not sufficient) and long-term financing of the LTCI system (current changes, that is the increase in contribution rates do not go far enough).   

Municipalities, that is cities and communities who are responsible for planning social welfare and long-term care services for their citizens, welcome the measures regarding quality improvement and the promotion of home care. Their criticism is addressed at the lack of long-term strategies to ensure financial sustainability of LTCI and at local support centers. Municipalities generally support the idea but fear that successful implementation is endangered if responsibilities are not clearly allocated between all involved actors. They criticize that the local support centers are to be managed by sickness/LTC funds and argue that municipalities would be better suited for this task because municipalities better know the local provider infrastructure. Since the MoH is however not authorized to allocate new tasks to municipalities within the federal German system, this structural change would have to be implemented in a separate law by the federal states.

The Federation of German Trade Unions argue that the poor conditions in residential homes and in home care are partly the result of years of underfinancing of long-term care. The Federation therefore demands more financial resources for the long-term care system and an increase in benefits. They call for higher qualified staff rates to help decrease overwork and the physical and psychological burden on caregivers.

Employer representatives criticize the six months unpaid leave proposal. This leave of absence would be a high strain on especially small and medium-sized companies. Instead, employer organizations would prefer voluntary agreements between employers and employees. Also, employer groups argue that the planned increases in contribution rates and services would further raise non-wage labor costs. They criticize that the reform proposal lacks plans for greater self-responsibility of beneficiaries (eg. introduction of deductibles, promotion of private (supplementary) insurance).

Actors and positions

Description of actors and their positions
MoHsehr unterstützendsehr unterstützend stark dagegen
Christian Democratssehr unterstützendneutral stark dagegen
The Greenssehr unterstützendneutral stark dagegen
Liberal Partysehr unterstützendneutral stark dagegen
Left Partysehr unterstützendneutral stark dagegen
Provider organisationssehr unterstützendneutral stark dagegen
Sickness/LTC fundssehr unterstützendunterstützend stark dagegen
Trade Unionssehr unterstützendneutral stark dagegen
Privatwirtschaft, privater Sektor
Employer representativessehr unterstützenddagegen stark dagegen
Municipalitiessehr unterstützendneutral stark dagegen

Actors and influence

Description of actors and their influence

MoHsehr großsehr groß kein
Christian Democratssehr großneutral kein
The Greenssehr großneutral kein
Liberal Partysehr großneutral kein
Left Partysehr großneutral kein
Provider organisationssehr großneutral kein
Sickness/LTC fundssehr großneutral kein
Trade Unionssehr großgering kein
Privatwirtschaft, privater Sektor
Employer representativessehr großgering kein
Municipalitiessehr großneutral kein
MoHSickness/LTC fundsTrade UnionsChristian Democrats, The Greens, Liberal Party, Left Party, Provider organisations, MunicipalitiesEmployer representatives

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

The draft law is currently being discussed in parliament. Stakeholders have the opportunity to comment on the proposal in hearing sessions. It is expected that the law will come into force in July 2008.

Actors involved in the implementation process would be the sickness funds as the administrators of the long-term care system, long-term care providers (nursing homes, home care providers), municipalities, researchers. Active involvement and commitment on the side of these stakeholders would be crucial in establishing local support centers because success of these centers depends on the cooperation between them.

Expected outcome

Improvements in care for the mentally ill

Measures proposed in the draft law would mean improvements in the care for persons with mental diseases. Benefits for this population group will quintuple by 2015 (compared to current benefits) and more money will be spent on pilot projects. However, revision of the notion "in need of care" and of eligibility criteria will be important to ensure that needs of this population will be taken into account in the long-term. A working group, appointed by the MoH, is to develop recommendations for a new definition and new criteria until fall 2008.

Better information and access to home care services

Home care could be strengthened by the establishment of local long-term care support centers and case managers. Case managers will inform persons in need of care and their relatives about existing care services and help them to organize and coordinate care. Moreover, the increase in home care benefits will make home care more attractive for beneficiaries.

Improved quality of long-term care

Quality of care will improve with the developement and compulsory implementation of care standards. Regular quality inspections and the publication of inspection results will act as an incentive for providers to further improve quality of long-term care.

Strategy for long-term financing still unclear

The increase of contribution rates will help to finance the envisioned benefit increases and new services until 2014. However, with a rising number of beneficiaries, rising expenditures, and a decreasing number of contributors, further steps to stabilize finances of the system in the long term seem to be necessary.

Stakeholders discuss various options: the creation of a capital stock through a one-time increase of the contribution rate to 2.3 %; a complete change from a pay-as-you-go system towards a privately funded long-term care insurance system; increasing self-responsibility through private supplementary insurances, etc. While the first two options are highly controversial and their implementation very unlikely, there is a trend towards putting greater responsibility on individuals (even though LTCI - with its capped benefits - has never been full coverage). Similar to developments in the health insurance system, sickness funds are to be allowed to offer private supplementary long-term care insurances.

Impact of this policy

Qualität kaum Einfluss neutral starker Einfluss
Gerechtigkeit System weniger gerecht four System gerechter
Kosteneffizienz sehr gering neutral sehr hoch

Quality - The reform proposal foresees quality inspections of residential homes and home care providers every three years (so far, there existed no specific regulations concerning quality inspections - according to the MoH, inspections took place every 5 years on average). Also, the development of evidence-based care standards and the professionalisation of long-term care will have a positive impact on quality. Moreover, the reform proposal stipulates that results of residential home evaluations are to be published in a language understandable for lay persons. This could be an incentive for residential home managers to improve the quality of care in their institutions.  

Equity - According to the draft law, every person in need of care will be entitled to receive information and support from case managers in local support centers. This could improve access to services and thus equity. Also, the reform proposal takes better recognition of the needs of persons with mental diseases by increasing benefits for this population group. In a next step, the government will revise the definition of "in need of care" and eligibility criteria for long-term care benefits to further improve their situation.

Costs - The government estimates that the proposed measures will lead to additional LTCI expenditures of up to 2.2 billion Euros in 2012. They will be financed through an increase in contribution rates by 0.25 percentage points. From 2015 on, when benefits will be regularly adjusted to pricing trends, another rise in contributions is likely to be necessary. With its focus on home care and the promotion of rehabilitation, service provision might become more cost-efficient since more expensive stays in residential homes can be delayed and/or shortened. Furthermore, the above described quality measures will improve services which means more effective usage of finances.


Sources of Information

Federal Government. Working together for Germany - with courage and compassion. Coalition agreement between the CDU, CSU and SPD. November 11, 2005.

Federal Government. Entwurf eines Gesetzes zur strukturellen Weiterentwicklung der Pflegeversicherung (Pflege-Weiterentwicklungsgesetz). Gesetzentwurf der Bundesregierung. October 2007. (Draft law for the reform of the long-term care insurance system)

Federal Ministry of Health. Selected facts and figures about long-term care insurance. Bonn. December 2007.,templateId=raw,property=publicationFile.pdf/pdf-Selected-Facts-and-Figures--04-2005--pdf.pdf

Federal Statistical Office. Germany's Population by 2050. Results of the 11th coordinated population projection. Wiesbaden. 2006.

Statements on the reform proposal by various actors involved in long-term care. Available at

von Schwanenflügel, Matthias. "The German Long-Term Care System and Future Reform". Speech held on the occasion of a visit in Seoul, South-Korea, September 2006.

Author/s and/or contributors to this survey

Lisac, Melanie

Reviewer: Sophia Schlette

Empfohlene Zitierweise für diesen Online-Artikel:

Lisac, Melanie. "Reform of the long-term care system". Health Policy Monitor, January 2008. Available at