Curbing the demographic “drifting dune” in long‐term care insurance financing: The case of Germany

Abstract

Long-term care provision and financing are becoming increasingly important matters in all ageing economies. Therefore, a major challenge for policy makers is to strike a balance between adequate care and sustainable financing. In this study, we evaluate the proposal of a so-called sustainability factor in German long-term care insurance. Considering changes in the beneficiary-contributor ratio, it aims for a rule-based consideration of demographic dynamics to alleviate pressure on long-term care financing. Using the framework of generational accounting, we demonstrate that this proposal could have a relieving effect on finances, depending on the share of involvement of current and future generations. It may offer an option for pay-as-you-go long-term care insurance systems worldwide that need to curb the impact of ageing societies. Therefore, this article addresses policy makers tasked with designing a sustainable financing model for long-term care insurance. It demonstrates that the sustainability factor represents a step

Life expectancy, long-term care demand and dynamic financing mechanism simulation: an empirical study of Zhejiang Pilot, China

“…The second contribution is that Zhejiang’s LTCI financing needs to grow at a relative high speed annually (5.25% under the medium scenario) to achieve sustainability in the long-term. It should be noticed that the LTCI financing parameters to achieve short-term and long-term fund equilibrium are different, and it is clear that long-term fund balance is a necessary condition to ensure the sustainability of the system [ 22 , 29 ]. If the accumulated surplus of the LTCI fund in Zhejiang Province before 2050 is used as a criterion for determining sustainability, as many studies have done [ 19 , 74 ], our results indicate that Zhejiang LTCI fund is projected to experience an accumulating deficit for over 20 years after 2050.…”

“…Most countries such as Germany and the Netherlands adopt a fixed percentage of income model to collect social LTCI premiums from individuals [ 20 ], and a few countries such as Singapore adopt a fixed amount premium model [ 21 ]. The premium of Germany LTCI has been 3.05% of gross income or 3.40% if individuals aged 23 and above without children since 2020 [ 22 ]. The Netherlands also has a tax-funded LTCI with the compulsory contribution of 9.65% of taxable income since 2017 [ 20 ].…”

“…OECD countries will face high pressure of LTCI financing because of increasing average public LTC expenditures to 2.3% of GDP in 2040 for the future financing level of LTCI [ 27 ]. Therefore, an adjustment factor is suggested incorporated to simulate LTCI fund to reduce future financing pressure [ 22 ], but a higher short-term financing will bring greater resistance to reforms. Most simulation studies on China’s LTCI, based on fixed percentage of income model, demonstrated that LTCI financing will increase rapidly based on different disability scenarios [ 28 – 31 ].…”

Quo vadis Pflegeversicherung?

“…Ist der Kostendruck hingegen noch stär-ker, lässt sich erahnen, welche Beitragssatzpfade alternativ eingeschlagen würden. Insgesamt bewegen sich diese Ergebnisse innerhalb der Bandbreite anderer Schätzungen zum SPV-Beitragssatz aus der jüngeren Vergangenheit [4,18,19].…”

Research on the income and expenditure forecast of long-term care insurance fund in Shihezi City based on community care

“…In the pay-as-you-go system, since insurance funds mainly rely on contributions from current workers, the model for sharing and distributing future long-term care risks lacks clarity. This can easily lead to instability in the system or inability to meet the demands ( 9 ). However, research shows that implementing a public long-term care insurance system is still beneficial, as insurance premiums are more accepted by the population than higher taxes ( 10 ).…”