German Care Funds Face Insolvency Warning Amid Mounting Financial Pressure

Urgent Warning from Health Insurance Association

The German health insurance association (GKV-Spitzenverband) has raised alarms regarding the financial stability of the country's long-term care funds, warning that several could face insolvency in the coming year. Oliver Blatt, CEO of the GKV-Spitzenverband, indicated that while the care insurance scheme currently relies on 4.2 billion euros in federal loans, this funding is primarily a stopgap measure. He stated that these loans would 'cover most of next year's shortfall but could leave several care funds requiring short-term liquidity assistance by 2026.' This warning underscores a deepening financial crisis within Germany's social security system, with one care fund reportedly already applying for financial aid due to insolvency in March 2025.

Mounting Deficits and Rising Costs

The long-term care insurance system (Pflegeversicherung), established in 1994 as the fifth pillar of Germany's social security, is grappling with significant financial challenges. In 2023, care spending reached €519 billion, while revenues stood at €473 billion, illustrating a growing deficit. The GKV-Spitzenverband projects a deficit of approximately 5.5 billion euros for the statutory health insurance system for the current year, with further contribution increases anticipated for 2026. This financial strain is attributed to several factors:

• A sharp increase in the number of people requiring care, with 360,000 new cases in 2023 and an estimated 400,000 additional individuals expected in 2024.
• Rising tariffs in care services and increased subsidies for inpatient care.
• A weak economic climate impacting revenue generation.
• Chronic workforce shortages and escalating costs for care personnel.
• Out-of-pocket expenses for families are reportedly rising by 16-18% annually in some regions.
• The demographic shift, often referred to as the 'Baby Boomer Wave,' is expected to lead to a significant surge in the 70-80-year-old demographic by 2030, further increasing demand for long-term care.

Government's Stance and Proposed Reforms

Federal Health Minister Karl Lauterbach (SPD) has publicly countered claims of imminent insolvency, asserting in October 2024 that 'The care insurance is not insolvent, nor is it threatened with insolvency.' He assured that the federal government guarantees the provision of services for those in need of care. However, Lauterbach acknowledged that the system is under 'considerable financial pressure' due to a combination of weak revenues and high expenditures. He has announced plans to introduce a 'major care reform' in the near future to address these systemic issues.

Despite the minister's assurances, the GKV-Spitzenverband maintains that federal loans are not a sustainable solution and criticizes the government for not fully refinancing 'insurance-external benefits' (versicherungsfremde Leistungen) that are currently borne by the care funds. To stabilize the system, contribution rates are expected to increase. The average supplementary premium for health insurance could rise from 2.9% to at least 3.1%, pushing the overall contribution rate from 17.5% to approximately 17.7%. Additionally, the contribution rate for long-term care insurance is set to increase by 0.2 percentage points as an emergency measure.