Care subsidies: When low-income earners have to protect rich heirs

23.10.2025 14:53

Long-term care insurance subsidies for out-of-pocket costs in nursing homes primarily benefit people who could otherwise pay for their own care. Nevertheless, some "social policy experts" are calling for an expansion of these subsidies. This would place an additional burden on jobs and average earners.

At first, it sounds like good news: More than two-thirds of pensioner households in Germany are so well-off financially that they could afford a stay of up to five years in a nursing home from their own income and assets.

This finding from an IW study takes on a bitter aftertaste because these well-off people are by no means required to contribute to the costs of care within their means. Statutory long-term care insurance covers – among many other benefits – up to 75 percent of care-related expenses for residential care. It's nice for those affected if their own assets are protected in this way. But as is so often the case, one man's joy is another man's sorrow.

One of the most expensive social reforms

The whole thing becomes bitter news because these subsidies, introduced in 2022, are among the biggest cost drivers for our already overstretched social systems: As early as spring 2025, a study by the IGES Institute had shown that the statutory long-term care insurance supplements to co-payments in nursing homes are developing into one of the most expensive social reforms in recent years.

Instead of the annual costs of €2.5 billion originally forecast by the Federal Ministry of Health until 2025, the actual expenditures of the social long-term care insurance system already reached €3.6 billion in the first year. Last year, the costs rose to €6.4 billion. And by the end of the legislative period, they could rise to as much as €9.4 billion annually.

Care allowances are inheritance protection

This money effectively protects the inheritance of the next generation. It is financed through social security contributions, which place a burden on employees and the labor market. Thus, even lower-income contributors subsidize the asset protection of wealthier care recipients. This contradicts any notion of solidarity, even in its current form.

However, for some time now, the idea of expanding the procedure and further reducing co-payments has been circulating – under the label of "social policy," of all things. The SPD favors full coverage of these contributions, or at least a cap on care costs in nursing facilities at €1,000 per month. Paradoxically, this cap would benefit people requiring shorter-term care more than the current regulations, while those requiring long-term care would be disadvantaged.

Costs of expansion

The Scientific Institute of Private Health Insurance (WIP) has now calculated the extent to which those in need of care would benefit from such regulations. According to the current WIP brief analysis, the income and asset-saving effect over a five-year period ranges from €52,146 with a care cost cap of €1,000 to €112,146 with the full co-payment covered by long-term care insurance.

As already mentioned, this money would largely benefit people with middle or even higher incomes and assets – and their heirs. Those truly in need don't actually depend on it: Those who can't afford accommodation in a care facility themselves already receive another social benefit, "Assistance for Care." Currently, this applies to about a third of nursing home residents. In this respect, the argument of subsidy proponents that only with ever-decreasing personal contributions can one afford care at all is irrelevant.

„Supplement “partial care insurance” with additional insurance

And so the WIP concludes that limiting co-payments is "neither efficient nor fair. It leads to free-rider effects, burdens the contribution-financed community of solidarity, and weakens the equivalence principle of social insurance. Instead of blanket co-payment limitations, targeted, means-tested support measures should be used that actually relieve the burden on those in need without unfairly privileging wealthy households."„

The existing partial coverage structure of long-term care insurance continues to correspond to the original concept of risk coverage with individual responsibility and should be retained in its basic orientation. The federal-state working group "Future Pact for Long-Term Care," established to stabilize long-term care insurance, should not challenge this, but rather examine how this partial coverage system can be secured, for example, through capital-funded supplementary insurance.