Introduction on German Long Term Care System Hamburg, 23rd October, 2013 Prof. Dr. Heinz Rothgang Centre for Social Policy Research University of Bremen
Contents I. Long-term care and healthcare in Germany II. III. IV. LTCI in Germany: Some Basic Facts Issues of actual debate and for future reforms Lessons to be learned Prof. Dr. Heinz Rothgang 2
Contents I. Long-term care and healthcare in Germany 1. Health Care and Long-term care 2. Why was LTCI introduced? II. III. IV. LTCI in Germany: Some Basic Facts Issues of actual debate and for future reforms Lessons to be learned Prof. Dr. Heinz Rothgang 3
I.1 Long-term care and healthcare in Germany (1/2) Social insurance is backbone of welfare state in Germany 5 branches of social insurance Statutory health insurance (SHI) founded in 1883 oldest social insurance system in the world Social long-term care insurance (LTCI) founded in 1994 latest branch of social insurance Healthcare and long-term care: coverage About 86% of population: social insurance system About 12% of population: private (mandatory) insurance About 2% in public systems (policemen, firemen, military etc.) Social Healthcare and LTC: financing and expenditures Almost no taxes go into insurance systems (SHI: <10%, LTC: 0%) biggest share of expenditure (SHI: 60%; LTC: 50%) Prof. Dr. Heinz Rothgang 4
I.1 Long-term care and healthcare in Germany (2/2) Health insurance vs. LTCI: kind of services SHI: basically cure: acute medical treatment (hospital, doctors, drugs) rehabilitation, prevention, psychiatric care Also chronically ill and expensive cases Sick pay (generally after 6 weeks) LTCI: basically care Basic care (assistance with ADLs and iadls) Health insurance vs. LTCI: expenditure and contribution rate SHI: 184 billion Euro (in 2012), contribution rate: 15.5% SLTCI: 23 billion Euro (in 2012), contribution rate: 2.05% Health insurance is 8 times as big as LTCI Prof. Dr. Heinz Rothgang 5
I.2 The introduction of LTC insurance: Goals and rationale (1/4) LTCI Act was passed 1994 after 20 years of debate: 1. Why was the system introduced at all? Which problems did the Act address? Who were the advocates of the reform and why? 2. Why was it introduced at this time? under a centre-right coalition in a period of permanent austerity? 3. Why was it introduced the way it was introduced with two branches of insurance with the social insurance following the PAYGO system with capped benefits etc.? Prof. Dr. Heinz Rothgang 6
I.2 The introduction of LTC insurance: Goals and rationale (2/4) Underlying problem perception Demographic change: number of dependent elderly was expected to grow Socio-structural change: care capacities of families were expected to decrease Increasing numbers of dependent elderly in nursing homes relying on (means-tested) social assistance burden for municipalities LTCI was fostered by two distinct discourses Welfare state discourse: German welfare state aims at status maintenance. It is unworthy if citizens after a normal working life depend on welfare just because of needing long-term care High share of welfare recipients was perceived as social scandal Fiscal policy discourse Municipalities were increasingly suffering from high expenditures for people in nursing homes. Federal states acted as advocates. Prof. Dr. Heinz Rothgang 7
I.2 The introduction of LTC insurance: Goals and rationale (3/4) Course of events 1974: report of KDA started welfare state debate on LTC 1980s: federal states put forward reform proposals triggered by the fiscal policy debate 1990s: Fiscal strains due to German reunification. Federal Minster Blüm advocated introduction of LTC insurance Blüm advocated insurance though he rejected the idea before There was also a game for power within government. LTCI was legitimated by welfare state discourse. The introduction, however, was due to fiscal policy discourse. Prof. Dr. Heinz Rothgang 8
I.2 The introduction of LTC insurance: Goals and rationale (4/4) Reshaping of the welfare state rather than expansion: Introduction of LTCI was accompanied by cuts in other welfare state areas LTCI marks break with German tradition of service provision according to needs (as in health insurance) LTCI Act was shaped in order to prevent any cost explosion thereafter tight definition of dependency capped benefits (nominally fixed) discretionary adjustment of benefits Compromise between Christian Democrats and Liberals: two-pillar system with Social LTCI as PAYGO system, but Private mandatory insurance as funded system Prof. Dr. Heinz Rothgang 9
Contents I. Long-term care and healthcare in Germany II. III. IV. LTCI in Germany: Some Basic Facts 1. Basic institutional arrangements 2. Utilization: Extramural and intramural care 3. Benefits and co-payments 4. Remuneration and regional variations 5. Social Assistance 6. Overall financing Issues of debate and for future reforms Lessons to be learned Prof. Dr. Heinz Rothgang 10
II.1 LTCI in Germany: Institutional arrangements (1/5) Coverage: 86% of the population: social LTCI 12% of the population: private mandatory LTCI Financing: PAYGO system in Social LTCI, contributions levied on income from wages and salaries up to a certain income cap. Parity between employers and employees, extra contribution (0.25 percentage points) for childless since 2004. Funding in private mandatory LTCI, but with strong elements of PAYGO when introduced: benefits also for those already in need of care and capped premiums (for the elderly) Entitlement: According to ADL scheme, differentiated according to three levels of care, no age limit, assessment by Medical Service of funds Prof. Dr. Heinz Rothgang 11
II.1 LTCI in Germany: Institutional arrangements (2/5) Prof. Dr. Heinz Rothgang 12
II.1 LTCI in Germany: Institutional arrangements (3/5) Benefits: Cash benefits, in kind benefits (for home care) and benefits for nursing home care with choice for the beneficiary Capped benefits with caps below need, no provision for automatic adjustment of nominally fixed benefits In nursing home care: only capped benefits for care costs, nothing for room and board or for investment costs Amount of LTCI Benefits (Major Types of Benefits) in 2012 in euros per month Home care Day and night care Nursing home care Level Cash benefits In-kind benefits In-kind benefits In kind benefits I moderate 235 450 450 1,023 II severe 440 1,100 1,100 1,279 III severest 700 1,550 1,550 1,550 Special cases 1,918 1,918 Source: 36-45 SGB XI. Prof. Dr. Heinz Rothgang 13
II.1 LTCI in Germany: Institutional arrangements (4/5) Monthly rates, LTCI benefits and out of pocket payments in / Monat Level of dependency (1) (2) (3) (4)=(1)+(2) (5) (6)=(1)-(5) (7)=(4)-(5) Care Room & Investment Daily rate LTCI Board (total) benefits Out of pocket: care costs only Out of pocket: total Level I 1.369 629 395 2.393 1.023 346 1.370 Level II 1.811 629 395 2.835 1.279 532 1.556 Level III 2.278 629 395 3.302 1.510 768 1.792 Data from December 2011 (1, 2, 5) and from 2010 (3). Today LTCI benefits do not even cover care costs Out of pocket payment is higher than LTCI benefits in all levels of dependency Prof. Dr. Heinz Rothgang 14
II.1 LTCI in Germany: Institutional arrangements (5/5) Administration: Social LTCI is administered by LTCI funds founded as a branch of the respective sickness fund. LTCI is independent but under the umbrella of health insurance No competition between funds as all contributions go into one fund which covers all expenditure difference to health insurance Health Ministry oversees LTC but is not directly involved in organizing it Providers have a legal right to contracts with funds if they fulfil certain requirements no capacity planning! Prof. Dr. Heinz Rothgang 15
II.2 Utilization (1/4): Care Capacities in the formal sector Introduction of LTCI triggered expansion of formal sector Number of Providers Capacities of formal care Extramural Care Employees Whole time equivalents Intramural Care Number of Nursing homes Number of beds in nursing homes 1999 10,820 183,782 56,914 8,859 645,456 2001 10,594 189,567 57,524 9,165 674,292 2003 10,619 200,897 57,510 9,743 713,195 2005 10,977 214,307 56,354 10,424 757,186 2007 11,529 236,162 62,405 11,029 799,059 2009 12,026 268,891 160,921 11,634 845,007 2011 12,349 290,714 178,096 12,354 875,549 1999-2001 -2,1 3,1 1,1 3,5 4,5 2001-2003 0,2 6,0 0,0 6,3 5,8 2003-2005 3,4 6,7-2,0 7,0 6,2 2005-2007 5,0 10,2 10,7 5,8 5,5 2007-2009 4,3 13,9 14,5 5,5 5,8 2009-2011 2,7 8,1 10,7 6,2 3,6 1999-2011 14,1 58,2 63,7 39,5 35,6 Source: Statistisches Bundesamt: Pflegestatistik, verschiedene Jahrgänge. Prof. Dr. Heinz Rothgang 16
II.2 Utilization (2/4): Extramural vs. intramural care LTCI aims to favour family care over (formal) community care over nursing home care There are several measures favouring home care, e.g. Cash benefits for family care Pension benefits for informal care-givers Higher benefits for home care (in level I and II) Substitute caregivers for vacations Counselling Practical training ( Pflegekurse ) Nevertheless, there has been a trend towards formal care, though the rate of the shift is declining Prof. Dr. Heinz Rothgang 17
Share of beneficiaries II.2 Utilization (3/4): Shift towards intramural care 100 90 80 70 60 50 40 30 20 10 0 6,9 8,8 9,4 Utilisation of LTCI benefits 23,1 25,4 26,3 26,8 27,5 27,9 28,3 28,7 29,2 29,5 29,6 29,8 29,5 29,0 28,7 28,8 7,1 7,8 8,4 8,9 8,8 8,8 9,0 9,0 9,1 9,3 9,3 8,9 8,5 8,4 7,7 10,0 10,6 10,7 11,0 10,9 10,8 10,8 10,8 10,7 11,0 12,0 13,5 14,4 15 61,3 58,1 55,9 54,2 53,0 52,3 52,0 51,5 51,0 50,6 50,3 49,9 49,6 49,0 48,5 48,5 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year Pflegegeld Kombileistung Pflegesachleistung Stationäre Pflege Source: own calculations based on data published by the Federal Ministry of Health Prof. Dr. Heinz Rothgang 18
II.2 Utilization (4/4): The Future There are good reasons to assume a continuation of this trend Demography: Decreasing share of informal caregivers per dependent elderly Socio-structural change: Increasing share of 1-person households among elderly; children live further away Increase female labour market participation higher opportunity costs of family care-giving Declining duty to care felt by families Prof. Dr. Heinz Rothgang 19
II.3 Benefits and co-payments (1/5) From 1994 to 2008 LTCI benefits have been kept constant in nominal terms. Real purchasing power has been decreasing considerably and out of pocket payments increased. Prof. Dr. Heinz Rothgang 20
in Euro / month II.3 Benefits and co-payments (2/5) Out of pocket payment for care costs in nursing homes 800 779 782 768 Level I 755 Level II 726 Level III 696 700 667 600 576 585 558 545 532 513 500 454 423 394 400 385 365 339 346 303 300 284 253 242 224 Aim of the LTCI for nursing homes: coverage of care costs 1996 aim was reached for some nursing homes From 1999 onwards: rates exceeded LTCI benefits in all levels 2007: out-of pocket payment of 300-700 200 133 163 100 0 1999 2001 2003 2005 2007 2009 2011 2013 2015 Prof. Dr. Heinz Rothgang 21
II.3 Benefits and co-payments (3/5) From 1994 to 2008 LTCI benefits have been kept constant in nominal terms. Real purchasing power has been decreasing considerably and out of pocket payments increased. Only 2008 a first adjustment was introduced Increase: 1.4 per cent per year for 2007-2012, about inflation rate Financed by an increase in contribution rate from 1.7 to 1.95 percent For some benefits there is no increase at all Prof. Dr. Heinz Rothgang 22
II.3 Benefits and co-payments (4/5) Benefits and respective adjustments Year Change Average annual growth rate in % (geometric mean) 2007 2012 in in % of original value 2007-2012 1996-2015 Cash benefits for informal care Level I 384 450 66 17,2 3,2 0,8 Level II 921 1.100 179 19,4 3,6 0,9 Level III 1.432 1.550 118 8,2 1,6 0,4 Formal home care Level I 205 235 30 14,6 2,8 0,7 Level II 410 440 30 7,3 1,4 0,4 Level III 665 700 35 5,3 1,0 0,3 Nursing home care Level I 1.023 1.023 0 0,0 0,0 0,0 Level II 1.279 1.279 0 0,0 0,0 0,0 Level III 1.432 1.550 118 8,2 1,6 0,4 Total 7,1 1,4 0,4 Prof. Dr. Heinz Rothgang 23
in Euro / month II.3 Benefits and co-payments (5/5) Out of pocket payment for care costs in nursing homes 800 779 782 768 Level I 755 Level II 726 Level III 696 700 667 600 576 585 558 545 532 513 500 454 423 394 400 385 365 339 346 303 300 284 253 242 224 200 163 133 100 0 1999 2001 2003 2005 2007 2009 2011 2013 2015 Aim of the LTCI for nursing homes: coverage of care costs 1996 aim was reached for some nursing homes From 1999 onwards: rates exceeded LTCI benefits in all levels 2007: out-of pocket payment of 300-700 Until 2015: Increase of out-of-pocket payments in level I and II Prof. Dr. Heinz Rothgang 24
II.4 Remuneration: Institutional arrangements Nursing homes are remunerated by daily rates for care costs, room & board and Investment cost (as far as not publicly financed) LTCI benefits are for care costs only, Room and board costs are for inhabitants (social assistant) Investment should be financed by provinces, uncovered investment cost are for inhabitants (social assistance) Rates are negotiated between LTCI funds and social assistance Nursing homes Negotiations are based on external comparisons and individual costs. Negotiations differ between provinces Prof. Dr. Heinz Rothgang 25
II.4 Remuneration: Institutional arrangements Home care Remuneration is based on about two dozens of service packages ( Leistungskomplexe ) which differ between provinces Relative prices ( points per complex ) are assigned to those services This fee scale as well as the remuneration level (value of a point ) are negotiated on the Länder level. Due to different definitions of the service packages remuneration levels are hard to compare between provinces Prof. Dr. Heinz Rothgang 26
Sachsen MV Thüringen BB Stadtstaaten NS Saarland SH RP Hessen D Vgl.länder Berlin Bayern Bremen Hamburg BW W.-Lippe NRW Rheinland 56,0 60,1 60,8 62,8 62,8 66,8 68,3 71,5 71,7 72,5 73,0 73,6 74,4 76,2 76,8 77,5 78,6 79,1 81,1 82,9 II.4 Regional variation in (daily) nursing home rates Remuneration rate (care costs + room & board) (weighted average) Prof. Dr. Heinz Rothgang 27
II.4 Regional variation in nursing home rates (care + R&B) Nursing homes rates in level I Nursing home rates in level II Prof. Dr. Heinz Rothgang 28
II.4 Regional variation in nursing home rates (care + R&B) Nursing homes rates in level III Average daily rate in nursing homes Prof. Dr. Heinz Rothgang 29
Index: 1995 = 100 II.5 Social Assistance: beneficiaries and expenditures 160 140 Beneficiaries in nursing homes Expenditures in nursing homes Beneficiaries in home care Expenditures in home care 120 100 80 60 40 20 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 Prof. Dr. Heinz Rothgang 30
II.6 Overall financing of LTC in Germany Estimated Sources of Present Funding for Long-term Care about today Source of Funding In million Euro As % of Public / private Spending As % of All Spending Public Funding (total), consisting of *** 25.95 100 58.7 Public LTCI* 21,92 84.5 49.6 Private Mandatory LTCI* 0,72 2.8 1.6 Social Assistance 3,10 11.9 7.0 Welfare for War Victims 0,21 0.8 0.5 Out-of-pocket Private Funding (total)** on: 18.27 100 41.3 Nursing Home Care 13,06 71.5 29.5 Home Care 5,21 28.5 11.8 Total 44.22 100 Source: Rothgang et al. 2008: 88 Notes: * Cash allowances are included ** Estimated. *** Federal states shall fund investment costs of LTC providers. Respective activities have been declining and recent figures are not published and therefore not included her Prof. Dr. Heinz Rothgang 31
Contents I. Long-term care and healthcare in Germany II. III. IV. LTCI in Germany: Some Basic Facts Issues of actual debate and for future reforms 1. Future financing 2. Needs assessment and entitlement 3. Quality of care, case and care management 4. Future Caregiving Lessons to be learned Prof. Dr. Heinz Rothgang 32
in million Euro III.1 Future Financing (1/5) 6,000 5,000 4,000 3,000 2,000 1,000 0,000-1,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Überschüsse 3,44 1,18 0,80 0,13-0,03-0,13-0,06-0,38-0,69-0,82-0,36 0,45-0,32 0,63 0,99 0,34 0,31 Liquidität 2,87 4,05 4,86 4,99 4,95 4,82 4,76 4,93 4,24 3,42 3,05 3,50 3,18 3,81 4,80 5,13 5,45 Prof. Dr. Heinz Rothgang 33
III.1 Future Financing (2/5) Until 2008: Contribution rate was stabilized by decreasing purchasing power of LTCI benefits option seems to be closed for the future Given there is proper adjustment: contribution rate will increase from 2.05 percentage points 2013 up to 3.5-4.0 percentage points in 2050/60 If major flaws of the system could be healed (inclusion of the whole population and contributions levied on all kinds of income up to an increased income ceiling) increase can be limited to about 3.3 percentage points Prof. Dr. Heinz Rothgang 34
III.1 Future Financing (3/5) Last government rather introduced subsidy of 5 Euro per month on contracts with a premium of at least 10 Euro / month benefits of at least 600 Euro in level III obligation to except every applicant not yet in need of LTC no medical underwriting, but age specific premiums Waiting time no longer than 5 years Privatisation strategy Prof. Dr. Heinz Rothgang 35
III.1 Future Financing (4/5) Effects and problems of the new subsidy ( Pflege-Bahr ) Number of insurees will be limited Government put 100 million Euro aside 1.67 million contracts By summer: 150,000 contracts Insurance is unattractive for households with low income Redistribution from the bottom to the top as those with lower income will finance tax-subsidy for better off households that buy insurance Prof. Dr. Heinz Rothgang 36
III.1 Future Financing (5/5) Effects and problems of the new subsidy ( Pflege-Bahr ) cont. Problem of adverse selection New insurance is particularly attractive for those who could not buy normal insurance Due to this risk selection premiums must be higher In the US a respective programme (CLASS Act) was stopped as unworkable last year Insurance companies will nevertheless develop products as waiting time works as a safety net for the first five years and premiums may be raised thereafter. Overall problems result when Pflege-Bahr is used to stop proper adjustments in Social LTCI Prof. Dr. Heinz Rothgang 37
III.2 Needs assessment and entitlement (1/2) Definition of LTC is very strict, cognitive impairments and not considered properly when LTC is measured Remedy I: Introduction of new benefits 2001: up to 460 per year for people with cognitive impairments 2008: benefits up to 1,200 or 2,400 per year; benefits also for people with care level 0; extra staff for people with dementia in nursing homes 2013: additional benefits for people with cognitive impairments ( 123 SGB XI) Level 0: 120 / 225 per month (cash benefits, in kind benefits) Level I: 70 / 215 per month (cash benefits, in kind benefits ) Level II: 85 / 150 per month (cash benefits, in kind benefits) Prof. Dr. Heinz Rothgang 38
III.2 Needs assessment and entitlement (2/2) Remedy II: Expert Commission for the developent of a new entitlement 2006 09: Development of new definition and assessment reports in Feb and June 2009 12: though positively perceived: nothing happens 2012: March re-establishment of expert commission, report in spring 2013 Plans to implement new assessment in next reform Prof. Dr. Heinz Rothgang 39
III.3 Quality of care Introduction of LTCI has raised awareness more scandals are revealed Quality improvement has been a major issue: 2002: Pflege-Qualitätsstärkungsgesetz (PQsG): attempt to enforce control by contracts between funds and providers: never introduced properly, failed 2008 reform Increased obligations for internal quality management Tenfold increased in frequency of quality controls by Medical Service Publication of reports from quality controls in a digestible way introduction of competition based on quality Quality is still a major issue Prof. Dr. Heinz Rothgang 40
III.3 Case and care management There is a lack of proper case and care management for people in need of long-term care The 2008 reform introduced the obligation to funds to provide case management and introduced Pflegestützpunkte, i.e. local centers providing counseling Implementation has been slow as neither Länder nor LTC funds are too enthusiastic Evaluations rather reveal Pflegestützpunkte as a failure as they are not just much Prof. Dr. Heinz Rothgang 41
III.4 Future care-giving The problem: Family care-giving has been on the retreat For the future this trend is likely to continue With constant recruitment, retaining and return patterns the number of professional care-workers is going to decline Projections show an (additional) gap of about 500,000 full-time employees in care work by 2030 Who cares? Only solution: combined strategy Make a career in formal care-giving more attractive Stabilize family care via support for informal care-givers and improved opportunities to combine care-giving and gainful employment Mobilize the potential of community to care. Prof. Dr. Heinz Rothgang 42
Contents I. Long-term care and healthcare in Germany II. III. IV. LTCI in Germany: Some Basic Facts Issues of debate and for future reforms Lessons to be learned Prof. Dr. Heinz Rothgang 43
III. Lessons from the German Experience (1/3) Achievements Acknowledging long-term care as a social risk Coverage of the whole population Increasing public spending: factor 2.5 Reducing the number of people in nursing homes depending on welfare Huge reducing of expenditure on social assistant for people in nursing homes Improving care infrastructure (quantitative) Putting the quality issue on the agenda Work with a stable contribution rate for 15 years Prof. Dr. Heinz Rothgang 44
III. Lessons from the German Experience (2/3) Room for improvement Benefits Definition of entitlement: better provision for dementia Too little rehabilitation Quality of care Future sustainable care structures Proper adjustment of benefits Financing: sustainable financing Prof. Dr. Heinz Rothgang 45
III. Lessons from the German Experience (3/3) The German experience shows: A social insurance system should relate to the whole population. Contributions should be levied on all kinds of income, not just on income from gainful employment. Due to demographic and socio-demographic change over time the contribution rate necessarily goes up. Considerably co-payments are possible, but proper adjustment of benefits is vital. The definition of entitlement should be broad enough to include e.g. people suffering from dementia properly. Case and care management is necessary, particularly if beneficiaries may choose between different kinds of benefits. Support for family care is necessary if informal care has a role in care-giving Prof. Dr. Heinz Rothgang 46
The end Thank you for your attention! Contact: rothgang@zes.uni-bremen.de See also: Rothgang, Heinz (2010): Social Insurance for Long-Term Care: An Evaluation of the German Model, in: Social Policy and Administration, Vol. 44, No. 4, August 2010, pp. 436 460 Prof. Dr. Heinz Rothgang 47