Ruhr Economic Papers

Ruhr Economic Papers #203

Are You Well Prepared for Long-term Care? – Assessing Financial Gaps in Private German Care Provision

by Matthias Keese, Annika Meng and Reinhold Schnabel

UDE, RGS Econ, 09/2010, 29 S./p., 8 Euro, ISBN 978-3-86788-232-3



The development of expenditure for care services is one of the most intensively debated topics in public. However, studies calculating financial provision gaps only focus on the macro-level implications for the compulsory care insurance. In contrast, this paper examines the individuals’ micro-level perspective. We use survey as well as regional and national statistical data to calculate expected individual costs of long-term care on a very detailed care arrangement and care level basis. Afterwards, we compare these costs with the individuals’ total wealth. In our most conservative policy scenario, our results show that about a third of statutorily insured individuals will have to face a financial care provision gap. Among homeowners, an even higher share will have to liquidate the main residence. The privately insured are affected to a somewhat lower extent. In both groups, the situation will become much more severe if the development of public transfers does not keep up with future increases of long-term care costs. Furthermore, regression analyses show that provision gaps are more frequent among statutorily insured individuals, females, and individuals in single households.

JEL-Classification: D91, H75, J14

Keywords: Long-term care costs; care prevalence; life expectancy; provision gap