Germany's long-term care system faces collapse amid rising costs

Germany's care crisis deepens as demand and costs spiral out of control

Germany's Care Crisis Deepens as Reform Plans Face Backlash

Germany's long-term care system has been grappling with major challenges for years: soaring numbers of people in need of care and rising costs are colliding with a severe shortage of care workers. A comprehensive overhaul of the system is urgently needed—and politically, at least, it is on the agenda. By the end of 2026, a reform package is set to be finalized, according to Federal Health Minister Nina Warken (CDU), following the concluding meeting of the joint federal-state working group "Future Care Pact" in December 2025, as reported by the Federal Ministry of Health (BMG).

Yet the working group's final report has so far met with criticism from care associations and politicians alike. Critics dismiss it as a "timid paper" lacking concrete solutions. Health economist Heinz Rothgang also views the situation with alarm. In an interview with MDR Aktuell, he outlines what "real reforms" would be necessary to resolve the crisis.

In 2017, Germany's Association of Statutory Health Insurance Funds (GKV) introduced a new definition of care dependency along with five care levels (Pflegegrade 1–5). This change expanded eligibility, allowing people with even minor impairments to receive support from long-term care insurance. According to the Federal Statistical Office, nearly 5.7 million people had an official care level in 2023—up from around five million in 2021 and just 3.4 million in 2017. While 2025 figures are not expected until December 2026, Rothgang predicts they will exceed six million.

Another key trend is the growing shift toward outpatient care. In 2023, nearly 86 percent of those in need of care were looked after at home—either by family members, professional outpatient services, or both, per the Federal Statistical Office. Rothgang estimates there are around ten million informal caregivers in Germany, alongside over 1.5 million professional care workers. This means one in five people in the country is directly affected by care responsibilities. Yet the system is critically understaffed: projections by the Federal Statistical Office suggest a shortfall of between 280,000 and 690,000 care workers by 2049.

The heavy reliance on home-based care is partly driven by cost. Compared to institutional care, it is considered more affordable—largely because family members provide unpaid support. Meanwhile, out-of-pocket expenses for nursing home residents continue to climb. An analysis by the Association of Substitute Health Funds (VDEK) found that in January 2026, new residents in their first year of institutional care paid an average of €3,245 per month—up €261 from January 2025 (€2,984). Rothgang calls the current situation "systemic failure," noting that these costs are now "twice the standard pension."

Rising personnel costs are the main driver behind the increasing out-of-pocket expenses, the VDEK explains. While higher wages for care workers are a positive development, the financial burden falls on those in need of care. Long-term care insurance, as outlined by the BMG, covers only care-related costs—up to a maximum of €2,096 for care level 5—plus a fixed subsidy toward the uniform facility fee (EEE).

Home-based care may appear far cheaper in comparison, but Rothgang argues this is only true from the perspective of the long-term care insurance system, which is already running massive deficits. "Studies show that the value of informal care amounts to roughly €200 billion per year—more than three times the total expenditures of the long-term care insurance fund," he explains. This creates a "distorted accounting" that makes outpatient care seem more cost-effective. From a broader societal standpoint, however, the legally enshrined principle of "outpatient before inpatient" primarily benefits the insurance system, which pays a maximum of €990 per month in care allowance for level 5—far less than institutional care would cost.

Health economist Heinz Rothgang sees a potential solution in comprehensive nursing care reform, requiring changes on both the spending and revenue sides. "My proposal is called sector-free care," he explains. His vision: a modular care system with standardized services that can be tailored to individual needs, regardless of whether care is provided at home or in a facility. Currently, he notes, there are two separate sectors—outpatient and inpatient—each with its own regulatory framework, service provisions, provider rules, and institutions. "We're regulating ourselves into paralysis by overseeing each model individually. All of that has to go," Rothgang argues. "We need unified regulations, less bureaucracy, and sector-free care."

On the revenue side, the expert also calls for reform, proposing to "broaden the contribution base." He suggests that long-term care insurance premiums should not only apply to income but also to other sources, such as rental earnings. According to Rothgang, this could ease the financial strain on the care system "and would be fairer, too."

In the name of fairness, he further recommends "forcing privately insured individuals into solidarity" with the broader population. While they receive the same benefits as those in statutory insurance, private insurers' costs are roughly half as high because their members tend to be younger, healthier, and more evenly balanced by gender. "Private insurance works on solidarity within its own group, but not with society as a whole," Rothgang says. "That's simply not acceptable."

Whether politicians will embrace these ideas remains to be seen. One thing is already clear: Rothgang himself doesn't expect swift action. "I spent ten years on the German government's advisory council on long-term care, where the goal was ultimately just to amend two paragraphs in Social Code Book XI," he told MDR in an interview. "Reforming care requires patience—it's a long game."