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Individuals in need of long-term care are heavily dependent on public transfer payments

14/04/2015 DIW Deutsches Institut für Wirtschaftsforschung

So-called “care households”—that is, households in which a person over the age of 60 and in need of long-term care resides—have similar household incomes to “non-care households,” in which no care-dependent person lives. But care-dependent individuals are more heavily dependent on public transfers; furthermore their assets are considerably less than those of individuals who do not require care. In particular, care households in which a care-dependent person lives alone have relatively meager financial resources—yet they make up over 40 percent of all care households. These are the key findings of a recent study by the German Institute for Economic Research (DIW Berlin) based on its long-term Socio-Economic Panel (SOEP) survey. "The greater reliance on public transfer payments carries risks for future generations, because the pension levels are going to decrease in the future," says DIW pension expert Johannes Geyer, who studied the income and assets situation of care-dependent individuals in private households and compared it with that of the rest of the population aged 60 and over.

s a general rule, nursing care is a financial burden on the individuals and households affected. For one, the need for medication as well as privately funded care creates additional costs. Secondly, the income of care-giving relatives often decreases, since their employment opportunities are limited by the difficulty of reconciling caregiving with work life. As the duration of the caregiving period increases, households are often no longer able to bear these costs using their current income, and thus must fall back on their assets. Currently, about 2.6 million people in Germany are receiving payments from nursing care insurance, which represents an increase of nearly 50 percent since 1998. This rise is primarily due to the demographic development, and is therefore likely to increase even more in the future. About 70 percent of nursing cases, or about 1.7 million people, are currently living at home, and just under 30 percent live in nursing homes. There is also a substantial number of people—almost 40 percent—who are dependent upon on nursing care but are not (yet) entitled to benefits, and are also cared for almost exclusively at home.

The weighted disposable income of [care-dependent individuals in private households] is around €20,000 a year, which is similar to that of households without care-dependent individuals. While non-care households earn 30 percent of their income through employment activity, this type of income accounts for only 18 percent of a care household’s income. Overall, about 71 percent of care households receive public transfer payments, as opposed to only 13 percent of the comparison group.

With regard to their private assets situation, care-dependent individuals and care households differ significantly from the rest of the population. Care households rarely receive income from investments, and therefore generate lower yields. They have average assets (median) of €9,000 at their disposal, compared to €60,000 for the rest of the population aged 60 and over. A considerable portion—almost 40 percent—possess no assets or are in debt, while this amounts to only 20 percent in the rest of the population. With a median of €3,000, care-dependent individuals who live alone—the majority of which are women—have the smallest reserves, while those in the comparison group have assets worth €35,000.

Around 73 percent of care-dependent individuals receive nursing care insurance; the care allowance averages around €5,000 a year. Insurance for long-term care is thus an important benefit, but it often does not cover all care needs—and in the past, it has only rarely been adjusted to fit current price and wage developments. Since 2008 there have been several incremental increases in benefits, and from 2015 onward they will be adjusted every three years to match the price development. "Price development is being taken into account only after it has already happened, but to maintain the level of care, it would be better to anticipate price development instead," says Geyer, who expects further reforms in this area.

Keyword: SOEP

The Socio-Economic Panel (SOEP) study is the largest and longest-running multidisciplinary longitudinal study in Germany. The SOEP is located at DIW Berlin and funded by the federal and state governments as part of Germany's research infrastructure under the umbrella of the Leibniz Association (WGL). Since 1984, the survey institute TNS Infratest has surveyed several thousand people annually for SOEP. There are currently about 30,000 respondents in approximately 15,000 households. The SOEP data include information on income, employment, education, health, and life satisfaction. Since the same individuals are surveyed each year, SOEP can not only identify long-term social trends but is also able to analyze in detail the group-specific development of individuals' lives.


DIW Economic Bulletin 14-15/2015 | PDF, 415.94 KB

Interview Johannes Geyer | PDF, 92.28 KB

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