Care must not make you poor!

Prof. Saatkamp, how did the TV appearance come about?

MDR had previously reported on our new nursing degree programme and asked my colleague Martin Knoll, who developed the programme, to appear on the show. Since the show focused primarily on nursing costs—rather than nursing content—he passed the request on to me. Five minutes after he asked me if I was interested, MDR was already calling.

What do you see as the causes of the drastic rise in out-of-pocket costs—despite increased subsidies—and what short- or medium-term measures do you consider appropriate to limit this trend?

First, it’s important to note that long-term care insurance was never intended to be comprehensive coverage, but rather “partial coverage.” As a result, payments from long-term care insurance funds do not fully cover the costs of a nursing home residence.

Nursing home costs consist of the costs of care, the costs for room and board, and the costs for the nursing home building (known as investment costs). Let’s take the average figures for Saxony as an example: Total care costs amount to approximately 3,400 euros, of which the resident must pay 1,858 euros out of pocket; this amount is called the facility-standard co-payment for long-term care costs (EEE). The remainder (which is not shown on the slide and amounts to approximately 1,500 euros) is covered by the long-term care insurance fund. This EEE is independent of the care level, meaning that every resident pays the same copayment for care, even though the actual costs vary. The higher costs for a resident with care level 5 are covered by the long-term care insurance fund. For example, if someone enters a nursing home with care level 2, the long-term care insurance fund pays 805 euros per month to the facility; for care level 5, the amount is 2,096 euros. These amounts are set by law. The resident does not feel this financially, as they always pay the EEE rate for their facility, regardless of their care level. In addition, there is an average of 830 euros for room and board, as well as 448 euros for capital expenditures (building costs), which the resident must cover in full. This results in a total theoretical out-of-pocket cost of 3,136 euros out of the total costs of approximately 5,000 euros.

Depending on the length of stay, a percentage subsidy on the EEE is granted based on this theoretical out-of-pocket cost. This is like a “discount,” which averages 270 euros in Saxony during the first year and rises to 1,394 euros in the fourth year of residence. Taking this into account, the total out-of-pocket cost (i.e., EEE plus room and board plus investment costs) is 2,857 euros per month in the first year and drops to 1,743 euros starting in the fourth year.

Care costs consist primarily of the salaries of the care staff. This cost category has more than doubled over the past five years. This was also a deliberate policy decision. By law, nursing homes are required to pay wages in accordance with collective bargaining agreements. In addition, there are guidelines for each nursing home regarding the staff-to-resident ratio (number of residents per caregiver) that must not be exceeded; otherwise, sanctions may be imposed because the quality of care is at risk.

The costs for food and lodging have risen by approximately 30 percent over the past five years. This is primarily due to general inflation and increased costs for electricity and energy. The investment costs category has risen by only about 10 percent over the past five years.

The conclusion is this: The rise in costs in the nursing home sector reflects society’s increased appreciation for nursing staff and the general rate of inflation in Germany. Legally capping costs—or, more accurately, prices—does not make sense, because some nursing home operators would then have to shut down. That would be like forcing Ferrero to sell Kinder Chocolate for no more than 80 cents per bar. The only way to “cap” prices for nursing home residents is through a functioning market. We currently have a weakened version of this in Germany, as prices are not determined by the market but rather through “binding agreements” with the long-term care insurance funds. In addition, the limited availability of nursing staff is perhaps currently the factor that most strongly influences the supply of nursing home beds. But there is certainly price competition regarding the out-of-pocket costs.

How do you assess the current financial burden on those in need of long-term care—particularly the out-of-pocket costs of 2,500 to 3,000 euros per month—in light of the actual pension situation?

The average statutory pension in Germany today is approximately 1,100 euros per month. This is by no means sufficient to cover a nursing home co-payment of 2,500 to 3,000 euros. The overall picture, however, is more complex than this comparison of figures suggests. Not every retiree receives a statutory pension; many retirees have an additional occupational pension, a Riester pension, interest income, or income from rental properties. In summary, therefore, one must consider the net income of retirees, which includes all types of income. The 2024 Pension Security Report, for example, provides the following data: The majority of retiree households (i.e., couples) have a net income of over 3,000 euros per month, and approximately 10 percent of single retirees have such a net income. Within this group, there are certainly individuals in need of long-term care who can afford a copayment of 2,500 to 3,000 euros per month without having to dip into their assets. If assets are also taken into account—which is consistent with the principle of the welfare state, whereby the government provides support only when a person’s income and assets are not sufficient—the picture becomes even more nuanced, particularly in western Germany.

Conclusion: Many retirees are overwhelmed by a monthly out-of-pocket expense of 2,500–3,000 euros and must rely on government assistance. This has sparked a debate about capping the out-of-pocket share of long-term care costs (EEE) at, for example, 1,000 euros, or having the government finance the investment costs. Both measures would require substantial additional funding—in the billions—from long-term care insurance or tax revenues. I do not currently consider either option to be economically or politically realistic. However, there is also a significant proportion of retirees who can cover the current out-of-pocket cost from their net income or assets. These “more affluent” retirees do not need a state-subsidized cap or subsidy.

My proposal is to grant the benefit subsidy based on income and asset status. For low-income retirees, this would mean capping the out-of-pocket expense for long-term care (EEE) starting in the first year at, for example, 1,000 euros, and possibly also relief from upfront costs; more affluent retirees would receive no subsidies, even in the event of a longer stay in a nursing home. The subsidy would be needs-based and no longer the same for every person requiring care. This would undoubtedly change the nature of long-term care insurance, but it would not place an additional burden on the already overburdened social welfare systems and would ensure a certain degree of social equity.

Can you provide examples or approaches for how older adults can access cost-effective alternatives to inpatient care—such as through outpatient models, shared living arrangements, or new care concepts?

There is now a wide variety of alternatives on the “market” for residential care services, such as care-sharing communities, assisted living, or 24-hour care. Under the logic of long-term care insurance, these are classified as “outpatient care services” because they are not traditional nursing homes. This may sound strange at first, since assisted living typically involves moving into an organized residential setting. Without delving into the legal and economic details here, it’s fair to say that these concepts are less regulated than a nursing home and are therefore more flexible and, in some cases, more cost-effective for residents. In addition, you can add the necessary services on an individual basis—though this may, under certain circumstances, lead to high costs that can match those of a nursing home. Another interesting concept is 24-hour in-home care. This is typically based on a caregiver—who, for example, comes from Poland and is employed there under Polish conditions—living in the care recipient’s building and providing care more or less 24 hours a day. Of course, this requires that the caregiver live in the Building. For those who have this option available, it’s an interesting choice. The costs are approximately 3,000 euros per month.

As a professor of health economics, how do you incorporate your experiences and perspectives into your teaching in the health care management degree programme?

My professorship is based on many years of practical experience in key areas of the healthcare system (health insurance companies, hospitals, outpatient care, and the pharmaceutical and medical technology industries). I strive to incorporate this knowledge and my practical experience into my teaching at HSZG. The focus of my teaching is therefore on conveying the complex economic regulations and conditions in the healthcare system to the students. To this end, I have been using a computer simulation program for many years in which students work in groups to manage a nursing home. In this simulation, they must make decisions regarding staff hiring, fringe benefits, continuing education, meal quality, quality of care, and patient copayments. The groups compete against one another within a virtual city, with the goal of running the facility successfully from a business perspective. This is realistic because, in addition to the efficient use of resources, quality of care and employee satisfaction play a crucial role in successfully managing a facility. This brings together content from various courses and is a lot of fun.