Abstract With an ageing population, the German pay-as-you-go long-term care insurance system is facing an increasing contribution burden. Supplementary funded financing would help to stabilise the contribution rate. In particular, a mandatory funded solution is being discussed to finance private co-payments for inpatient long-term care. The reasoning behind a mandatory insurance is that, given the prospect of tax-funded support, people could forego private provision (free-riding behaviour). However, this is countered by the fact that insured persons already must pay a deductible due to the means-tested support. In addition, empirical findings show that most pensioner households can cover private care costs from their own means, i. e. income and assets. Furthermore, it is uncertain whether a supplementary but mandatory funded scheme would ease the burden on the state. Although extended mandatory insurance would reduce the likelihood of people claiming tax-funded support, transfer payments would instead have to be made to households that would be disproportionately burdened by premium payments.
Pimpertz et al. (Tue,) studied this question.