Complements or Substitutes? Young Germans’ Experience and Expectations with Financing Sources for Long-Term Care

Financing long-term care is a growing challenge in aging societies. To address this challenge, Germany created public long-term care insurance (DPV) more than 25 years ago. Germans still need to prepare for their own care throughout their life course to supplement public insurance. This study presents descriptive statistics and multivariate regression analysis to examine young Germans' experiences and expectations of the relationship between the DPV and private financing sources. We base our analysis on a proprietary data set of young Germans (16–39 years old) that oversamples those with caregiving experience and East Germans. We find that public long-term care insurance is a substitute for rather than a complement to other financing sources. Specifically, many young Germans do not count on public long-term care insurance to finance care. Instead, they see private funding sources as substitutes for long-term care insurance. Those who count on private long-term care insurance are between 48 and 70% less likely to count on DPV benefits. Experience with care increases the likelihood of young Germans expecting future public benefits by factor of six or 18, depending on the specific care familiarity. Young Germans are also more likely to count on future generations to support their own care than they expect themselves to support the care of their parents through the DPV. Given that the DPV provides basic universal insurance that requires some complementary private income sources, our findings suggest that young Germans, who will need to build some of these income sources throughout their careers, are underestimating the value of the DPV and overestimating their own ability to pay for long-term care. Policymakers will need to reduce the political risks to the DPV and increase young Germans' savings over the life-course to address this imbalance.