German cabinet approves care reform to close eight billion euro deficit and raise childless contributions

Emergency measures to close the deficit

The German federal cabinet approved the draft Care Reorganization Act on Wednesday to avert an estimated €8 billion deficit in the statutory long-term care insurance system for 2027. To stabilize finances without raising the general 3.6% contribution rate, the draft increases the surcharge on childless workers by 0.3 percentage points to 0.9%, effective 1 January 2027. The income ceiling for contributions will rise by €300 per month above the current threshold of €5,812.50 per month (€69,750 per year). Marginal employment arrangements, known as minijobs, will also become subject to care insurance contributions, generating an estimated €1.4 billion in annual revenue.

Starting 1 January 2028, a contribution surcharge of 0.52% will apply to non-working spouses and civil partners covered by family insurance, with exemptions granted to parents caring for children with disabilities and caregiving relatives. Long-term care insurance will also receive €1.6 billion from the federal special fund for infrastructure and climate neutrality to support digital investments. The measure will next go before the Bundestag and the Bundesrat ahead of the planned implementation at the turn of the year.

Coalition compromise and deferred structural changes

The agreement followed contentious negotiations between the CDU/CSU and the SPD that extended into Wednesday morning. Health Minister Carsten Linnemann arrived late to the cabinet meeting after the SPD threatened to block the legislation over concerns that it functioned purely as an expenditure-cutting package. Two core SPD proposals (a statutory cap on out-of-pocket care home costs and a financial equalization mechanism between statutory and private care insurers) were excluded from the final draft.

Linnemann also failed to secure €5 billion in pandemic-era federal aid repayments requested from Finance Minister Lars Klingbeil. Instead, the coalition agreed to refer the unresolved structural disputes to an expert commission that the cabinet plans to establish next week. The commission is mandated to present detailed proposals by the end of January 2027, with the government aiming to enact a second reform package on 1 July 2027.

The system is under massive financial pressure.

Benefit rules and rising care home costs

The number of individuals receiving statutory care benefits in Germany has increased from two million people two decades ago to six million today. Under the draft bill, evaluation guidelines for care grades 1 through 3 will be adjusted to assess whether rehabilitation services can reduce individual care dependency before higher benefit levels are assigned. Annual statutory benefit payments will also be indexed to inflation beginning in 2029.

We are making no cuts to the pensions of family caregivers, because they are the quiet heroes of our society.

The legislation draws upon initial groundwork prepared by former health minister Nina Warken, who now serves as head of the Federal Chancellery. Warken's proposals include lengthening the progression schedule for nursing home subsidies, extending each entitlement tier from 12 months to 18 months. Currently, the insurance fund covers a growing proportion of resident costs across four annual tiers. Data compiled by the Association of Substitute Health Funds (vdek) for July 2026 indicates that nursing home residents face average total costs of €3,364 per month. The pure care portion stands at €1,775 per month during the first year, declining to €522 per month after three years of residency.