The social costs of private elderly care 1

The process of civilization is characterized by an increasing collectivization of various risks (Swaan 1988). The rise of welfare states covering many life-threatening risks to humankind has been the most visible outcome of this evolution. In Germany the introduction of the social long-term care insurance in 1995/1996 was the last major milestone of the Bismarckian welfare state, covering the risk of elderly care within the framework of social insurance. Beyond this long-term trend of risk-collectivization, a short-term trend of risk-privatization has evolved in parallel since the 1980s, putting welfare states under pressure. ² Both trends have influenced the way the care risk has been addressed in institutional terms in Germany. Given this more recent second trend, as well as the reform pressures stemming from demographic ageing combined with severe economic difficulties, it is obvious that private sector actors have become a relevant player in the respective welfare mix in the policy field of elderly care. The contemporary financial and economic crisis poses an important challenge to welfare states, which have to find practical solutions to the most pressing problems in an environment of public budget retrenchment. Obviously the recent economic downturn has negatively influenced labor markets, which are key determinants for financing public social insurance via compulsory contributions from wages. In terms of decreased employment and wage growth rates, the financial base of social insurances is weakened, thus leading to further reform pressure within the system. Although welfare spending – in particular, unemployment benefits – performs the important macroeconomic function of an automatic stabilizer in phases of economic downturn, it is important to free additional resources by means of reducing social costs and thereby enabling social spending that is even more needed in times of crisis. Against this background, and through Kapp's theory of social costs, the policy field of elderly care is examined for the empirical case of Germany. The proposal of increased coordination to improve the quality of out-patient elderly care indicates an avenue for public policy that makes better use of various existing resources (e.g., family, third sector).