Closure of care facilities. Not a by-product of a "wave of insolvencies", but system failure

A press release from the AGVP, one of the business associations in the inpatient care sector, briefly made waves in the media at the beginning of April. It points out that an increasing number of care facilities are currently having to file for insolvency or close. In this case, the association's criticism is that care insurance funds and local authorities are too hesitant to cover and pay costs. The issue of the closure of care homes, care services and general care facilities has been a burning issue for some time, particularly in view of the personal dramas that lie behind the figures.

The AGVP, as a "political, economic and collective bargaining organisation representing the interests of the most renowned and highest-turnover corporate groups in the German care industry" with the slogan "We love lobbying" (both quotes are from an association brochure ), is not a source that should be believed unquestioningly. Whether continued payment of wages in the event of illness, statutory regulations on working hours or minimum wages - companies look at all issues from the perspective of their profitability.

No general "wave of insolvencies"

The fact that this report only appeared briefly and quickly disappeared again is certainly also due to the fact that it fits in so well with the general talk of a wave of insolvencies triggered by "deindustrialisation" and is lost in it. It is therefore worth examining the latter statement: The less there is to the claim of a general wave of insolvencies, the more important it is to look for reasons in the care sector itself. First of all, it should be noted that the evidence of "deindustrialisation" claimed by some as a result of the war in Ukraine and rising energy prices is thin on the ground. Industrial production in Germany has been on a downward trend since 2018 and cannot be explained by rising energy prices since the start of the war, for example.

Rather, the issue is long-term stagnation: real gross domestic product per capita in Germany in 2024 was at the level of 2017 (p.5 of the source). Along with GDP/E, labour productivity is also stagnating (ibid., p.33). The export surpluses underlying the economic momentum are tending to decline, but continue to exist. This can be seen in the development of the trade balance. As capitalism does not work without growth and employment, wages and government revenue also depend on its success, stagnation is a crisis of the neoliberal model. Its central component is the crisis of social reproduction, which is reflected, among other things, in the stagnating supply of labour, a shortage of skilled workers in many areas and a growing number of people who can no longer meet the demands of companies and no longer want to. Insufficient resources are being spent on training, support for carers and material infrastructure. The growing insecurity of life prospects - exacerbated by the onset of climate catastrophe and the threat of war - increasing demands for flexibility and increased labour intensity are having an impact. Two of the best-documented indications of this connection are the rise in mental illness (p. 28 of the source) and the desire for shorter working hours (p. 13ff. of the source).

The sudden onset of a crisis that would simply explain insolvencies in the care sector does not exist. Conversely, the effects of the permanent overload of paid and unpaid workers on the economy contribute to the permanent crisis constellation. This is described in more detail here or in Gabriele Winker's book "Solidarische Care-Ökonomie". A general "wave of insolvencies" affecting all sectors is also not currently observable. Despite a sharp rise in the last two years, the number of corporate insolvencies is still well below the average from around 1995 to 2015. At the moment, it has reached roughly the level of 2015. It is therefore currently more a case of a return to the normal state of capitalism after the coronavirus bridging measures and, in particular, after the phase of low interest rates, which also enabled unprofitable companies to survive. However, this is certainly happening under the condition of stalled accumulation and under circumstances that make a global crisis appear possible.

Insolvencies of care facilities - causes in care financing

The fact that insolvencies are a phenomenon that particularly affects the care infrastructure is shown by a breakdown by sector carried out by the Institut für Mittelstandsforschung on the basis of figures from the Federal Statistical Office. This shows the much higher increase in insolvencies in the healthcare and social services sector compared to other sectors. The AGVP report mentioned at the beginning of this article mentions 1,200 insolvencies or closures of care facilities in 2023 and 2024 without any further evidence. However, these figures can be confirmed: Not exactly, but in terms of order of magnitude, they match those of the pflegemarkt.com portal. Here, around 1,100 insolvencies and closures of care facilities with a total of almost 50,000 people in care are mentioned for the period from the beginning of 2023 to February 2025. These figures include outpatient services (36,370 people cared for), care homes (10,112 places) and day care facilities (3,235 places). This is of course a dramatic failure of the care system, given the difficulty of obtaining places in outpatient or inpatient care.

The AGVP cites the care insurance funds and local authorities in particular as being responsible for this by being too hesitant to cover the costs. However, it must first be noted that care companies have flourished to date: Since the introduction of long-term care insurance in 1995, the proportion of private, profit-orientated providers has grown every year, so that in outpatient care, around 60 percent of the people cared for are now looked after by private care services. In nursing homes, around 40 per cent of care places are offered by private companies.

It therefore stands to reason that if the health insurance companies are more reluctant to pay, they themselves are in trouble. After all, they obviously do not represent a fundamentally unfriendly environment for returns in the care sector. There are also indications of these financial problems. According to a report in the Deutsches Ärzteblatt, the first long-term care insurance fund applied for financial aid from the Federal Social Security Office in March. Overall, statutory long-term care insurance closed 2024 with a deficit of €1.54 billion. This will not change fundamentally despite the increase in long-term care insurance contributions. Another factor contributing to the increased burden on the health insurance funds is that the permanent increase in the personal contribution of care recipients to nursing home costs - which is being borne in particular by those in need of care and their families, but also by local authorities - has been cushioned by higher subsidies from the nursing care insurance funds since the beginning of 2024. The neoliberal construct of seeing the need for long-term care as an individual fate rather than a social responsibility and therefore dispensing with full insurance is leading to relief for the rich and high earners and a burden for everyone else.

A central cause of the increased costs is the shortage of skilled labour. This is largely due to the working conditions in geriatric care and means that the number of nursing home places has largely stagnated since 2017 despite the demand. It has long been reported in the media that the stressful working conditions - in particular forced flexibility, too little time for those being cared for, high work intensity - are the main reason why trained carers change careers or reduce their contract hours. A comprehensive study commissioned by the Bremen Chamber of Labour and the Saarland Chamber of Labour also confirms that this is indeed the main cause of the shortage of skilled workers. It is based on data from 2021 (survey of well over 10,000 people on the conditions for returning to work or increasing contract hours) and concludes that the required staff would also be available if working conditions were improved; at the very least, this would solve the majority of the problem.

Wages in geriatric care are rising at an above-average rate, primarily due to the shortage of skilled workers (p. 2-6 of the source). While the real wages of all skilled workers (three-year training) rose by an average of 4 per cent between 2012 and 2023, wages for geriatric nurses increased by an average of 29 per cent. The trend is similar for geriatric care assistants. As a result, wages for geriatric nurses have been above the average for all skilled workers since 2020, while wages for geriatric care assistants have been above the corresponding average since 2022. However, rising wages are relativised in comparison if the work can only be done part-time: the profession remains unattractive.

The labour market situation is therefore fundamental to wage development. However, there has been an additional boost from the "Tariftreuegesetz" (Collective Bargaining Act), which since September 2022 has obliged care facilities to pay collectively agreed or regionally customary wages. This is precisely what the AOK sees as the source of the problems faced by care facilities. It refers to a study presented in November 2024, according to which the share of personnel costs in the turnover of outpatient care services rose from 67% to 72% within two years, from 2021 to 2023. However, the AOK is extremely selective in its interpretation. The central conclusion is not reproduced: "The implementation of the higher wage remuneration for nursing staff is important and correct in order to improve working conditions and the remuneration of nursing staff. The inadequate refinancing of personnel cost increases has a considerable impact on the liquidity of outpatient care organisations." (S. 5)

However, the above-mentioned financial problems of the care insurance funds themselves remain; the underfunding of some is caused by the underfunding of others. Those who suffer are those in need of care, caring relatives who take on home care beyond their desire and strength, as well as the employees. It is also to be feared that care insurance funds and local authorities, profit-orientated and other providers of care facilities as well as the federal government will come together to dequalify care work. This is because, if implemented, it will simultaneously increase the potential labour force and reduce wage costs. The division of care work into qualified and unqualified activities and, as a result, the reduction of the skilled labour ratio is under discussion, as is the increasing mobilisation of "voluntary" work.

Solidarity-based responses to the crisis

It is important to take a differentiated approach to answers based on the needs of carers and those being cared for. On the one hand, more money must definitely be channelled into care for the elderly. The proposals of ver.di and the alliance for a solidarity-based full long-term care insurance scheme, for example, show how this can be done in a solidarity-based manner: including all types of income in the assessment of contributions, abolishing the assessment limit for high incomes, abolishing the separation into statutory and private long-term care insurance. There is enough money, which currently flows into luxury consumption, for example. If the argument that good and needs-based care in care conditions cannot be financed does not hold up, it remains the case that in many cases it is important for needs-based care that friends, relatives or people who want to get involved are included. Similarly, carers do not want to be torn away from their social and physical environment; the debate about caring communities is not simply a ploy to cut costs. It is crucial that unpaid carers are not pushed into (old-age) poverty and excessive demands, that they can hand over tasks if necessary, that they receive the necessary professional and technical support from care facilities and that day and residential care are available and of high quality if there is no other option.

The Care Revolution network has a bundle of approaches here, each of which is supported by many members: Profit-oriented companies out of care, democratisation of care facilities, community-based care solutions in neighbourhoods that go beyond the restrictions of the nuclear family, more time for care by reducing working hours and providing individuals with employment-independent, sanction-free security. In addition, of course, the expansion of the care infrastructure through a solidarity-based reorganisation of social insurance, as outlined above.

Making the right demands is one thing, getting closer to realising them is another. We have a lot of thinking, searching and trial and error in conflicts ahead of us. What is currently happening in the care of the elderly cannot simply be transferred to closures in inpatient healthcare, doctors' surgeries, daycare centres or social services. All of these fields function differently when it comes to the financing of services, when it comes to how and to what extent they have been neoliberally restructured and in terms of their relevance for politics. Nevertheless, generalisable demands and struggles that bring together the various actors should be possible. What else can we do in view of the situation?

Matthias Neumann, April 2025