Europe Barely Sells Long-Term-Care Insurance Because It Barely Needs It: The Care Gap, in Dollars

In America, long-term-care insurance is a whole anxious industry. Financial advisers press it on their clients, retirees agonize over whether to buy it, and the policies themselves have become a byword for a market gone wrong, with premiums that soar, benefits that shrink, and insurers that vanish. It is one of the standard set-piece worries of American retirement planning, a decision people know they should make and dread making.

Move to Europe, and you find that this entire product barely exists. There is no great long-term-care insurance industry, no adviser urging you to buy a policy, no anxious calculation over premiums, and the reason is not that Europeans are careless about old age. It is simply that they barely need such insurance, because the risk it covers is largely handled another way, through the state rather than the individual. Here is why America built a troubled private market for long-term-care insurance, why Europe barely has one at all, and what the difference means, in dollars, for anyone thinking about where to grow old. The contrast is one of the clearest illustrations of how the two continents split on who should bear the cost of getting old.

What follows is the American product nobody loves, why Americans need it in the first place, why Europe barely sells it, the same risk handled two ways, and what it means for a retiring American.

The American Product Nobody Loves

To understand the gap, start with the strange state of the American long-term-care insurance market, which is by wide agreement broken. The idea behind it is sound enough: you pay premiums over the years so that, if you eventually need expensive long-term care, a nursing home or extended in-home help, the policy pays for it rather than your savings. In theory it is exactly the kind of large, unpredictable, potentially ruinous risk that insurance is built to handle. But the execution has been a slow-motion disaster, one that has quietly played out over the past two decades. Insurers badly mispriced these policies decades ago, underestimating how many people would claim and for how long, and the result has been carnage across the industry.

Where more than a hundred companies once sold traditional long-term-care policies, only a handful, perhaps ten or so, still do. the insurers that stayed have raised premiums relentlessly, sometimes doubling them, leaving policyholders to choose between paying far more than they signed up for or accepting reduced benefits.

Sales of new policies have collapsed. Trust in the product has evaporated, with lawsuits over undisclosed rate increases and a general sense that the whole thing was a bad bargain. The result is a market that serves almost nobody well: too expensive for the people who most need it, financially precarious for the insurers still in it, and shrinking every year. It is, in short, a product almost nobody loves, bought by relatively few, and increasingly hard to buy at all, which is a remarkable thing to say about insurance against a risk that the majority of older people will eventually face. When the insurance meant to cover a near-universal risk is itself failing, something has gone badly wrong with the design.

The Workaround America Reached For

Faced with the collapse of the traditional product, the American market did not fix the underlying problem so much as invent a new way around it, and the workaround is worth knowing because it is now what many advisers steer clients toward. Rather than a pure long-term-care policy, insurers increasingly sell hybrid policies, combining life insurance or an annuity with a long-term-care benefit, so that if you never need care, the money is not simply lost but passes to your heirs or comes back to you instead of vanishing into premiums.

The appeal is obvious: it answers the biggest objection to traditional long-term-care insurance, the fear of paying premiums for decades and getting nothing if you happen to stay healthy, by guaranteeing that the money does something either way. For that reason these hybrid products have grown popular even as traditional policies have withered. But they are not a real solution to the underlying problem, because they tend to require large upfront sums and remain out of reach for many, and they are fundamentally still a private, individual answer to a risk that other countries handle collectively. The hybrid policy is a clever patch on a broken market, not a repair of it, and its rise is really a sign of how thoroughly the original product failed. It is the American instinct in miniature: when the private market breaks, invent a more complicated private product rather than build the public system that would make the whole problem smaller.

Why Americans Need It in the First Place

The obvious question is why Americans bother with this troubled product at all, and the answer lies in a gap in the American system that Europeans do not have. In the United States, the main government health program for older people, Medicare does not cover long-term custodial care, the ongoing help with daily living that a nursing home or home aide provides. That care, which can run to around nine thousand dollars a month or more, is left almost entirely to the individual to fund. So an American facing the prospect of needing care has, broadly, three unappealing options.

They can buy private long-term-care insurance, with all the problems just described. They can self-insure, meaning pay for care out of their own savings if and when it is needed, and simply hope those savings hold out. Or they can spend down, exhausting their assets on care until they become poor enough to qualify for Medicaid, the safety-net program for the impoverished, which then takes over.

None of these is good. The insurance is expensive and shaky; self-insuring means gambling your life savings against a risk that could wipe them out; and the spend-down route means impoverishing yourself, and often your spouse, before the state will help. Each path asks you to accept either a large ongoing cost or a large potential loss, with no genuinely comfortable option among them. The private long-term-care insurance market, for all its dysfunction, exists precisely to give people a fourth option, a way to cover the risk without either buying pricey insurance or losing everything, and its failure to do that job well is exactly why the whole subject is such a source of American anxiety. Americans need long-term-care insurance because their system leaves a gaping, ruinous hole where public coverage might be, and the private market that grew up to fill it has never worked properly.

Why Europe Barely Sells It

Now look at Europe, and the striking absence of a big long-term-care insurance market suddenly makes sense: there is little private market because there is little need for one, and there is little need because the state largely covers the risk. Where the American system leaves long-term care to the individual, most European countries treat it as a public responsibility, funded collectively, so the catastrophic gap that private insurance exists to plug in America simply is not there to be plugged. There is little market for insurance against a catastrophe the state has already agreed to absorb.

The mechanisms vary by country but the principle is shared. Germany offers the clearest example: since the 1990s it has had a compulsory public long-term-care insurance system, into which everyone in the health system pays, and which then provides care benefits to everyone who needs them, a genuine social insurance against old-age care that covers the whole population rather than the fraction who choose to buy a private policy.

France provides a public allowance toward the cost of care for the elderly. The Nordic countries fund elder care heavily through general taxation, so the individual pays relatively little. Across these systems, the working population supports the care of the old through taxes or mandatory contributions, on the understanding that they in turn will be supported when their time comes.

Spain has its national dependency law providing subsidized care. The details differ, but in each case the risk is borne substantially by the society as a whole, through taxes or mandatory public insurance, rather than dumped on the individual to insure against privately. And when the state already covers the risk, there is simply nothing much for a private long-term-care insurance industry to sell, which is why the product that looms so large in American financial planning is, in most of Europe, a minor afterthought or absent altogether. Europe does not lack long-term-care insurance because it neglects the problem; it lacks it because it solved the problem a different way, taking the risk off individuals and onto the collective before a private market for it ever needed to grow.

The Same Risk, Handled Two Ways

Step back and the whole comparison resolves into a single clear contrast, because the underlying reality is identical on both continents. Everyone ages, and a large share, the majority of those who reach old age, will at some point need some form of long-term care. That fundamental risk is exactly the same for an American and a German and a Spaniard; what differs entirely is how each society has chosen to handle it. The Americans made it a private problem, to be solved by each individual through the insurance market or their own savings, and the market they built to do it has largely failed. The Europeans made it a public problem, to be solved collectively through mandatory social insurance or taxation, and that approach has, for the most part, worked.

This is the same fundamental fork in the road that runs through so much of the healthcare comparison between the two continents, playing out here in the specific arena of old-age care.

One path trusts the market and the individual; the other trusts the collective and the state; and long-term care is where the consequences of the choice fall most heavily, because it is so expensive, so common, and so often needed at the very end, when people are least able to fight for themselves. The German model, of a compulsory public long-term-care insurance that everyone pays into and everyone can draw on, is essentially the road the United States chose not to take, opting instead to leave the risk to a private market that then broke. Neither system is perfect, and the European public systems have their own strains, funding pressures, and limits as their populations age. Waiting lists, co-payments, and debates about how to fund the growing cost of care are real across Europe too, and no one there would call the system flawless. But the basic difference is stark and consequential: in Europe, the risk of needing care is spread across everyone, so no individual faces financial ruin from it; in America, the risk falls on the individual, who must navigate a failing insurance market or gamble their savings, with real ruin a genuine possibility. It is the same human certainty, that we grow old and may need care, met by two opposite philosophies of who should bear the cost.

What This Means if You Retire Abroad

For an American contemplating retirement in Europe, this difference is one of the quieter but weightier points in Europe’s favor, though as ever it comes with honest caveats. The appeal is real: moving to a country where long-term care is socially covered means moving toward a system where the terrifying, savings-destroying risk of needing years of care is largely handled by the state rather than left to you and a broken insurance market. For anyone who has lain awake worrying about long-term-care costs, or watched a parent spend down everything on a nursing home, the European approach can be a profound relief, removing a threat that hangs heavily over American retirement. It is one of those differences that does not show up in a cost-of-living comparison but weighs enormously on peace of mind.

The caveats matter, though. As with public healthcare generally, access to a country’s public long-term-care system usually depends on residency and, often, on having paid into it, so an American who moves over later in life may not immediately or fully qualify for the local coverage that lifelong residents enjoy, and may need to plan for private care, at least for a time. This means long-term-care planning does not simply vanish when you move to Europe; it changes shape. The question shifts from how to insure privately against a ruinous cost to how and when you gain access to the local public system, and what to do about care in the meantime.

The good news is that even where an American must arrange private care abroad, the underlying cost of that care is far lower than in the United States, as the enormous gap in nursing-home prices shows, so even self-funding is a smaller mountain to climb. The honest summary is that retiring to Europe moves you toward a world where the long-term-care risk is socially shared rather than privately dreaded, which is a genuine and underappreciated advantage, but that you should understand your specific access to the local system and plan accordingly rather than assuming full coverage from day one.

Do the homework on how the system in your chosen country treats a newcomer, and you can move toward that shared safety net with your eyes open rather than banking on protection you have not yet earned. The broken American product you were agonizing over may become, in Europe, a problem you no longer have to solve alone. That shift, from a private burden you carry by yourself to a risk the society around you helps shoulder, is one of the deeper and less obvious changes that comes with growing old on the other side of the Atlantic.