BackgroundDementia and care need are challenging aging populations worldwide. Lower extremity injury (LEI) in the elderly makes matters worse. Using a multi-state approach, we express the effect of LEI on dementia, care need, and mortality in terms of remaining life expectancy at age 75 (rLE) and years of life lost (YLL).MethodsA population-based random sample of beneficiaries aged 75–95 years was drawn from the largest public health insurer in Germany in 2004 and followed until 2010 (N 62,103; Mean Age ± SD 81.5 ± 4.8 years; Female 71.2 %). We defined a five-state model (Healthy, Dementia, Care, Dementia & Care, Dead), and calculated transition-specific hazard ratios of LEI using Cox regression. The transition probabilities as well as the YLL due to LEI were estimated.ResultsLEI significantly increased the risk for each transition, with a maximum risk for the transition from Healthy to Care (HR: 1.70, 95 % CI: 1.63-1.77) and a minimum risk for the transition from Care to Dead (HR: 1.16, 95 % CI: 1.10-1.22). If the elderly had LEI-history, their age-specific mortality was generally higher and their probabilities of transient states peaked at younger ages. At age 75, initially dementia-free and care-independent elderly experiencing LEI lost about 2 years of life, of which more than 90 % were life years free of dementia or care need. Dementia patients lost about one and a half year, more than 60 % were free of long-term care need.ConclusionsLEI not only casts a large health burden on care need, but is also associated with cognitive decline and shortened rLE. LEI plus dementia extend the relative life time in need of care, despite generally shortening rLE. Using the composite measure YLL may help to better convey these results to the elderly, families, and health professionals. This may strengthen preventive measures as well as improve timely and rehabilitative treatment of LEI, not only in cognitive and physically intact elderly.Electronic supplementary materialThe online version of this article (doi:10.1186/s12877-016-0184-7) contains supplementary material, which is available to authorized users.