Current Options for Health System Reform in Germany

1
Current Options for Health System Reform in
Germany

• Friedrich Breyer
• University of Konstanz and DIW Berlin
• Civitas Health Policy RoundtableCologne,
  February 22, 2005

2
Contents

• 1. The Extent of Compulsory Membership
• 2. How to Levy Contributions
• 3. Concluding Remarks

3
The Y- Model of the Rürup-Commission
The True Y-Model
Citizens Insurance
Lump-sum Contribution
Lump-sum contributions
Citizens Insurance
Switzerland
Lauterbach
Rürup
yes
yes
Status Quo
no
no
uslagerung von Leistungen
4
Compulsory Membership for the whole population?

• Compulsion must have a solid justification
• Reasons for compulsion solidarity between low
  and high risk groups
• In Germany income redistribution through
  earnings-related contributions
• Solidarity requires mandatory membership for
  everybody
• Exempting politicians and civil servants is
  particularly problematic

5

• Model Switzerland
• Mandatory Membership for the whole population
  (Citizens Insurance)
• Private Insurers can offer mandatory health
  insurance
• Transition mandatory membership only for new
  members of the workforce

6
How to Levy Contributions

• a) income-related contributions
• Which income types to include?
• Income ceiling yes or no? What level?
• individual versus household taxation?

7
The Citizens Insurance of the SPD

• Key elements1) additional contribution on
  capital income with separate income ceiling2) no
  contribution on rents
• Criticisma) violates horizontal equity when
  income is earned from more than one source (7000
  wage vs. 3500 wage, 3500 interest),b)
  Higher tax on mobile factor (capital) than on
  immobile one (land) violates efficiency rules

8

• Conclusion Several parallel systems of income
  redistribution do not make sense
• b) lump-sum contributions are they feasible?
• Exemptions for very low incomes are common
  (Switzerland, reform models CDU, Rürup, Herzog).
  

9
The CDU/CSU-Model

• Key elements1) Employers contribution is fixed
  at 6.5 per cent2) lump-sum contribution of 109
  3) subsidies when contribution exceeds 7 per
  cent of income4) sickness funds get 169 for
  every person.
• Criticisma) distortion of labour demand and
  supply is not removed, employers contribution
  can be raisedb) system is extremely
  intransparentc) not compatible with sickness
  fund competition

10
Abb. 1) Lumpsum Contribution with and without
premium subsidies and income-related contribution
contribution
14
Income
Contribution ceiling
11

• c) The Bertelsmann Model - lump-sum contribution
  (adults 190 , children 75 ),
• - Employers contribution is paid out
• - Redistributive elements
• Higher tax exemption
• Higher social assistance payment
• Higher child allowance
• Specific subsidies only for pensioners

12
3. Conclusions

• a) Political Debate is in a dead end parties
  dedicated to their model which mixes the two
  issues (membership and contributions)
• b) 2004 Annual report of the 5 Sages
  Citizens Insurance compatible with lump-sum
  contributions
• c) Possible grand coalition after 2006 makes
  compromise likely