In:
Zeitschrift für Wirtschaftspolitik, Walter de Gruyter GmbH, Vol. 53, No. 2 ( 2004-8-1), p. 170-202
Abstract:
In their contribution Bernd Raffelhüschen and Jasmin Häcker point out that by now it is common knowledge that the German Long-term Care Insurance (LTCI) is in urgent need of a broad reform. Without any doubt, two fundamental mistakes have been made from the scretch: First, it was constructed as a pay-asyou- go scheme, despite of the demographic turbulence ahead. Secondly, contributions were drawn from the payroll although the risk of long-term care is definitely not correlated with personal income. Hence, it is essential to revise both mistakes and to bring about a new and sustainable insurance scheme. In their paper they suggest a reasonable transition from the current pay-as-you-go system to a fully funded strategy thereby accounting for the burden each generation is confronted with. With the help of generational accounting they demonstrate that the so called “Auslaufmodell” achieves a certain intergenerational balance. It is, however, crucial that the reform takes place instantly, otherwise it will never. This is due to the fact that only in the very near future people can not argue that they have paid their dues. Winfried Schmähl and Heinz Rothgang discuss the consequences of a judgement of Germany′s Constitutional Court. In April 2004 it decided that the Social Long-term Care Insurance discriminates families as compared to those without children since the former also contribute to the system by raising children while the latter do not. The court thus asks for an internalisation of the externalities resulting from child raising, i.e. future contributions of the children. Until 2004 the legislator has to reform the financing system respectively. In this article several options to do so are discussed. With respect to five normative criteria the authors conclude that a reduction of contributions for families is inferior to a fixed cash transfer per child financed by a special tax. Gisela Färber points out that reforming Germany′s system of Long-term Care Insurance (LTCI) is necessary for two major reasons: Since 1999, spendings in this pillar of Social Insurance in Germany exceed contributions; in 2003 deficits added up to 700 Million Euro. Demographic changes will even increase the funding gap. Furthermore, Germany′s Constitutional Court decided that families are discriminated in the existing pay-as-you-go system, a disadvantage which has to be corrected before end of 2004. The author criticises the Court’s argumentation from an economic point of view. She argues that the problem of LCI is not the lack of children but the increase of life expectancy with each year of birth. She therefore proposes to add elements of capital funding within or besides the existing system which helps to overcome the increasing costs. A total abolition of the pay-as-you-use principle however would restrict (limited, but necessary) spaces of redistribution within the LTCI. Furthermore, adult family members of employees should not get free insurance coverage anymore, but pay at least a minimum rate of contribution themselves. Then contributions for family members during a certain period of education might be subsidised by tax revenue.
Type of Medium:
Online Resource
ISSN:
2366-0317
,
0721-3808
DOI:
10.1515/zfwp-2004-0204
Language:
English
Publisher:
Walter de Gruyter GmbH
Publication Date:
2004
detail.hit.zdb_id:
2112616-1
detail.hit.zdb_id:
2259867-4
detail.hit.zdb_id:
865276-4
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