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Current Options for Health System Reform in Germany

Current Options for Health System Reform in Germany. Friedrich Breyer University of Konstanz and DIW Berlin Civitas Health Policy Roundtable Cologne, February 22, 2005. 1. The Extent of Compulsory Membership 2. How to Levy Contributions 3. Concluding Remarks. Contents.

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Current Options for Health System Reform in Germany

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

  3. The Y- Model of the Rürup-Commission The True Y-Model Citizens Insurance Lump-sum Contribution Citizens‘ Insurance Lump-sum contributions 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 Citizen‘s Insurance of the SPD • Key elements1) additional contribution on capital income with separate income ceiling2) no contribution on rents • Criticism:a) 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 elements:1) Employer‘s 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. • Criticism:a) distortion of labour demand and supply is not removed, employer‘s 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% Contribution ceiling Income

  11. c) The Bertelsmann Model - lump-sum contribution (adults: ~190 €, children: ~75 €), - Employer‘s 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“: „Citizen‘s Insurance“ compatible with lump-sum contributions c) Possible grand coalition after 2006 makes compromise likely

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