Gone with the windfall

  • Due to the debate about the generosity of LTC insurance benefits the German government decided to increase benefits and widen the circle of LTC beneficiaries with the Second LTC Strengthening Act. In this paper, we evaluate the long-term implications of this recent reform for the German LTC insurance scheme. Using the framework of generational accounting we show that the reform has led to a widening of the short-term gap between revenues and expenditure and that the LTC insurance is not sustainably financed, neither pre- nor post-reform. By the early 2020s there will be fiscal pressure for further reforms. From an intergenerational perspective, the reform can be seen as a windfall to current beneficiaries increasing the intergenerational redistribution through the pay-as-you-go system.

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Author:Lewe Bahnsen, Stefan Fetzer, Fabian Franke, Christian Hagist
Subtitle (English):Germany’s second LTC strengthening act and its intergenerational implications
Series (Serial Number):WHU – Working Paper Series in Economics (WP 18/05)
Publisher:WHU - Otto Beisheim School of Management
Place of publication:Vallendar
Document Type:Working Paper
Date of Publication (online):2018/10/26
Date of first Publication:2108/10/26
Publishing Institution:WHU - Otto Beisheim School of Management
Release Date:2018/10/28
Tag:Generationenbilanz; Intergenerative Verteilungswirkungen; Pflegeversicherung
Generational accounting; Intergenerational distribution; Long-term care insurance
Page Number:30
Institutes:WHU Economics Group / Chair of Intergenerational Economic Policy
JEL-Classification:H Public Economics / H5 National Government Expenditures and Related Policies / H51 Government Expenditures and Health
J Labor and Demographic Economics / J1 Demographic Economics / J14 Economics of the Elderly; Economics of the Handicapped
I Health, Education, and Welfare / I1 Health / I13 Health Insurance, Public and Private
Licence (German):Copyright for this publication