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Gone with the windfall
(2018)
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.
At the beginning of their career civil servants in Germany can choose between the social health insurance (SHI) system and a private plan combined with a direct reimbursement of the government of up to 70 percent. Most civil servants chose the latter, not only but also because they have to cover all contribution payments in the social system themselves, while normal employees get nearly 50 percent from their employers. The city state of Hamburg decided to change the system by paying a share of the contributions if civil servants choose the social plan. We use a stochastic microsimulation model to analyse which socio-economic types of civil servants could benefit from the Hamburg plan and if this changes the mix of insured persons in the SHI system. Our results show that low income and high morbidity types as well as families have a substantially higher incentive to choose SHI. This reform might thereby increase the adverse selection of high risk cases towards SHI.
Background: In view of steadily rising healthcare expenditures (HCE), studies on spending distributions can provide important guidance for policy decisions. Since the majority of HCE is concentrated in a few high-cost cases, this study focusses on the spending distribution between different cost-risk groups. We show detailed allocation structures, distinguishing several categories of HCE and the survival status of insureds to gain insights regarding the share of mortality costs.
Methods: Our analyses rely on data from a large sickness fund that covers around four million insureds. We classify the population into ten equal risk groups by costs and then determine expenditure shares of total HCE and daily per-capita expenditures depending on survival status and risk group affiliation.
Results: Our results offer that the often stated dominating effect of mortality costs of HCE is only evident in lower cost-risk groups and almost exclusively attributable to inpatient care. Furthermore, HCE in the calendar year of death is the same for most cost-risk groups, with the exception of risk groups at both ends of the distribution. However, in the case of the highest cost-risk group, the difference between survivors and decedents is proportionally small. The differences in cost structure between decedents in high-risk and other risk groups are primarily attributable to pharmaceutical spending.
Conclusion: Short-term high HCE in the year of death occur equally in all cost-risk groups and are hardly avoidable. By contrast, in the extremely high cost-risk groups, the cost difference between the year before death and the year of death is much smaller. Overall, this group remains the main target to influence the rise in HCE and its characteristics should be considered with respect to future HCE projections.