How to Finance Social Health Insurance: Issues in the German Reform Debate

Posted: 15 Oct 2004

See all articles by Friedrich Breyer

Friedrich Breyer

University of Konstanz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

In view of the rapidly rising contribution rates in the Statutory Health Insurance system and the persistently high unemployment rate, Germany has recently debated radical changes in the mode of health care financing. Among the controversial reform proposals were the possible expansion of mandatory membership to the whole population and the uncoupling of health insurance contributions from wage income. The main arguments in the German debate are presented and discussed. It is shown that there are valid welfare-economic reasons both for universal coverage and income-independent contributions. Moreover, it is demonstrated that the efficiency gains implicit in a transition to flat-rate contributions can be achieved in a distributionally neutral way if the measure is combined with an appropriate reform of the income tax system. Finally, it is shown that the replacement of pay-as-you-go financing by funding within social health insurance, while seemingly increasing the sustainability of the system, may create important additional problems.

Suggested Citation

Breyer, Friedrich, How to Finance Social Health Insurance: Issues in the German Reform Debate. Geneva Papers on Risk and Insurance: Issues and Practice, Vol. 29, No. 4, pp. 679-688, October 2004. Available at SSRN: https://ssrn.com/abstract=605155

Friedrich Breyer (Contact Author)

University of Konstanz - Department of Economics ( email )

Fachbereich Wirtschaftswissenschaften Fach D-135
D-78457 Konstanz
Germany
+49 (0)75 31/88-25 68 (Phone)
+49 (0)75 31/88-41 35 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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