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Health premiums or health contributions? An evaluation of health care reform options in Germany


  • Hans Fehr
  • Heinrich Jess


The present study quantifies the revenue, distributional and efficiency effects of various reform options for the German health care system. Starting from a baseline path of the economy which represents the existing public and private mixture of health care providers in the German health care system, we introduce various reform packages which change the financing, the contribution base and the membership in the public system. Our simulations indicate that a premium system is superior to the citizen insurance model, since the former allows the redistribution to be financed through consumption taxes instead of wage taxes. Efficiency gains are maximized with the health premium model because this reform allows an immediate transition (compared to a privatization strategy) and minimizes the required compensation payments (compared to the citizen premium model) which distort labor supply. Winners of such a reform are mainly younger workers, while older workers, civil servants and self-employed will lose.

Suggested Citation

  • Hans Fehr & Heinrich Jess, 2006. "Health premiums or health contributions? An evaluation of health care reform options in Germany," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 126(1), pages 20-57.
  • Handle: RePEc:aeq:aeqsjb:v126_y2006_i1_q1_p20-57

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    References listed on IDEAS

    1. Van den Berg, Gerard J., 2001. "Duration models: specification, identification and multiple durations," Handbook of Econometrics,in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 55, pages 3381-3460 Elsevier.
    2. Hunt, Jennifer, 1995. "The Effect of Unemployment Compensation on Unemployment Duration in Germany," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 88-120, January.
    3. Lauer, Charlotte, 2003. "Education and Unemployment: A French-German Comparison," ZEW Discussion Papers 03-34, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Bernd Fitzenberger & Ralf A. Wilke, 2010. "Unemployment Durations in West Germany Before and After the Reform of the Unemployment Compensation System during the 1980s," German Economic Review, Verein für Socialpolitik, vol. 11, pages 336-366, August.
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    Cited by:

    1. Alexander Kemnitz, 2013. "A Simple Model of Health Insurance Competition," German Economic Review, Verein für Socialpolitik, vol. 14(4), pages 432-448, November.
    2. Jess Heinrich, 2006. "Steuerfinanzierung von Sozialleistungen? / Tax Funding of Social Security Benefits?: Verteilungs- und Effizienzeffekte einer Umfinanzierung von Sozialleistungen in der gesetzlichen Renten- und Kranken," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(4), pages 436-462, August.
    3. Feil, Michael & Klinger, Sabine & Zika, Gerd, 2006. "Sozialabgaben und Beschäftigung : Simulationen mit drei makroökonomischen Modellen," IAB Discussion Paper 200622, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Schubert, Stefanie & Schnabel, Reinhold, 2009. "Curing Germany's health care system by mandatory health premia?," Journal of Health Economics, Elsevier, vol. 28(5), pages 911-923, September.
    5. repec:jns:jbstat:v:227:y:2007:i:1:p:27-48 is not listed on IDEAS

    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts


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