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

  • Friedrich Breyer

    (University of Konstanz and DIW, Berlin)

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. The Geneva Papers on Risk and Insurance (2004) 29, 679–688. doi:10.1111/j.1468-0440.2004.00310.x

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Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance.

Volume (Year): 29 (2004)
Issue (Month): 4 (October)
Pages: 679-688

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Handle: RePEc:pal:gpprii:v:29:y:2004:i:4:p:679-688
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  1. Cochrane, John H, 1995. "Time-Consistent Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 445-73, June.
  2. Baumann, Florian & Meier, Volker & Werding, Martin, 2008. "Transferable ageing provisions in individual health insurance contracts," Munich Reprints in Economics 20150, University of Munich, Department of Economics.
  3. Breyer, Friedrich & Haufler, Andreas, 1999. "Health care reform: Separating insurance from income redistribution," Discussion Papers, Series I 296, University of Konstanz, Department of Economics.
  4. Homburg, Stefan, 2000. "Compulsory savings in the welfare state," Journal of Public Economics, Elsevier, vol. 77(2), pages 233-239, August.
  5. Breyer, Friedrich & Franz, Wolfgang & Homburg, Stefan & Schnabel, Reinhold & Wille, Eberhard, 2004. "Reform der sozialen Sicherung," EconStor Books, ZBW - German National Library of Economics, number 92399.
  6. Kifmann, Mathias, 2002. "Insuring Premium Risk in Competitive Health Insurance Markets," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 15, number urn:isbn:9783161477409.
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