University of Bayreuth, press release No. 176/2021 03 December 2021
Bayreuth finance expert demands social security supply and financing structures be adapted to long-term requirements
The financing of pensions, long-term care, and statutory health insurance are still only possible with money from the state. In order for the social systems to remain financially viable in the future, the financing mix must be revised and benefit transfers must be precisely defined, explain Prof. Dr. Volker Ulrich from the University of Bayreuth and Prof. em. Dr. Eberhard Wille from the University of Mannheim in a recently published joint expert report.
The two economists have published an expert opinion entitled "Budgetary and economic policy illusions and dangers of tax financing of social security systems" on behalf of the Private Health Insurance Association (PKV). The problem at the heart of their report is the financing of social security and statutory health insurance.
"The article discusses the starting points for a target-oriented contribution, tax, or credit financing of coming expenditure increases," explains Prof. Ulrich, Chair of Financial Economics (VWL III) at the University of Bayreuth. "The effects of demographic change, medical-technical progress, and benefit expansions, as well as the consequences of the coronavirus pandemic have led to more tax revenue flowing into the social security systems."
Particularly because the possibilities of increasing contribution rates are limited - here politicians intend to keep to the 40 percent limit of the social guarantee in the future - it must be assumed, in the view of the experts, that the increased costs will have to be financed by tax money.
This results in a competitive situation. The federal budget would have to find more money for pensions, care, and health, but at the same time the money is also needed in other areas, such as education, infrastructure expansion, and digitalization. "It is already foreseeable today that, if the debt brake and the social guarantee remain in place, federal subsidies will experience a considerable dynamic in the next two legislative periods and beyond," warns the article, which appeared in issue No. 2/21 of the journal "Gesellschaftspolitische Kommentare". "The next legislative period will be of great importance for the future financial architecture of the statutory health insurance funds."
Ulrich and Wille conclude in their article that there are contradictory assessments in health policy on the financing mix of contributions, taxes, and new debts, as no binding definition for the financing mix of the Statutory Health Insurance (SHI) has been arrived at to date. "In a contribution-financed SHI system, tax financing should be limited to non-insurance benefits, otherwise it becomes the plaything of politics," says Ulrich. Therefore, a clear definition of non-insurance benefits is very important. This must be done in order to ensure transparent financing.
Finally, the article recommends: "Overall, the supply and financing structures should be more strongly adapted to the long-term requirements of the sustainable development of the social security systems".