Because the cost of care continues to rise, health economist Jürgen Wasem proposes mandatory supplementary insurance for all citizens. Does that make sense?

The proportion that older people have to pay themselves for nursing care in a home has never been so high: on average, they have to pay 2,400 euros per month privately, because statutory nursing care insurance only covers part of the costs. The traffic light government wants to limit the co-payment and examine how it can be reduced in the future. Now the association of private health insurers is proposing the introduction of mandatory supplementary long-term care insurance, into which all citizens would have to pay. Health economist Jürgen Wasem, professor of medical management at the University of Duisburg-Essen and chairman of the insurance association’s panel of experts, explains the background.

ZEIT ONLINE: Mr. Wasem, there is already a statutory long-term care insurance scheme. Why is there now a need for yet another compulsory insurance?

Wasem: Statutory long-term care insurance does not cover all costs. And the basic principle applies that the costs for the elderly are largely borne by the young. However, their burdens will continue to increase due to population development, not only in nursing care insurance, but also in health and pension insurance. It would therefore not be fair to expand statutory long-term care insurance for the younger generation. That’s why we don’t want to transfer the financing of co-payments to this system as well.

ZEIT ONLINE: What exactly does your proposal look like?

Jürgen Wasem: Today, two-thirds of nursing home residents are still able to pay their own contributions, and we have an older generation that is relatively well off financially. That’s why we in the Council of Experts are of the opinion that the legislature should not extend benefits across the board for today’s elderly and make the young pay for it. However, we believe it is important for today’s younger people to make provisions for their own future. We therefore call for funded supplementary insurance with age-related provisions. Because care costs will continue to rise disproportionately in the future. Newsletter

ZEIT ONLINE: What contributions would insured persons have to expect?

Wasem: The fees could be graduated according to age and would initially range between 39 and 52 euros per month. According to our calculations, this would cover 90 percent of care-related costs.

ZEIT ONLINE: These are considerable sums, especially when you consider that the contributions to long-term care insurance have been increased again and again. What is the basis for calculating your figures?
Wasem: We assume that the care-related costs will be two percentage points above the general inflation rate. This is because it is realistic to assume that care costs will rise disproportionately in the future, even more so than in the past. For our calculation, however, we have assumed that general inflation will again be two percent in the long term. Currently, two percent general inflation sounds too low, of course. But that is the inflation target of the European Central Bank. To the extent that real costs rise more sharply, of course, premiums will have to be adjusted.

“The insurance companies would have to take in everyone”
ZEIT ONLINE: How is this to be financed?

Wasem: We propose a so-called funded insurance, i.e.: the young build up ageing provisions from which the own contributions are paid in the event of long-term care. The main advantage is that we would not create an additional burden on the capital market for the young to cover the costs of the elderly. Employees and employers would each pay half of the contributions. Children would be insured free of charge, and non-working spouses would pay only half. Low-income earners would also pay only half, and those who receive a citizen’s allowance would have their contributions paid by the welfare state. Pensioners also pay only half the contribution, because this is already taken into account when calculating the ageing provisions.

ZEIT ONLINE: But investing the money on the capital market naturally also involves risks.

Wasem: There is, after all, strict regulation by law and supervision for the management of funded insurance. Only a small part of the financial investments may be made on the stock market, for example. We are also proposing that the existing Auffanggesellschaft should be responsible for this if an individual insurer were to become insolvent. In the 20 years it has been in existence, it has never had to take action because there have been no insolvent health or long-term care insurers.

ZEIT ONLINE: What should parity financing look like with the involvement of employers?

Wasem: Employers would pay a subsidy equal to half of the contributions. In the case of civil servants, the employers have to decide how to do it. Here, the federal legislature cannot impose any regulations on the states and municipalities.

ZEIT ONLINE: What should parity financing look like with the involvement of employers?

Wasem: Employers would pay a subsidy equal to half of the contributions. In the case of civil servants, the employers must decide how to do this. Here, the federal legislature cannot impose any regulations on the states and municipalities.

ZEIT ONLINE: Would it even be possible to legally oblige citizens to make private provision?

Wasem: We already have an obligation today for those who are not in the statutory health or long-term care insurance to take out private insurance. An obligation to take out supplementary insurance does not violate either EU law or the Basic Law, so the legislature can decide on it. And it would also be possible for the statutory health insurance funds to also offer the new supplementary insurance, legally separate. Or the statutory health and long-term care insurance funds – but only if the financial resources are legally separate from their other activities.
ZEIT ONLINE: Where would the difference be to private supplementary long-term care insurance, which after all already exists on the market today?

Wasem: The difference is enormous. In our proposal, the insurance companies have to accept everyone, so there is a so-called contracting obligation. That is not the case with today’s products – the insurance companies can also reject people.

ZEIT ONLINE: That means compulsory insurance would be a profitable business for the industry, right?

Wasem: Our calculation does not take into account profits or commissions for taking out insurance. We calculate with the lower edge of the administrative costs to be taken into account. From there: Of course, this should not become a loss-making business, but for the Council of Experts was certainly not a driver to bring the insurance companies a profitable business.

Backround informations: Germany’s Problem with demography and what it means for the younger generation?

Germany faces a demographic problem known as population aging, which poses a significant challenge for the country’s economy and social welfare system.

The German population is aging rapidly, with a declining birth rate and increasing life expectancy. According to the Federal Statistical Office of Germany, the proportion of people over the age of 65 is expected to increase from around 21% in 2019 to over 33% by 2060. At the same time, the working-age population is shrinking, which means there are fewer people available to support the growing number of retirees.

This demographic shift is causing several economic and social challenges for Germany:

1. Pension System – As the number of retirees increases, the pension system is facing significant strain. With fewer workers contributing to the system, it becomes more challenging to finance pensions for the growing number of retirees.
2. Healthcare System – As the population ages, there is a greater demand for healthcare services, which can put pressure on the healthcare system. The costs of healthcare can also increase as older people tend to require more medical care.
3. Labor Market – With fewer young people entering the labor market, companies may face labor shortages and struggle to fill job vacancies. This can limit economic growth and innovation.
4. Economic Growth – An aging population can lead to lower economic growth due to lower productivity and less innovation.
5. Social Welfare – As the number of elderly people increases, there is a greater demand for social welfare programs, including long-term care, housing, and social services.

Overall, the demographic problem in Germany poses significant challenges for the country’s economy and social welfare system. It is a complex issue that requires innovative solutions and long-term planning to address the needs of the aging population while ensuring economic growth and social welfare.

What it means for the younger part of the socieaty in germany?

The demographic problem in Germany can have a significant impact on the cost for younger people and the need for young foreigners in the country.

1. Cost for Younger People – As the number of retirees increases, there may be a greater demand for social welfare programs, including healthcare, housing, and pensions. This can lead to higher taxes and other costs for younger people, who will need to contribute more to support the growing number of retirees. Younger people may also face more limited job opportunities due to labor shortages and increased competition for available positions.
2. Need for Young Foreigners – With a declining birth rate and shrinking working-age population, there may be a need for young foreigners to fill labor shortages and help support the economy. This could create opportunities for young people from other countries to work and live in Germany, which could help address the demographic problem and provide benefits for both the German economy and the individuals themselves.

However, it is important to note that immigration policies and integration efforts must be carefully managed to ensure that young foreigners can contribute effectively to the German economy and society. There may also be cultural and linguistic barriers that need to be addressed to facilitate successful integration.

In summary, the demographic problem in Germany can impact the cost for younger people and create a need for young foreigners to fill labor shortages. Addressing these challenges will require careful planning and innovative solutions to ensure the long-term sustainability of the German economy and social welfare system.

What kind of social insurances you have to pay employee / Self employed

In Germany, both employees and self-employed individuals are required to pay into various social insurance programs. These programs are designed to provide protection and support for individuals in various areas of life, including healthcare, retirement, disability, and unemployment.

As an employee in Germany, the following social insurance contributions are mandatory:

1. Health Insurance: Every employee is required to have health insurance. The cost of this insurance is shared between the employer and the employee. The employer pays around 50% of the cost, and the employee pays the other 50%.
2. Pension Insurance: Every employee is required to contribute to the pension insurance program, which provides retirement benefits. The cost of this insurance is shared between the employer and the employee. The employer pays around 50% of the cost, and the employee pays the other 50%.
3. Unemployment Insurance: Every employee is required to contribute to the unemployment insurance program, which provides benefits in case of job loss. The cost of this insurance is shared between the employer and the employee. The employer pays around 50% of the cost, and the employee pays the other 50%.
4. Long-Term Care Insurance: Every employee is required to contribute to the long-term care insurance program, which provides support for people who need long-term care due to illness or disability. The cost of this insurance is shared between the employer and the employee. The employer pays around 50% of the cost, and the employee pays the other 50%.

As a self-employed individual in Germany, the following social insurance contributions are mandatory:

1. Health Insurance: Self-employed individuals are required to have health insurance. The cost of this insurance is based on the individual’s income and other factors.
2. Pension Insurance: Self-employed individuals are also required to contribute to the pension insurance program, which provides retirement benefits. The cost of this insurance is based on the individual’s income and other factors.
3. Long-Term Care Insurance: Self-employed individuals are required to contribute to the long-term care insurance program, which provides support for people who need long-term care due to illness or disability. The cost of this insurance is based on the individual’s income and other factors.

Overall, both employees and self-employed individuals in Germany are required to contribute to various social insurance programs, which provide support and protection in various areas of life. The cost of these contributions is shared between the individual and their employer (for employees) or based on the individual’s income (for self-employed individuals).

How the social costs as a part of the wage rised in the last decades?

Social costs have played a significant role in the rise of wages in Germany over the last few decades. Social costs refer to the mandatory contributions that employers make on behalf of their employees to support the social welfare system, including health insurance, pensions, and unemployment insurance.

In Germany, social costs are relatively high compared to other countries, which has had an impact on wage growth. Employers must pay around 20-25% of an employee’s gross salary to the social welfare system, which is one of the highest rates in Europe.

However, these social costs also provide significant benefits for workers, including access to high-quality healthcare, retirement benefits, and unemployment insurance. This can help to offset the cost of living and improve the overall quality of life for workers.

Over the last few decades, social costs in Germany have continued to rise, which has put pressure on employers to increase wages to cover these expenses. This has contributed to wage growth in the country, although it has also made it more expensive for companies to employ workers.

In recent years, there have been efforts to reform the social welfare system in Germany to make it more sustainable and reduce the burden on employers. This includes proposals to lower social costs for small and medium-sized businesses and increase flexibility in the labor market.

Overall, social costs have been a significant factor in the rise of wages in Germany over the last few decades, and they will continue to play a role in shaping the labor market and social welfare system in the future.