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Welform Reform Team Faces Tough Task

The experts who are meant to get Germany's health and pension systems back on their feet could come up with some tough medicine. But will the government act on it?

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Germany's health system is nearly out of cash

Faced with a collapsing social welfare system and a populace divided on who should foot the bill, the German government presented a commission this week it hopes will find a solution by next Fall.

Headed by Bert Rürup, an economist whose expertise in pension matters has been drawn on by Helmut Kohl as well as Gerhard Schröder, its 26 members are drawn from academic and research institutions, as well as industry and the unions. The commission will have ten months to come up with proposals for a fundamental overhaul of the pension and health-care systems.

Rürup has said his aim is to push non-wage costs down to 40 percent from its present 41.7 percent while safeguarding the long-term viability of the welfare system. Andreas Esche from the Bertelsmann Stiftung, a leading German think-tank, told DW-WORLD that the commission can be seen as a statement of intent which the government will find difficult to back down from as well as providing the expertise necessary to tackle such complex issues.

The three pillars of the German welfare state

The commission’s brief covers three distinct areas: state pensions, state health insurance and home nursing care insurance. The government is already trying to encourage Germans to invest in their own supplementary pension plan with the introduction of the so-called “Riester Pension,“ named after earlier employment minister Walter Riester, which offers limited tax breaks for those signing up.

Health Minister Ulla Schmidt wants the commission to assess how well the system is working and recommend adjustments that will ensure present income covers both future payments and future investment requirements. Commission member Gert Wagner from the German Institute for Economic Research in Berlin told DW-WORLD that these could included raising retirement age - although that would depend on the economic situation as a whole - and a solidarity tax for wealthier pensioners.

Schmidt has said she intends to tackle health care reform before the end of next year. As state health insurers warn of soaring costs and huge impending deficits, the commission will be scrutinizing both demographic trends and technical advances in medicine to determine where costs can be cut without affecting basic health care provisions.

However, there is little doubt that state health insurers will have to cut back on what they are prepared to pay for. “We have to look at the range of services,“ Bernd Raffelhüschen, a member of the commission, said. “There’s no question of that.”

Prevention is better than cure

Professor Bert Rürup

Professor Bert Rürup

Focusing more on preventative medicine rather than treatment could drastically reduce health care expenditure. This fits in with Rürup’s (photo) contention that people should take more responsibility for their own health.

Andreas Esche thinks the commission will also have to consider thornier issues such as whether a spouse and children should be covered by a family breadwinner’s health insurance, or whether the whole health care system could be financed in another way, like through taxation.

The greying of Germany

The ageing of Germany’s population means home nursing insurance will take on an ever greater significance, and the commission will have to consider ways of ensuring it can meet new demands whilst maintaining quality of care. Again, the introduction of private supplementary insurance is one possibility.

Rürup expects the commission to meet fierce opposition. “Social systems cannot be reformed through consensus," he says. Mindful of potential problems, Schmidt has warned the commission that its solutions have to be politically feasible. “I expect proposals which can be put into practice,” she said, adding that there was no guarantee that the government would adopt all the recommendations.

Before the commission makes any recommendations, however, it will have to achieve a consensus. Peter Hartz, who headed the commission for labour market reform before the last election, found that was no easy matter, and there is no guarantee of success for Bert Rurüp either. But, as Andreas Esche pointed out, if the Rürup team manages to come up with a social welfare system which is effective, affordable and transparent, it will be a German export winner.

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