1. the role of public finance and private supplementary funds”
LONG TERM CARE POLICY SOLUTIONS FOR AN AGEING SOCIETY AND ITS FINANCIAL SUSTAINABILITY IN THE GERMAN EXPERIENCE
Markus Sailer
Component Two Training Course “Financing the social security system in an ageing society:
the role of public finance and private supplementary funds”
Italy, July 1st -15th, 2018

2. Index: MANAGEMENT AND ORGANISATION: DECENTRALISATION AND INTEGRATION
Principles of design and organisation
Number of insured

3. Index: TYPE OF ELDERLY SERVICES: FORMAL AND INFORMAL CARE
Definition: …»in need for care»
Dimensions of assessment
Care grades
List of benefits
Size of benefit according to care grade
Benefits for all grades
Number of beneficiaries

4. Index: FINANCING AND SPENDING LEVELS
Financial parameters: rate of contributions
Contribution payment
Financial parameters: Revenues and expenditure
Mechanism of revenue sharing
Medium term financial stability
Long term financial stability
Financial parameters: projection of expenditure
Long term care provident fund

5. MANAGEMENT AND ORGANIZATION: DECENTRALIZATION AND INTEGRATION

6. PRINCIPLES OF DESIGN AND ORGANISATION
Germany: History of social security and social protection through branches of social insurance
Statutory health insurance (1883), statutory industrial injury insurance (1884), statutory pension insurance (1889), statutory unemployment insurance (1927)
Coverage gap: insurance of the long term care risk
If in need of care: out-of-pocket payment or means tested social assistance
1995: statutory social long term care insurance (LTCI)

7. PRINCIPLES OF DESIGN AND ORGANISATION
Mandatory social insurance
Statutory benefits, partially comprehensive insurance
LTCI Management entrusted to Statutory Health Funds, but separate branch and distinct accounts; LTC insurance follows health insurance
Private insurance for those not entitled to statutory health insurance or opting out
Opting out possible, if monthly (annual) wage is above Euro 4,950 (59,000)
Supplementary insurance for individual benefits: private insurance, tax subsidized

8. PRINCIPLES OF DESIGN AND ORGANISATION
Delivery of services
Care givers (family members or acquaintances): home care
Contracted facilities under municipal, non-profit or private ownership
Out-patient care services
In-patient care services, nursing homes

9. NUMBER OF INSURED (2017, in million)
SOCIAL LTC
PRIVATE LTC
Contributing members
56.0
n.a.
Family members
16.3
Total
71.4
9.4

10. TYPE OF ELDERLY SERVICES: FORMAL AND INFORMAL CARE

11. DEFINITION … IN NEED FOR CARE
Impairments of independence or incapacitation due to physical, mental and psychological disabilities
… in six fields, which are weighted (next slide)
The need must be long-term, at least for six months and of a defined gravity

12. DIMENSIONS OF ASSESSMENT
Mobility (10%)
Cognitive and communicative abilities (15%, jointly with (3))
Behaviour patterns and psychological problems (15%, jointly with (2)
Level of self sufficiency (40%)
Health restrictions, demands and stress due to therapies (20%)
Structure of every day life and social contacts (15%)

13. CARE GRADES
The weighted results are added to a total of 0 to 100 points.. The scale is divided into five segments which define the five grades of “need for care”.
TYPE OF BENEFIT
CARE GRADE 1
CARE GRADE 2
CARE GRADE 3
CARE GRADE 4
CARE GRADE 5
Points
70-90
90-100
Definition
Minor impairment of independence
Considerable impairment of independence
Severe impairment of independence
Most severe impairment of independence
Most severe impairment of independence with special care requirements
Source: Social Code Book no 11

14. LIST OF BENEFITS Cash transfer Benefits in kind
Substitute for prevented caregiver
Day-/Night care
Supplementary ambulatory care and relief benefits
Short term care
Social insurance of caregivers (non-professional)
Auxiliary devices / improvements to the living environment
In-patient care
In-patient care in home for handicapped
In-patient care top-ups
Counselling services in LTC matters
Other benefits: Training courses, …

15. SIZE OF BENEFITS ACCORDING TO CARE GRADE
TYPE OF BENEFIT
CARE GRADE 1
CARE GRADE 2
CARE GRADE 3
CARE GRADE 4
CARE GRADE 5
Euro per month
Care allowance
125
Outpatient care: benefits in cash
316
545
728
901
Outpatient care: benefits in kind -
689
1,298
1,612
1,995
Inpatient care: benefits in kind
770
1,262
1,775
2,005
Day- / Night care
Euro per year
Short term care and substitute for prevented care giver
Source: Federal Ministry of Health

16. BENEFITS, for all care grades
Auxiliary devices: 40 Euro per month
Improvements to the living environment: 4,000 euro per case
Top up for resident group: 214 Euro per month
Counselling services in LTC matters; 23 Euro per semester: grade 1-3, per quarter: grade 4 and 5

17. NUMBER OF BENEFICIARIES (2017, in thousend, rounded figures)
CARE GRADE
OUT-PATIENT CARE
IN-PATIENT CARE
TOTAL 1
163.0
4.1
167.2 2
1,269.2
186.8
1,1456.0 3
695.2
240.9
936.5 4
285.4
224.2
509.5 5
109.0
123.9
232.7
2,522.0
779.9
3,302.0
Source:
Federal Ministry of Health (BMG)

18. FINANCING AND SPENDING LEVELS

19. FINANCIAL PARAMETERS: RATE OF CONTRIBUTIONS
TIME PERIOD
RATE OF CONTRIBUTION
in percent
Start
End
1995, January
1996, June
1.0
1996, July
2008, June
1.7
2008, July
2012, December
1.95
2013, January
2014, December
2.05
2015 January
(present)
2.55
Since 2005 the rate of contribution for childless insured is increased by 0.25%.

20. CONTRIBUTION PAYMENT
Contributions levied on gross wages up to the contributory threshold, Euro 4, per month in 2018
Employees: Contributions are equally shared between employees and employers
Pensioners pay entire contribution

21. FINANCIAL PARAMETERS: REVENUES AND EXPENDITURE
YEAR
CONTRIBUTIONS
TOTAL REVENUES
EXPENDITURE ON BENEFITS
TOTAL EXPENDITURES
BALANCE
In billion Euro
2014
25.8
25.9
24.2
25.5
0.4
2015
30.6
30.7
26.6
29,0
1.7
2016
32.0
28.3
31.0
1.0
All figures rounded.
Source: Federal Statistical Office, Statistical Yearbook 2017

22. MECHANISM OF REVENUE SHARING
Dotations from contributions made by pensioners.
Excess funds of LTC funds
Other contributions
Preliminary, ex ante revenue and expenditure sharing based on estimated balances
Ex post annual revenue and expenditure sharing based on final balances
Principle of expenditure appropriation: Fund’s share on scheme’s revenues
Management by Federal Insurance Supervisory Office

23. MEDIUM TERM FINANCIAL STABILITY
Model projections
Current rate of contributions sufficient until 2022
Additional revenues from increased contribution rate: Euro 2.5bn p.a.
Further increase in revenues to Euro 2.7bn by 2020

24. LONG TERM FINANCIAL STABILITY
Model projections
Macroeconomic model
Scenario T+: positive development regarding demography, employment, productivity, gross domestic product
Scenario T-: negative development regarding demography, employment, productivity, gross domestic product

25. FINANCIAL PARAMETERS: PROJECTION OF EXPENDITURE
Projections
- price indexed
___ wage indexed
In percent of GDP
Scenario T+

26. LONG TERM CARE PROVIDENT FUND
Established and operational
In 2015
Purpose
Smoothing of expected increase in contribution rates
Accumulation phase
2015 to 2033
Annual dotation
0.1% of previous year’s (standardised) revenues
Dotation of 2017
Euro 1.36bn
Assets, end of 2017
Euro 3.83bn
Decumulation phase
Starting in 2035
Maximum annual drawing
not in excess of 1/20 of the assets as of end of 2034
Management
German Central Bank (Deutsche Bundesbank)
Monitoring
German Federal Ministry of Health

27. Thank you very much