On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in

Germany – A Sustainable Step?

Jasmin Häcker und Bernd Raffelhüschen

University of FreiburgResearch Centre for Generational

Contracts

European Conference on Long-Term Care, Mannheim 21.10. - 22.10.05

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

1 The Status quo of Long-term Care Insurance

2 Projection of Dementia Patients and Sustainability

3 Citizens‘ Insurance vs. Partial Funding Strategy

4 Conclusion

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

Method of Generational Accounting 1. The Status quo of LTCI

Population projection

-50000

-40000

-30000

-20000

-10000

0

10000

20000

30000

40000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

AlterProfil aller Steuerzahlungen u.ä. Profil der NettosteuerzahlungenProfil aller empfagenen Transfers u.ä.

Age-specific net contribution payments

revenues(contribution payments)

expenditures(transfer receipts)

159,2sum sum 159,2

National account budget forthe base year

age

Eur

o

Nachhaltigkeitslücke

63.5

57.6

40

60

80

nur 10. AHV-Revision mit 11. AHV-Revison (Refrenzszenario)

in p

erce

nt o

f GD

P

Nachhaltigkeitslücke

Sustainability gap Generational accounts

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

0

500

1000

1500

2000

2500

3000

3500

4000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

age

in E

uro

transfer receipts contribution payments

1. The Status quo of LTCI

Fig. 1: Age-specific contribution payments and transfer receipts of LTCI

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

32.1

61.5

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

scenario 1 scenario 2

Perc

ent o

f GD

P

0

1

2

3

4

5

6

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060

year

Perc

ent

scenario 1 scenario 2

1. The Status quo of LTCI

Fig. 2: Sustainability gaps of LTCI in the status quo with an increase in LTC costs by 1,5% (scenario 1) and 2,5% (scenario 2) (base year 2003, r=3%, g=1,5%)

Fig. 3: Development of the contribution rate of LTCI in scenario 1 and 2 (base year 2003, r=3%, g=1,5%)

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

2. Projection of Dementia Patients and Sustainability

Age-specific prevalence rates of dementia patients (Bickel (2000)):

over 90Age-group

Prevalence rate

65-69

1,2 %

70-74 75-89 80-84

2,8 % 6 % 13,3 %

85-89

23,9 % 34,6 %

According to the 5th variant of the 10th coordinated population projection the number of

dementia patients can be extrapolated for all years after 2003

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

100

150

200

250

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

year

Perc

ent

dementia patients 'all other beneficiaries' according to SGB XI, §14

Fig. 4: Development of the number of dementia patients and „all other beneficiaries“ for the years 2005 to 2050 (in percent)

2. Projection of Dementia Patients and Sustainability

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

32.1

44.4

0

5

10

15

20

25

30

35

40

45

50

Status quo scenario 3

perc

ent o

f GDP

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060

year

perc

ent

Status quo scenario 3

Fig. 5: Sustainability gaps of LTCI in the status quo and in case of additional benefits for dementia patients (scenario 3) (base year 2003, r=3%, g=1,5%)

Fig. 6: Development of the contribution rate of LTCI in the status quo and in case of additional benefits for dementia patients (scenario 3) (base year 2003, r=3%, g=1,5%)

2. Projection of Dementia Patients and Sustainability

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

3. Citizens‘ Insurance vs. Partial Funding Strategy

Citizens‘ Insurance (Lauterbach/Nahles)

Changes on the revenue side: inclusion of all citizens in the pay-as-you-go scheme increase in the assessment limit increase in the assessment of contributions through including

incomes other than wages

Changes on the expenditure side: Additional benefits for dementia patients Increase in the outpatient in-kind transfers for the care levels 1 and 2:

care level 1: 384 €

704 €

care level 2: 921 €

1.100 €

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

32.1

48.9

0

10

20

30

40

50

60

Status quo Citizens' insurance

perc

ent o

f GDP

0

1

2

3

4

5

6

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060year

perc

ent

Status quo Citizens' insurance

Fig. 7: Sustainability gaps of LTCI in the status quo and in case of the citizens‘ insurance (base year 2003, r=3%, g=1,5%)

Fig. 8: Development of the contribution rate of LTCI in the status quo and in case of the citizens‘ insurance (base year 2003, r=3%, g=1,5%)

3. Citizens‘ Insurance vs. Partial Funding Strategy

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

Partial Funding Strategy (Stewens)

supplementary funded LTCI, mandatory for all 60 year-olds and younger in 2006

Adjustment of outpatient and inpatient in-kind transfers:

1.432 € care level 2: 921 €

care level 1: 384 €

400 €

500 €

1.023 € 1.000 € 1.279 €

outpatient inpatient

care level 3: 1.432 € 1.500 €

Freezing of the nominal

transfer level

Supplementary Insurance: benefits are adjusted annually

Changes on the revenue side:

Changes on the expenditure side: Additional benefits for dementia patients

3. Citizens‘ Insurance vs. Partial Funding Strategy

+ Fig. 9

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

Fig. 9: Real term transfer level of the base year if the supplemetary insurance covers the loss in benefits of unfunded LTCI due to the freezing of the nominal transfer level

3. Citizens‘ Insurance vs. Partial Funding Strategy

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 2054 2058year

tran

sfer

leve

l

real term transfer level of the unfunded LTCI ... of the supplementary funded insurance

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060

year

perc

ent

Status quo Partial funding strategy

Fig. 10: Development of the contribution rate of LTCI in the status quo and in case of the partial funding strategy (base year 2003, r=3%, g=1,5%)

Premiums for the supplementary insurance:

2006 2010 2020 2030 2040 2050 2060calculations according to

Stewens4.00 € 5.88 € 10.58 € 15.28 € 19.98 € 24.68 € 29.38 €

own calculations 8.50 € 15.30 € 32.30 € 49.30 € 73.10 € 83.30 € 100.30 €

3. Citizens‘ Insurance vs. Partial Funding Strategy

On the Inclusion of Dementia Patients into Compulsory LTC-Insurance in Germany - A Sustainable Step?

Conclusion

Neither of the reform options can curtail the problems of the LTCI

partial funding strategy does not fully account for the

development in expenditures

citizens‘ insurance even aggravates the demographic burden

Without having solved existing problems, no new basis for claim should be created!