In a few years, more and more elderly people in need of care will bring the social security funds to their knees. Without reform, the younger generation is threatened with contribution rates of more than 50 percent of their gross earnings, predicts the Economics Advisory Board of the Ministry of Economics and proposes a way out.
Because the costs of nursing care for the elderly are rising and the proportion of people in need of care is growing, social security soon reaches the limits of its ability to finance itself. This is the conclusion reached by the Scientific Advisory Board at the Federal Ministry of Economics in a new report on “Sustainable financing of care services”, from which the “Frankfurter Allgemeine Zeitung” quotes.
According to the report, the contribution rate for long-term care insurance would have to rise from the current 3.05 percent to around 5 percent of gross wages by 2040 simply due to the increasing number of benefit recipients in the so-called baby boomer generation. Plans by the traffic light coalition to cushion the financial burden for those in need of care through higher social security benefits are not even taken into account, the newspaper writes.
Due to the foreseeable increase in pension and health insurance contributions, a total contribution rate of 49 to 53 percent of gross wages can be expected on this basis alone, the expert reports, according to the report, and warns: “It is doubtful that the contributors of the year 2040 willing to give up so much of their labor income.” This puts the ability to finance social security “overall in jeopardy”. So far, the total contribution rate is 40 percent. An increase to 49 percent would burden the contributors by at least 140 billion euros more per year.
According to the FAZ, the Advisory Board, a traditional advisory body that currently includes 41 economists and lawyers, clearly advises against expanding contribution-financed care services. Instead, he recommends introducing an obligation to take out supplementary private insurance against the risk of long-term care. The fact that the members of the baby boomers born between 1957 and 1969 could also participate in the financing of the high care expenses for their generation speaks for such a funded provision.
With a further expansion of social insurance, on the other hand, these additional expenses would only be felt later in the form of higher contribution rates, which would then put a greater burden on the next generation of payers, the newspaper quotes from the report. An expansion of contribution-financed services in care “would lead to a significant redistribution from the younger to the older generations and within the older generations would favor the wealthy in particular,” warned the chairman of the advisory board, Klaus Schmidt, economics professor at the Ludwig-Maximilians- University in Munich.
