Demographic Developments, Full Funding and Self-Regulation: The Foundations of the Social Health Insurance of the Future

Every European healthcare system must cope with the impact of demographic developments. Rising life expectancies – the increase in the number of senior citizens combined with a decline in the number of individuals still employed – will profoundly jeopardize the financial viability of social health insurance systems. The core problem faced by all European healthcare systems, in connection with demographic developments, is the pay-as-you-go method, which is inherently vulnerable to the consequences of such demographic changes. The full-funding method represents a way out of this dilemma. In contrast to the pay-as-you-go approach, the full-funding approach is demographics-resistant, since accrued capital is used to cover future risks. The full-funding approach is already in use to cover the risk of illness in both Europe and Asia (Singapore).In parallel with a changeover to the full-funding approach, the care-delivery end of the healthcare system must also be reorganized in such a way that accrued resources are applied as efficiently as possible, while at the same time ensuring that Europe's citizens will have the broadest possible options for choice within the healthcare system, as they do elsewhere.The model for the future presented here offers up for discussion a new healthcare system – one that strengthens the driving forces of the health market as an engine of the economy, yet leaves those involved more leeway to set their own terms. For that reason, the model is founded on a healthcare system organized as a market economy, strongly encouraging individual responsibility on the part of everyone involved, yet also guided by a new sense of social solidarity. The relationship between the state and individual players in the healthcare system must be reorganized; the role of the state must be pared down to establishing an overall regulatory and social-policy framework. The healthcare sector, as a personnel-intensive growth industry, needs significantly more legal latitude than it has today.This article presents a concrete rough proposal for both the financing and the care-delivery end of a future model for a demographics-resistant health insurance system, using an example developed for the reform of the German healthcare system. The Geneva Papers on Risk and Insurance (2003) 28, 351–367. doi:10.1111/1468-0440.00229