Indicators for Measuring Intergenerational Fairness of Social Security Systems—The Case of the German Social Health Insurance

Abstract

The issue of fiscal sustainability is often labelled as a synonym for intergenerational fairness; however, pay-as-you-go schemes such as the German Social Health Insurance (SHI) involve a “natural” amount of intergenerational redistribution from younger net payers to older net beneficiaries. We calculate intertemporal balance sheets of SHI and compare two generational accounting approaches (GAC and GAIB) with an alternative measure of intergenerational fairness, SM, which we derive from Settergren and Mikula (2005). Our results indicate that the SM concept leads to similar implications concerning the amount of intergenerational redistribution as classical measures of fiscal sustainability. For the SM approach, the balance sheet of SHI shows a rate of unfunded benefits of 25 percent. Closing this gap requires an increase of the contribution rate by 30 to 40 percent. This total effect can be separated into an effect due to the current population structure (10 p.p.), the increase in life expectancy (10 p.p.), and medical technical progress (about 10 to 20 p.p.).