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The existing differences for example in financing of family policy in health insurance as well
as in long-term care insurance compared to pension insurance can be explained to a large
extent from history: In the founding period of Germany’s social insurance in the eighties of
the 19th century chancellor Bismarck could not realise financing part of health insurance by
taxes. A few years later, when pension insurance was established, 30 % of pension
expenditure were financed from tax revenue beside employer’s and employee’s
contribution.10
Until some years ago, there was strong resistance in the German public debate regarding
partial tax financing in health insurance and the effect in particular on employer’s
contributions (as non-wage labour costs). This now starts to change mainly because of
increasing contribution rates in health insurance. In particular, part of benefits in health
insurance towards families is looked upon now as family policy by some actors. While family
policy in general is financed from tax revenue in Germany, it is argued that a shift in financing
from contribution to tax financing should take place.
5. The present debate in Germany on improving the conditions
for families in social insurance
As already mentioned, in March 2001 the Constitutional Court decided that in long-term care
insurance there is at present an unequal treatment of insured persons with and without
children which violates the constitution. The main argument was that insured persons raising
children contribute additionally beside their contribution payment in cash, because a PAYGO
financed scheme needs future generations. Therefore, families produce a contribution in kind.
This second type of contribution is according to the Court not - at least not adequately -
recognised. Therefore, the Court demanded a reduction of contribution payments in cash for
families. This has to be implemented by the legislator up to the end of 2004. But the legislator
has also to examine whether the effect criticised in long-term care insurance does also exist
in other PAYGO financed social insurance schemes.
5.1 Raising children as a contribution in kind in pension insurance?
This instruction by the Constitutional Court can have far reaching effects particularly in social
pension insurance. If the Court’s argument that raising children is a contribution in kind is
accepted in pension insurance, this would undermine the present earnings-(income-)related
concept of pension insurance. If pension claims are based on the fact of raising children this
10 An important argument to realise this was the fact that the introduction of the pension insurance
reduced the expenditure for poor people on the local level.