21
Similarly with labour market policy, old-age pensions experienced at least one path-
departing reform in contrast to previous periods. As a whole, the post-1998 period first saw
a combination of reversed policy and incremental changes18 and then a structural reform:
the so-called Riester pension reform, which was discussed as early as 1999 and got adopted
in 2001. That reform marked the transition towards a pension policy that is oriented towards
securing its financing base and stabilizing contribution rates, rather than towards securing a
certain level of benefits. As a result, future decreases in benefit levels could no longer be
ruled out and were met with a new privately funded but state-subsidized pillar, in the Ri-
ester reform. It was path-breaking in so far as it departed from the traditional social insur-
ance state adding an element of capital-funding in old-age provision, which tends to be as-
sociated with liberal welfare states (Schmidt 2005: 116ff.). In reaction to renewed pension
budget deficits in 2003, another round of incremental cutbacks included the suspension of
pension indexation for 2004 and cuts that would affect the pension entitlements of those in
higher education and starters and those wishing to retire early. Another reform containing
measures with long-term effects was legislated in 2004 with the so-called ‘sustainability
factor’ (which incorporates the changing ratio between contributors and recipients into the
pension formula) designed to influence future pension adjustments (Schmidt: 116f.). The
reforms of the Red-Green coalition have been characterized as a ‘partial privatization of the
old-age and disability insurance system, minimizing its decommodification potential, whilst
at the same time expanding family-oriented benefits’. While the government withdrew from
the principle of guaranteeing the achieved living standard in the public system, it offered
fairly generous incentives for people to participate in the new private pension scheme and it
intended to improve the situation of very low-income senior citizens by enacting a special
social assistance benefit for them (Bleses/Seeleib-Kaiser 2004: 77)
In health care policy, the Red-Green coalition was committed to increase efficiency by
modernizing care provision structures and contractual relations between stakeholders to
ensure the stability of contribution rates and retain a comprehensive benefit catalogue in the
statutory health insurance (SHI). Three distinct phases can be distinguished (Gerlinger
2003: 7). Initially (1998-2000), the government repealed a number of privatizing measures
of the Kohl government and adopted the 2000 SHI Reform Act: it modernized contractual
relations and care provision in order to control costs and improve quality in the SHI. In a
second phase, from 2001 to 2002, the coalition sought to address some visible malfunctions
in the system: the existing risk-adjustment scheme and regulation concerning medication
provision. In the future, the risk-adjustment scheme would take account of more character-
for older workers and public support was granted for jobs with wages below the former income of work-
ers.
18 The Red-Green coalition started by suspending parts of the 1997 pension reform under Kohl (espe-
cially its demographic factor which was to lower pension levels in the long run) and cuts in disability
benefits. It also added some revenue-enhancing reforms such as including low-wage earners and those in
atypical employment into the circle of contribution payers and introduced a tax on energy consumption
that was to complement pension fund revenue. In turn, contribution rates could be lowered by 1.2 per
cent to 19.1 per cent in 2001 (Clasen 2005: 112 f.).