domingo, fevereiro 28, 2010

Paying for pensioners, your budget or mine?

The concept of Twin Budget Time Bombs reminds us that Government spending increases directly with the ageing of the population, not just with the payment of Social Security and other Government pensions but also due to the impact of health spending with people aged 65+ years.

Pension liabilities increase with longevity, and with the generosity of Government and employer pension programs, and can be predicted fairly accurately with actuarial studies. Old age pensions are usually “portable”, that is, they are paid by the country where the pensioner worked during his active life, regardless of where the pensioner and his family chooses to live after retirement.

A Portuguese pensioner, who may have worked 15 years in Portugal, 15 years in France, and 15 years in Germany, will have three small  pension claims on each of those countries, which he will receive whether he lives the whole year in Portugal, or whether he chooses to spend four months visiting his grand-children in France. Similarly, the British or Dutch pensioners who choose to enjoy the fair Portuguese weather in Algarve continue to receive their home country pensions.

The Government health spending with pensioners is rather more complex. First, total health spending increases quasi-progressively with longevity. Estimates show that annual health spending with 80-year-old pensioners can reach nearly three or four times the annual health spending of active 50-year-old workers. As the annual health spending increases progressively with age and longevity, a growing proportion is paid by the Government, either through insurance and reimbursement programs like Medicare, or by exempting older pensioners  and those with chronic diseases from making the out-of-pocket co-payments (isenção de taxas moderadoras e de comparticipações do utente).

Most countries have unfunded acturial pension liabilities from the Pay-as-You-Go social security pension systems.  Only fortunate and prudent countries like oil-rich Norway have sizable Government pension funds. From the Government's perspective, pensioner health liabilities are even more difficult to estimate and to provision.
From the pensioners perspective, an active worker accumulates two types of “pensioner rights” for every year worked:
(1) The right to a  pension-in-cash, an annuity usually adjusted by inflation, from each of the countries where he worked at least a minimum number of years (5, 10 or 15 years). Usually, workers with shorter lengths of services may choose to receive the pension and Social Security contributions paid by them and their employers as a lump-sum. For mobile pensioners, these "portable pensions" imply  that the cost of this “pension in cash” falls on the countries where the pensioner worked, proportionately to the length of service in each country. See the  EUlisses arrangements for portable Social Securities schemes covering EU members, plus Iceland, Liechtenstein, Norway and Switzerland.

(2) The right to nearly-free health services in old age, which can be seen to represent a “pension-in-kind”, as the Government reimburses or supports nearly all of the pensioners’ health costs. These pensioner health benefits in kind are much less portable, and the burden of these “health related costs with pensioners” fall first and foremost on the country of the residence, which may or may not be able to obtain any reimbursement from the countries where the pensioner worked.

Thus the timely question of who pays the health costs of the modern mobile European pensioners, your Government health budget or mine?

The budget impact of demographic changes can be enormous.  Bu in a country like the USA, both the Social Security and Medicare health coverage programs are federal, so the federal budget continues to pay both pensions and health care for the Michigan “snow birds”, whether or not they choose to move to Florida.

In Europe, the aptly named Club Med countries (Greece, Spain, Italy, but also Portugal and France) attract both returning citizens and foreign pensioners. These older residents easily bring their pensioner rights when it comes to the “cash pension”, but not necessarily the rights to the “health pension”, thus may become a burden to the local SNS/NHS and to Government health budgets. In general, cash pensions are paid proportionately by the countries-of-work, pensioners’ health spending is paid mostly by the countries-of-residence in old age.
A new EU Directive has been under discussion since 2008, to define EU patients' rights to cross-border health care and to correct this asymmetry in dealing with pension health care benefits for mobile pensioners. It would allow those national health systems which actually provide the pensioner’s healthcare to obtain reimbursement from the countries where the pensioner worked, in a manner proportionate to the length of service in each country. Given the complexity and divergent interests, the proposed Directive has not yet reached achieved consensus among the paying and receiving countries, in part because there is insufficient information on the actual number of mobile European pensioners and budget amounts involved.

But this asymmetric treatment of pensioner-related Government expenditures needs to be corrected urgently, if the southern European countries are to continue to pursue their strategic vocations as the “Floridas of Europe”, even as they struggle to invert the unsustainable health spending trends which significantly aggravate their critical Government deficit and debt problems.

Related artices:
TRESS Think Tank report on health care for EU pensioners,

Is there a public debt problem in France?

UK Dependency time-bomb


How to account for Europe's debt

24 comentários:

EU longevity disse...

In most western European countries life expectancy for WOMEN averages around eighty years, with the highest in France (81.5) and Spain (81), and the lowest in Denmark and Portugal (77.8).
For MEN, the average life expectancy at birth is around 74 years, with the highest found in Sweden and Greece (75.5 years), and the lowest in Portugal (70.6). disse...

Patients rights in Cross-border healthcare Directive
A blocking minority of countries (Spain, Hungary, Poland, Portugal, Greece and Romania) still reject a compromise proposal on cross-border healthcare put forward by the Swedish Presidency. The Southern member states fear that the notion of costs borne by the “member state of affiliation” would lead to enormous costs of pensioners from northern Europe who retire in these countries. With Spain opposing the directive, it seems probable that it will be put on hold during the current Spanish Presidency. The Commission may decide to withdraw the proposal and allow the Court of Justice to establish rules on the reimbursement of cross-border health care based on case law. disse...

Lessons from the 2003 negotiations of the EU pensions Directive:

Economic Interests and the
Construction of a Single Pension Market in Europe, by Alexandra Hennessy
Why were the EU member states able to agree on a single market for pension funds in 2003 whereas they had failed to do so in several previous attempts (1991-2002)?
The main argument is that the single pension market was a desirable project before 2003, but bargaining inefficiencies prevented
its realization...

Blog imf-direct disse...

Health spending in OECD countries increased from 4½ percent of GDP in 1960 to 12½ percent in 2007.
What accounts for this dramatic increase?
Income growth, insurance, demographics, and technological change all contributed, but the latter was the key driver.
Public spending for health care also increased sharply (by 5½ percentage points of GDP) during this period ...

Spanish doctores.... disse...

Spanish doctors call for reevaluation of EHIC Scheme disse...

...“This is a sad moment for patients. They are the main losers today. A golden opportunity has been missed to reinforce their rights to seek treatment in another member state and to be reimbursed,” said Vassiliou... disse...

Mobility in Europe
...EC proposal to help EU patients in getting the healthcare they need, and to help EU Member States ensure the accessibility, quality and financial sustainability of their health systems ... disse...

Mobility in Europe
...EC proposal to help EU patients in getting the healthcare they need, and to help EU Member States ensure the accessibility, quality and financial sustainability of their health systems ... disse...

As a pensioner, do I have to pay contributions for health-care insurance in the country of residence?
Each European country has its own social-security rules. Some countries DO NOT ASK for health insurance contributions from pensioners at all.

In others, how much you contribute will depend on how much pension or benefit you receive, and yet others ask all their pensioners to pay contributions.

For more information, please contact the institutions paying your pension and providing health services and/or coverage, from the countries of work, before moving to another European country.

PPP Lusofonia disse...

Anyone who has ever worked with Argentina KNOWS that it is not a MODEL for any sort of economic and political management.
It is the original down-up-down-up-down... country...Venido a menos...
Leaving the Euro and devaluing provides no permanent boost to external competitiveness.
Better to go for debt relief (cutting exisisting debt) and reducing future borrowing needs with realistic austerity measures, sharing the sacrifice between the profligate creditors and the profligate debtors.
If the ECB is holding large amounts of troubled sovereign debt as collateral, then it’s easy to see where the creditor sacrifices might start.

Contribuinte pagador disse...

VER Quem realment paga a saúde

PPP Lusofonia disse...

We need to create a EU-wide Medicare program so that pensioners can have access to their home-country health benefits anywhere in Europe, without becoming a burden to the taxpayers in their host country, usually a Club Med country.

Reforma só aos 70 disse...

Reforma só aos 70 anos
A 7 de julho, a Comissão Europeia apresentou um livro verde com recomendações pormenorizadas aos Estados sobre a questão do financiamento das reformas. “O executivo europeu preconiza um ‘aumento da idade em que os cidadãos cessam de trabalhar e recebem uma pensão', a fim de evitar a falência do sistema atual”, explica Le Figaro. Citado pelo diário parisiense, o comissário europeu para o Emprego, Laszlo Andor, explica que os seus serviços “apelam aos Estados no sentido de promoverem uma vida ativa mais longa. ‘Devem preparar muito a montante o ajustamento dos seus sistemas de reforma à demografia’.”

...end of retirement as we know it disse...

In theory, retirement was supposed to rest on a "three-legged stool" of Social Security, pensions, and private benefits

Read more:

... society cannot have a high and growing dependency ratio... disse...

Mathematically, society simply cannot have a high and growing dependency ratio--at least, not if the retirees expect to be supported in the style to which they have become accustomed. (I take it that this is what is meant by "a decent living and a stable retirement").

We can warehouse people in spartan old folks homes (or treat them like kids and move them into the spare bedroom), in which case they can enjoy a lengthy retirement. Or they can retire for less time, and live more lavishly. But there is no conceivable system that is going to allow the vast majority of the population to spend a full third of their adult life in retirement, at anything like the same standard of living they had when they were working.

Read more:

Contribuinte Paga Tudo disse...

Não basta congelar as pensões, como foi agora anunciado.
Vai ser necessário cortar as pensões, especialmente as mais elevadas, ainda em 2011.

TU Berlin disse...

SEE Busse on:
Patient mobility and financial sustainability of health systems

EU directive approved disse...

Foi aprovada a directiva que regula o exercício de direitos dos doentes em cuidados de saúde transfronteiriços.

Swiss pensions disse...

Ver video sobre as pensões de reforma na Suiça, que são limitadas a cerca de 1700 euros

Healing Public Health Care Finances: Budget Reforms That Work disse...

The most promising reform strategies combine top-down budget control and bottom-up reforms to improve efficiency.

Budget systems that cap total health expenditures and impose a high degree of central oversight can provide powerful incentives for expenditure restraint.

Bottom-up reforms help control costs by enhancing efficiency. This allows more and better service delivery to patients for a given amount of resources.

In debt to Grandpa disse...

Old age pension and health benefits, whether funded or unfunded, are a postdated cheque on the income of future workers

Pensionistas pt disse...

Cerca de 85% dos reformados por velhice a cargo da Segurança Social têm direito a menos de 500€ mensais. Em 2010 estes reformados representavam 79,3% do total

PPP Lusofonia disse...

Ver mais sobre como exportar saúde

Exportação de serviços de saúde disse...

Hospitais de Coimbra com parcerias de prestação de serviços de saúde remunerados por seguradoras de saúde estrangeiras