German FM 'Isolates' Bahr On Care Reform Plans

by Ulrika Lomas, Tax-News.com, Brussels

22 February 2012

The German finance ministry has fiercely criticized Health Minister Daniel Bahr’s bill on care reform in Germany, insisting that the proposed contribution increase will not serve to fully finance the reform.

The German cabinet united on the cornerstones of its long awaited care reform plans back in November last year. Under the plans, the reform aims to significantly improve care services from 2013, in particular for dementia sufferers. To fully finance the reform, the coalition envisaged a 0.1% increase in the care insurance contribution from 2013.

In accordance with the proposed reform, the existing statutory care insurance scheme will be supplemented from 2013 with a voluntary private care provision, promoted by means of tax incentives.

The finance ministry argued recently, however, that the EUR1.1bn (USD1.45bn) generated annually from the contribution increase will simply not meet the additional costs of the reform.

German Finance Minister Wolfgang Schäuble has also rejected the health minister’s plans to promote additional private care insurance. Bahr has suggested that private care insurance could be supported by a direct grant from the state. Individuals opting to pay, for example, EUR50 a month for the extra insurance would, under the minister’s plans, receive EUR10 from the state.

Given that the costs associated with such a system are difficult to calculate, Finance Minister Schäuble has advocated instead that the costs be tax deductible, maintaining that such a provision would lead to less costs for the federal budget and would be easier to calculate.

Opponents argue, however, that the tax deductibility provision would merely serve to benefit those well off in Germany, already able to afford the additional care insurance.

The government’s care reform bill is due to be examined in the German Bundestag in the coming months.

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