Social Protection Flashcards
define social protection and state its two main subsystems.
= interventions of public&private institutions to alleviate risks and needs (such as sickness, employment injury, old age, unemployment, big families, housing etc.)
it’s an umbrella term for social insurance, social assistance and universal benefits
two main subsystems are the pension and healthcare systems.
define welfare state and state the three types
it is a system where the state takes care of its citizens’ social protection.
- bismarck’s model: social insurance (financed through SSC, principal of reciprocity = benefits are levied on contributions; mostly continental Europe)
- beveridge’s model: social assitance (mostly financed through general taxes, based on needs of individal -> means-testing; eg. Ireland)
- scandinavian model: universal benefits (mostly financed by taxes, everyone gets it no matter what)
explain the characteristics of social INSURANCE (3)
- risk is socialised = pooled (the contribution of oneself is not connected to their individual risk - eg. if one is sick a lot, they don’t have to pay more. it enables the same SSC rate for everyone, a compulsory one)
- can have negative effects of allocation of production factors (eg. labour)
- can be public or private
- —public: mandatory, financed through SSC and gov transfers, principal of reciprocity
- —private: voluntary, many different suppliers, high govertnment regulations and favourable tax treatment (tax reliefs), cross-subsidisation done to disable separation by risk (= insurance companies give each other subsidies when one has more expenses than another)
state 3 welfare state problems in Europe and describe the solution
- revenue sources (SSC) are not adequate anymore because of ageing
- changed perception on egalitarianism (we are all equal and deserve equal rights) - less of it
- negative impact on labour market competitiveness
solution: privatise risk (shift the burden of risk to individuals and not have it socialised anymore)
state the three pillars of the pension subsystem.
- mandatory public (PAYG approach)
- private systems
- other forms
explain the PAYG approach (the 3 methods of calculating pensions)
intergenerational redistribution, diff methods of calculation pensions:
- pension base = ‘best 24 years’ average; replacement ratio (given in the country, depends on your situation); pension = base * ratio
- point system. every year: point = ind. wage / avg wage of yr; value of a point is set by law; pension = sum of all pts * value of one pt
- notional defined contribution scheme NDC. every year, a contribution is made and recorded. it is paid out (to pensioners), so you don’t get that money exactly, but your pension is a function of that sum you contributed (and some other things)
should always be in balance:
# of pensioners * avg pension = contribution rate * avg wage * # of contributors
Nb * B = t * w * Nw
if it is out of balance, then on the right side there is also G (gov transfers)
how to put it back in balance without G?
1. reduce B
2. increase t (= increase taxes)
3. increase Nw and decrease Nb (= increase retirement aget)
explain how the private pension systems work.
usually, it is conditioned on the mandatory public system. it is fully funded = the contributions are invested (in gov bonds) and their return is the real interest rate (in PAYG it’s growth rate of population and avg wage). when you start working, you start paying and the interest is building up. when you are eligible to retire (by the standards of the first pillar), you can withdraw the funds and use it ONLY for monthly pensions (that is in the contract).
if you die before you retire, your family gets all the funds.
if you die after you retire and before you use up the money, nobody gets it (except if u buy that option - like a phone and TV package)
what is the goal of the healthcare subsystem?
to achieve both horizontal (all people have access to health care) and vertical (those who need more should receive more) equity.
how is the efficiency of healthcare defined?
on macro level, as % of GDP (= healthcare expenditure / all expenditure) - higher the %, higher the efficiency
on micro level, there are several options. one is ‘payment for providers’ = fee-for-service and ‘capitation system’ (doctors), DRG diagnosis related groups (hospitals, costs of hospitalisation are categorised by diagnosis)
who are the major actors within the healthcare subsystem and what are their goals?
patient (best possible care, minimised costs for them) insurance company (minimised costs for them) doctors (maintaining high demand, following doctrine)
state 6 cost containment measures within the healthcare subsystem.
these are elements of healthcare reforms to minimise costs.
- GP is a gatekeeper (for the hospital)
- copayments (deductibles (insured person pays first x€ of service) or coinsurance (dopolnilno zdravstveno zavarovanje, insured person pays a given % of each service)
- limited supply of providers of healthcare (with a certain insurance company)
- queues for medical services
- social health insurance doesn’t cover everything
- decreasing sick-leave compensation
define the moral hazard within the healthcare subsystem.
it derives from the fact that there is no direct connection between the service and the payment.
ex ante moral hazard = insured person behaves risky
ex post moral hazard = when something happens, the insured person demands the best possible service
state two causes of rising healthcare costs
- problem of quantity (aging + progressive medical treatments that were not possible before)
- baumol’s disease = unequal growth of labour productivity in different sectors (it is super low in healthcare compared to anywhere else)
