Thirteen Good Reasons for Open Capitalisation Funds, Covering both Pension and Health Care Provisions


Health care is the expenditure item that poses the most urgent problems for long term sustainability. Without policy interventions and structural reforms, its physiological tendency towards increases over Gdp will inevitably require access restrictions and cutting off of demand for services.

This paper highlights the need to renew the current health care financing scheme. In the presence of ageing populations and rising incidences of health care expenditures over Gdp, this scheme cannot remain fully in charge of the working income of active people (pay-as-you-go), if we want to avoid depressive effects on employment, investments and productivity.

The financing scheme must become multipillar, with pay-as-you-go complemented by a private channel based on the real capitalisation of contributions. This channel would be capable of allocating savings, supporting productive investments and generating resources to be dedicated to health care.

This position paper puts forward an operational proposal: the open capitalisation fund for welfare should offer both pension and health care provisions through real accumulation of contributions on individual accounts, and should be linked to collective insurance coverage against major risks and lack of self-sufficiency.

This tool presents numerous positive characteristics, compared to the public pay-as-you-go monopillar as well as to a multipillar system in which the private component consists exclusively or mainly of insurance contracts. In fact, it is necessary to restrict the recourse to pure insurance coverage only to a limited group of treatments, because this kind of coverage is not equipped to deal with the dynamics of future expenses. The pure insurance coverage ends up with the recurrence, in the private area, of the same defects as the pay-as-you-go in the public health care systems. Insurance pooling is not but a pay-as-you-go scheme applied over the group of insured members.

fabio pammolli & nicola salerno

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Nicola Carmine Salerno, Independent Economist | Attorney Advertising

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