picture showing Jerome Cosandey
echo interview, June 2021

Doing the right things and doing them properly!


echo interview with Jérôme Cosandey

echo interview with Jérôme Cosandey, Director for French-speaking Switzerland of Avenir Suisse, Head of Research «Sustainable Welfare Policy»

elipsLife echo: Avenir Suisse is worried that soon two thirds of all government spending will be devoted to social and health care. Money that’ll be lacking elsewhere. Given that this trend is also the result of demographic developments, how can you call for its reversal?
Jérôme Cosandey:
Every year, around 170 billion Swiss francs are spent on social services in Switzerland. Demographic trends mean that the number of pensioners is rising, which increases the transfers between the generations. Nevertheless, no one wants to cut pensions – there’s a consensus on that. All the more reason for us to do the right things properly, especially when it comes to insurance policies with a «consumption» character, such as disability, unemployment and health insurance. We have to ask ourselves whether we achieve more with the same money we have today, or would the same thing be possible with less money?

Is more effectiveness alone the key to solving the disability insurance (IV) problems?
Here, too, we need to ask ourselves about effectiveness. In our new study «Integration instead of exclusion», which focuses on people between the ages of 20 and 60 and is based on 250’000 IV applications, we examined the question of how more people could be reintegrated with the funds available. 

Avenir Suisse attaches great importance to the reintegration of people affected by disability. In the aforementioned study, you examined the reintegration efforts from canton to canton and discovered considerable differences. What do individual cantons do well, and what do they do badly?

On the one hand, we compared what the disability insurance schemes (IV programmes) run by the cantons actually do. On the other, we looked at the role of the employers, doctors, sickness benefit insurers, pension funds and the Regional Employment Agencies (RAV). In the case of the IV programmes, there are two main differences between the cantons. These are, firstly, the cultural behaviour of the IV offices themselves and the courts that confirm or reject IV decisions. Secondly, there’s the nature and effectiveness of the reintegration measures taken. 

For the latter dimension, we examined whether a larger number of people tend to get less money or fewer people tend to get more. In addition, we analysed which people were impacted by reintegration measures, which age categories benefited, and how much the measures cost. Also relevant was the question of how many people whose circumstances were changed by such mesaures nevertheless became pensioners in the end. The study didn’t aim at «finger pointing». Rather, we wanted to show the differences between the cantons and encourage them to initiate improvements based on the data from the comparisons.  

picture showing Jerome Cosandey

How did you determine the differences between the cantons?
If we look per canton at how many people who were reintegration recipients nevertheless ended up drawing a pension, we have an indicator of the programme’s effectiveness. The pension rate - the ratio of pensions awarded per application - and the resources invested are not directly related. Cantons that invested more did not automatically have a lower pension ratio. The study also revealed whether and where deviations occur compared to the national average: For example, is there less investment among the young? Or is the pension ratio above average? 

Avenir Suisse estimates the total cost of curing, integrating and retiring people with disabilities at CHF 24 billion per year. Where do you see room for improvement? 
With this estimate, we wanted to show that disability is far more costly than the roughly 9 billion francs annually provided by IV programmes in the narrow sense. Many players are involved here. And it’s worth optimising the way they interact because this will benefit everyone, first and foremost the sick people themselves. The decisions made by IV are lead decisions, which are followed by the other insurance providers. It’s therefore important to understand the cantonal differences and to be inspired by the best approaches. At the same time, redundancies, misaligned incentives and information deficits with other actors also need to be addressed. 

Can you elaborate on what could be done to improve this situation? 
The nexus «sick person - employer - doctor» is key. These are the parties that first learn of an illness. Today, when an employee falls ill, the employer often only receives a sick note from the doctor saying that employee is unable to work for a certain period. Employers only know how long the person concerned will be absent from work. They’re not told how bad the illness is and whether the person will return to work after the sick note expires. However, uncertainty is toxic for a company. So communication between the affected person, employer and doctor has to be improved without creating pressure or the appearance of control. The Resource-Oriented Integration Profile (REP) from the Compasso Association helps to improve this communication by focusing on the ability to work.

What about the cooperation with the other parties involved?
Here, the providers of daily benefits insurance (KTG) play a decisive role, because this coverage comes into play earlier than IV. In the case of mental illnesses, which today account for 47% of all new IV pensions, it’s important to act quickly, otherwise the chances of reintegration are greatly reduced. In such cases, KTG insurers can use case managers who act as an interface between the sick person, the employer and other agencies. However, KTG insurance is only involved for a maximum of two years. The KTG insurer therefore has a limited benefit from the use of a case manager, but bears these costs alone. IV and pension fund benefit from the work of the KTG case manager, but don’t have to pay for it. This is not only unfair, but often results in KTG insurers not using case managers, even though this would be beneficial for the system as a whole. 

Unemployment insurance and social welfare also play important roles. How these these agencies cooperate in the canton of Aargau is an interesting example: For complex cases involving RAV, IV and social assistance, IV takes the lead, provides the interface to the sick person and coordinates all measures taken. Contact with the (potential) employer is handled by the RAV. This cooperation is simply regulated by performance contracts. 

picture showing Jerome Cosandey

Let's switch from your study to everyday politics: As part of the current reform of the pension system (AHV), the Council of States has approved raising the retirement age for women to 65. What’s your opinion on this?   
Raising the retirement age is important for the future reform of the AHV, otherwise we’ll never be able to put the AHV on a financially and structurally sound footing. By the way, when the AHV was introduced in 1948, men and women were treated equally in this regard. In recent decades, Switzerland has always compensated for higher AHV expenditures with higher wage deductions or value-added tax. Now structural adjustments are unavoidable. Switzerland is one of the countries with the highest life expectancy. But at the same time, it’s one of the few countries in the OECD comparison that hasn’t yet spoken out in favour of raising the retirement age to 67. Raising the retirement age isn’t the only way forward, but as part of the overall package to safeguard the AHV, we won’t be able to avoid it. 

Are the proposed measures sufficient to sustainably restructure the AHV?  
In its latest AHV forecasts, the Federal Social Insurance Office (FSIO) says that, despite restructuring, 2030 will likely see the structural deficit reach 2.4 billion francs. And by 2031, i.e. in 10 years, this deficit will already amount to 4.1 billion francs! So it’s pretty clear that the proposed measures are far from sufficient. The necessary structural changes must be made in small steps, including raising the retirement age, for example, by one month every year. That would be fair and digestible.

Should pensioners participate in the restructuring of the pension system, or are acquired pension rights off-limits?
Retroactive adjustment of pensions is not legally possible. However, some pension funds that go beyond the compulsory scheme are familiar with the variable pension: For new pensioners, a small variable component, say 5%, can be built in. How high this «13th pension» is then depends on how the pension fund in question fares on the capital market. The variable component can thus work both ways: If the result achieved is good, there’s more pension on the variable part, if it’s poor, correspondingly less. Implemented with moderation, the variable pension is an interesting solution for the insured, also because it offers a certain protection against inflation. 

picture showing Jerome Cosandey
Personal Profile
Dr. Jérôme Cosandey
Director for French-speaking Switzerland of Avenir Suisse, Head of Research «Sustainable Welfare Policy»

Dr. Jérôme Cosandey has been Director for French-speaking Switzerland of Avenir Suisse since September 1, 2018. As Head of Research on Sustainable Welfare Policy, he focuses primarily on retirement provision, health policy and the inter-generational contract. After completing his doctorate at the ETH, he worked for several years as a strategy consultant at The Boston Consulting Group, then at UBS, before joining Avenir Suisse in 2011. He also holds a master's degree from the University of Geneva in international economic history. Cosandey lives in Biel with his partner and is the father of two children.

echo interview with Jérôme Cosandey