In order to provide the Parliament, before the summer, with an appraisal of the
financial situation of various public administrations for the past year, the Cour des
comptes presents its annual analyses of the financial situation and outlook for
local authorities and the social security system in two stages. This report analyses
the financial situation of the social security system for 2019, expressed in general
accounting terms, as is the Social Security Financing Act (LFSS).
THE SOCIAL SECURITY SYSTEM
The financial situation of the social security system
in 2019: a long trend towards rebalancing the budget
has been interrupted.
June 2020
A small deficit in 2019, as in 2018, interrupts
a long trend towards rebalancing the budget
Although the LFSS 2019 expected
the budget for the social security
system
to
return
to
equilibrium
in
2019,
with
a
small
surplus
(of €0.1bn), the deficit in the general
regime and the Retirement Solidarity
Fund (FSV) in fact started to rise
again to reach €1.9bn at the end
of 2019, compared with €1.2bn in
2018. This deterioration of €0.7bn
in
2019
contrasts
with
average
improvements of over €3bn per year
between 2010 and 2018.
Evolution of the aggregated deficit of the
social security and FSV basic mandatory
regimes (2008-2019, in €bn)
Source: Cour des comptes, according to data
from the audit commission reports on the
social security system
Summary report on the financial situation of the social security system in 2019
2
Considering that rebates of €0.6bn from
pharmaceutical firms were recorded
in the 2020 accounts whereas they
should have been included in 2019,
the 2019 deficit is in fact nearly iden-
tical to that of 2018.
The deterioration of the general regime
and FSV balance between 2018 and
2019 is much smaller than foreseen
in the amending section of the LFSS
2020. The amendment forecast a
deficit of €5.4bn in 2019, considering
the emergency economic and social
measures implemented at the end
of 2018 (€2.6bn), modifications to
the expected evolution of revenue
and expenditure compared to those
stated in the LFSS 2019, a smaller
progression of private sector payroll
(+3% compared to +3.5%) and an
increase in expenditure.
Two thirds of the much smaller deficit
than predicted for the general regime
and the FSV can be explained by
larger revenues, notably from the
social contributions of independent
workers and salaried employees in the
agricultural regime. The remaining
third can be explained by lower
expenditure, notably on retirement
funds.
Although quite small, the deterioration
of the balance for the general regime
and the FSV in 2019 nevertheless hides
a
greater
structural
deterioration.
The LFSS 2019 and the emergency
measures at the end of 2018 have in
fact reduced revenues by €5.4bn and
the impact of this reduction has only
been offset partially by the slight
slowdown in expenditure.
Continued rapid progression
in expenditure
This slowdown is the result of benefits
revaluations lower than that which
would have resulted from indexation
against the rate of inflation (+0.3%
compared to +1.6%). Otherwise, the
expenditure would have risen faster in
2019 than in 2018.
The retirement branch had the most
dynamic expenditure in 2019. It rose
by 2.6% compared to 2.9% in 2018.
This slowdown was mainly due to
the
lower
revaluation
of
benefits
compared to inflation.
The expenditure of the family branch
dropped slightly, resulting from the
lower revaluation of benefits, the
reforms made to childcare benefits
and the decrease in birth rates.
The
expenditure
covered
by
the
growth
norm
for
healthcare
expenditure
(objectif
national
des
dépenses
d’assurance
maladie
-
ONDAM), mainly from the sickness
and occupational injury and sickness
branches,
reached
€200.3bn
in
2019, according to provisional data.
For the tenth consecutive year, the
target figures stipulated in the Social
Security Financing Acts (LFSS) have
been met. Expenditure has risen by
2.6% compared to 2018, against the
2.5% expected in the LFSS 2019. This
0.1 percent difference results from a
negative base effect on spending in
2018, which is lower than expected in
the LFSS 2019. This evolution marks
an acceleration: in 2018, this spending
rose by 2.2%.
Non-hospital
care
spending
has
remained dynamic (+2.7% compared
to +2.4% in 2018), despite a stagnation
or decrease in some expenditure (net
medicine rebates, general practitioner
fees). Spending on sick leave, benefits
for medical assistants and transport
have accelerated compared to 2018
and the rise in spending on medical
devices has remained high. Only half
the savings expected from controlling
unnecessary prescriptions have been
made.
Summary report on the financial situation of the social security system in 2019
3
More dynamic revenues than expected
Despite a large number of negative
new
measures
(€5.4Bn),
revenue
progressed by 2% in 2019, after
a rise of 3.4% in 2018. Indeed,
the spontaneous rise of 3.4% has
exceeded that of 2018 (+3%) and the
figure for 2019 updated by the LFSS
2020 (+2.6%). Overall, evolution in
revenue has remained close to that
of payroll, the social security system’s
main funding base, of which the
private share rose by 3.1% in 2019.
Effect of the new revenue measures,
net of spending scoping measures,
on the balances of the general regime
and the FSV.(in €bn)
Source: Cour des comptes
Summary report on the financial situation of the social security system in 2019
Spending by health establishments
has accelerated (+2.5% compared to
+2.0% in 2018). However, the definitive
amount
of
spending
is
uncertain
because of the ‘administrative strike’
instigated in some hospitals which
affected the accounting of activity-
based payments for hospital stays.
Due to the health crisis, the hospital
deficit, which in the last few years
has negatively affected
the growth
norm
for
healthcare
expenditure,
will not be known before the end
of 2020. As in 2018, allocations to
health establishments have not been
reduced against initial provisions. As
in 2017 and 2018, they were allocated
just
before
finalizing
the
health
insurance accounts (in March 2020) to
account for a smaller progression than
forecast in revenues from activity-
based payments for hospital stays.
Since the deficit of the general regime
and the FSV has remained below
the funds allocated from the Caisse
d’amortissement de la dette sociale
(Social
Security
Debt
Repayment
Fund, CADES), social debt has once
again gone down to €115.6bn at the
end of 2019, a reduction of €13.3 bn
compared to the end of 2018. The
share of the debt carried by CADES
decreased by €16.3Bn, but the share
funded by the Central Agency Social
Security
Bodies
(ACOSS),
through
short term loans, rose by €3bn.
Since the last debt transfer to CADES
in 2016, the debt funded by ACOSS
has risen every year to reach €26.5bn
at the end of 2019. The continued rise
in ACOSS financial debt, 95% of which
is in the form of papers issued on the
money markets, had exposed it to
growing refinancing risk even before
the health crisis, because of the
large volume of refinance required.
Considering
that
the
LFSS
2020
forecasts a deficit until 2023, these
risks are set to accentuate.
Long-term debt at the end of 2019, even
before the health crisis
4
The
health
crisis:
financial
outlooks
disrupted in 2020
The Social Security Financing Act for
2020 forecasted a deficit of €5.4bn
for the general regime and the FSV in
2020. The higher revenues at the end
of 2019 could have served to reduce
the level of this deficit.
Since mid-March 2020, the health
crisis
has
considerably
increased
cash flow requirements for ACOSS
due to the effect of the measures
taken by authorities, notably the
extension
of
payment
dates
for
social contributions, the extension of
eligibility for the furlough scheme,
and significant impact on revenues
due to the deterioration of the general
economic situation. According to the
Social Security Audit Commission’s
(CCSS) report for June 2020, the
general regime and FSV deficit is set
to reach an unprecedented level of
€52bn in 2020. Thus, the financial
debt ceiling for ACOSS was raised to
€70bn in March (from a level of €39bn
voted initially in the LFSS 2020), then
to €95bn in May.
Since the end of February, ACOSS has
considerably increased its borrowing.
The money market investors through
which ACOSS is normally funded
(in Paris for the NeuCP programme
and in London for the ECP programme)
cannot alone absorb all of ACOSS’s
financial requirements caused by the
health crisis. It has thus been forced to
diversify its funding sources. Thus, it
took €17bn of exceptional borrowing
from
the
Caisse
des
dépôts
et
consignations, which is €10bn above
their annual agreement, and sourced
an additional €22.5bn from a pool
of banks. These transactions were
traded off-market and ultimately took
the form of purchases by the CDC and
the banks of ACOSS papers on the
Paris money market (NeuCP). In total,
on 12 June 2020, through its normal
market sources of funding and the
above exceptional sources, ACOSS
had raised more than €62bn of extra
funding since the end of February.
Summary report on the financial situation of the social security system in 2019
ACOSS funding on the Paris money markets (NeuCP) and London (ECP)
in 2020 (in €M)
Source: Central European Bank
5
A
draft
law
currently
under
consideration
by
Parliament
forecasts
that
€136bn
of
social
debt will be transferred to CADES.
Apart from the €31bn accumulated
deficits at the end of 2019 for the
general regime sickness branch and
the FSV, the retirement regime for
non-salaried
agricultural
workers,
and
the
State
Insurance
Fund
for
Local
Government
Workers
(CNRACL),
this
figure
includes
€92bn of anticipated deficits from
2020 to 2023 in the sickness, family
and retirement branches of the
general regime, the FSV and the
non-salaried
agricultural
worker
retirement
regime.
Additionally,
it
includes
the
sickness
branch
covering an additional €13bn of debt
maturities from public hospitals. In
total, these new transfers will take
the total of debt assumed by CADES
since its creation in 1996 to €400bn.
A draft institutional law makes this
debt transfer to CADES possible,
without assigning new resources
to this body to prevent extending
its lifespan beyond the 2024 term
estimated before the health crisis.
Instead, it stipulates that all of the
debt transferred to CADES will be
repaid by 2033. The aim to eliminate
social debt through the resources
assigned is thus maintained, but the
timeline is extended by ten years.
However, a significant proportion
of the debt assumed (€92bn out
of €136bn) covers financial years
for which a new Social Security
Financing Act has not revised the
balances stipulated in the LFSS
2020.
Unlike for the central government
budget, the government has not
introduced an updated financing
act to tackle the disruption of the
financial
outlook
for
the
social
security system. The revision of
revenue, expenditure and relative
balance
forecasts
for
2020
and
subsequent financial years has been
postponed until the 2021 financing
act, to be submitted rather late in
October.
Moreover, savings measures are not
planned at this stage. However, the
resources allocated to the CADES
will be reduced from 2024 onwards
in order to fund extra spending
linked to dependency. This makes it
necessary to extend the repayment
schedule for debts transferred to
the CADES by one to two years.
A new trajectory to rebalance the
books of the social security system
must therefore be defined.
A large-scale transfer of debt to CADES,
with the end of term pushed out from
2024 to 2033
Summary report on the financial situation of the social security system in 2019