Germany's Healthcare System

The last country we will examine is Germany. The article is from the CATO institute; The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis

Germany

Germany ranked 25th in the WHO ratings. (287) Despite that low ranking, however, the country is worth examining because it is frequently cited as a model by advocates of national health care.

National health insurance in Germany is part of a social insurance system that dates back to Bismarck. All German citizens with incomes under €€ 46,300 (roughly $60,000) are required to enroll in one of approximately 250 statutory “sickness funds.” Those with higher incomes may enroll in the funds if they wish, or may opt out of the government system and purchase private insurance.(288) About three quarters of workers with incomes above the statutory limit choose to remain in the sickness funds, which currently cover approximately 90 percent of the population. Overall, insurance coverage is nearly universal. However, the number of uninsured has been rising, roughly tripling in the last 10 years to 300,000 people. (289) About 9 percent of the population purchases supplemental insurance to cover items that are not included in the standard benefits package. (290)

Sickness funds are financed through a payroll tax split equally between the employer and employee. The size of the tax varies depending on which fund the worker has chosen, but averages around 15 percent of wages.(291) Sickness funds are supposed to be solvent and self-supporting, but in reality the system ran a €€ 7 billion deficit in 2006.(292) The German government has proposed a 1 percent increase in the payroll tax, split evenly between employer and employee, starting next year.(293) In addition, general tax revenues finance capital costs for acute care hospitals and many rehabilitative services, especially for retirees.

Benefits are extensive, covering physicians, hospital and chronic care, diagnostic tests, preventive care, prescription drugs, and part of dental care. In addition to the medical benefits, sickness funds provide sick pay to those who cannot work due to illness, ranging from 70 to 90 percent of the patient’s last gross salary, for up to 78 weeks. (294)

The central government and state governments split the regulation of the health care system. The central government establishes the national global budget for health care spending, defines any new medical procedures to be included in benefit packages, and sets reimbursement rates for physicians. Some of this is accomplished through legislation, while the rest is handled through negotiations between the National Association of Sickness Funds and the National Association of Physicians. At the state level, state associations of sickness funds and physicians negotiate overall health budgets, reimbursement contracts for physicians, procedures for monitoring physicians, and reference standards for prescription drugs.(295) The bargaining power in these negotiations clearly lies with the sickness funds backed by the government, allowing them to effectively impose fee schedules and other restrictions on providers. The purchasing power of a German physician’s wages is now about 20 percent that of a U.S. physician. (296) This has led to physician strikes as recently as 2005. (297)

Although Germany spends less on health care than the United States, both as a percentage of GDP and per capita, expenditures have been rising at an alarming rate in recent years. Friedrich Breyer, an economist from Konstanz University, estimates that health care spending could reach 30 percent of GDP by 2020 unless significant changes are made. (298)

The German government has responded by beginning to cut back on benefits. In 2004, sickness funds stopped covering eyeglasses, lifestyle medications, and all over-the-counter drugs. Co-payments were imposed for the first time, such that Germans now pay €€ 10 per quarter to see a general practitioner, €€ 10 per day of hospital stay, €€10 per prescription, and for certain specialty services.(299) The highest co-payments are 10 percent for prescription drugs. Overall, Germans pay out of pocket for about 13 percent of total health care spending; only slightly less than Americans. (300) Preliminary evidence suggests that the introduction of cost sharing has slightly reduced utilization and spending. (301)

In 2006, Chancellor Angela Merkel proposed a sweeping set of health care reforms that included creating a centralized health fund, shifting financing in part from payroll taxes to general revenues, trimming benefits, imposing greater cost sharing, and making the system more transparent. She was forced to abandon the package in the face of public and political opposition. (302)

The degree of health care rationing in Germany is the subject of considerable debate. Unlike many OECD countries, the German government does not compile data on waiting lists.(303) One frequently cited study suggests that Germans are no more likely than Americans to wait more than four weeks to see a specialist. (304) The WHO says, “Waiting lists and explicit rationing decisions are virtually unknown.”(305)

However, at least one study concludes that rationing is occurring for the elderly and those with terminal illness, and concludes that “the question remains as to whether lives at advanced ages could be saved if age rationing were discontinued and maximum medical treatment were to be applied to everyone, irrespective of their age.”(306) In addition, a survey of German hospitals reported that “waiting times were prolonged” due to both a lack of capacity and hospital target budgets that make the treatment of sickness fund patients with serious conditions financially unattractive.(307)

Also, Germans have less access to modern medical technology than Americans. The United States has four times as many MRI units per million people and twice as many CT scanners. (308) The situation would undoubtedly be worse without the existence of the small private insurance sector. Although small as a proportion of total health spending, private insurance puts competitive pressure on sickness funds, pushing them to expand their quality and services. At one time, CT scanners were even rarer in the public system, available only under exceptional circumstances and after long waits, yet relatively common in the private sector. Competition forced the public sector to add more CT scanners. (309)

Some analysts blame price restrictions and reimbursement rates for increasing bureaucratic interference in how German physicians practice medicine. Physicians trying to work within the maze of reimbursement caps and budget restrictions have no financial incentive to provide more than the minimally necessary care. That has led to questions of quality assurance, and the government has responded with ever greater micromanagement of practice standards. The result has been a huge increase in red tape for physicians and a general loss of innovation. (310)

Germans seem aware of the need to reform their health care system. In a 2004 poll, 76 percent of Germans thought health care reform was “urgent,” while an additional 14 percent thought it was “desirable.” However, Germans are split nearly down the middle about what that reform should be. Roughly 47 percent would like to see an increase in private health care spending, whereas 49 percent would not. Similarly, 45 percent of Germans believe that more patient choice would improve health care quality, whereas 50 percent do not. The reluctance to fully embrace market reforms undoubtedly stems from a long-standing German belief in social solidarity. By a margin of 81 to 18 percent, Germans believe that equal access to the same quality of care for everyone is more important than their own access to the best possible care.(311)

Costs and demographics will eventually force changes in the German system. However, given the failure of Chancellor Merkel’s reforms, change is unlikely in the near future.