Health Care in Germany

 Christa Altenstetter, Ph.D.
Graduate Center , Queens College ,
And European Union Studies Center , of
The City University for New York (CUNY)
365 Fifth Avenue
New York , N.Y. 10016-4039
Tel. (212) 817-8675
Fax: (212) 369-3940
E-mail: caltenstetter@gc.cuny.edu

Copyright:  Christa Altenstetter
Do not quote or reproduce without the permission of the author

 Prepared for distribution at the series,
“Rekindling Reform: A Vision of Quality Health Care for All”
New York , January 10 through May 16, 2002

1.  Introduction[1]

 The question of whether the introduction of competition and managed care in the German health care system means a "new paradigm" or simply a "stalemated strategy" was raised in a 1999 issue of Health Affairs by Lawrence Brown and Volker F. Amelung (1999). In that same issue, Uwe E. Reinhard (1999) responded with a question of his own: "Why would Germany wish to emulate the US style of managed care, with its as yet unproven effect on quality and outcomes?" The core of their disagreement seems to center around two issues.  First, can competition and managed care flourish in a political culture and healthcare system where central policy-making and enforcement arrangements are embedded?  The distinct political economy and history of Germany may create conditions that are not conducive to competition and managed care, unlike the US . The second issue that leads to the different interpretations above is the elusive concept of quality in health care, especially how to measure and achieve it.

The historical record is clear on the first issue, at least as it has been treated in the past. At critical junctures of Germany's history—1918, post-1945 in former West Germany, and at reunification in 1990—successive generations of politicians from federal and regional governments and public administration have judged that the political price for dismantling self-governance was too high.  (That is, except for Hitler’s government, which is the only regime that touched on the management of self-governance structures by subjecting all social insurance carriers, including health insurance, to central control in Berlin , although SHI remained in place.)  Will today's elected politicians take the risk of fundamentally restructuring self-governance, a prerequisite for genuine competition? The record on quality of health care and quality assurance in medical services is more ambivalent, despite frequent invocations of the need for high quality care by German politicians and experts alike. Yet Germany is not alone in its demands for higher quality, and finds herself in good company with the United States (Shine 2002) in a need for improvement, as reflected in the ratings of both countries by the Institute of Medicine , the Organization for Economic Cooperation and Development (OECD), and the World Health Organization. Yet rather than pursue a task which even quality experts have not mastered, let us limit the discussion to the macro-policy and macro-structures of policy-making in Germany .

This paper first updates policy developments since the publication of this debate in 1999 before briefly returning to the questions raised by the authors at the end.[2] Statutory healthcare insurance (SHI) will be examined, including benefits, organization, financing, major flows of funding, compensation of providers, and resource allocation. Then, SHI will be contrasted to long-term care insurance (LTCI). Mental health services and the Public Health Service will be surveyed only briefly. Finally, a few implications will be drawn from the policy and institutional context of SHI and LTCI, and likely future scenarios for political action be suggested.

Brown and Amelung (1999, p. 86) define managed competition as “arrangements in which purchasers (public and private) contract with payers who seek to win business and market share by offering incentives for providers to manage care.”  Managed care is defined as “organizational or contractual arrangements in which those who purchase and pay for medical care use financial incentives, administrative controls, or both to hold providers… accountable for the quality and costs of their treatment decisions”. For Reinhard, managed care ultimately involves exercising control over (1) the volume of goods and services going into medical treatments, (2) the production cost of these treatments, (3) the money transfers made to the providers of these treatments (prices), and (4) these treatments’ impact on their recipients’ quality of life. One might even include (5) the impact that the entire health care system makes on the quality of life of the population. (1999, p. 92)

        Since Reinhard’s and Brown and Amelung’s views were published in 1999, a new Social Democratic/Green legislative coalition continues to travel on the competition track, on some dimensions even more so than the Right government in 1993. The current government enacted Health Care Reform 2000, which introduced new or strengthened existing “competitive elements” in SHI, LTCI, and the health care system at large. Through the introduction of a nationwide system of Diagnosis-Related Groups (DRGs) in all German hospitals by 2007, the idea of competition was substantially expanded in the hospital sector, building on earlier partial DRGs introduced in 1996. In the reformers’ view, the allocation of resources should follow patients, who can receive inpatient services ranging from standard to sophisticated ones depending on the capacities of individual hospitals. But at no point has it been politically feasible to dispense with self-governance.

The federal minister of health and the advisory council in health care (Sachverständigen-rat im Gesundheitswesen) also declared a Qualitäts-offensive, a war on behalf of “quality, transparency and economy” (Federal Ministry of Health, 2001e). This mandate is not new, but renews the need for quality assurance, disease management and quality management in all care sectors. In addition, it calls for improving existing risk adjustment mechanisms across all SHI carriers by establishing a genuinely nationwide pool of high-risk patients across all population groups, delivery sites and funding sectors.  It also calls for more action on behalf of the chronically ill and the mentally handicapped. These are laudable goals, but the real issue is the gap between rhetoric and what happens on the ground. The problem is compounded when the same groups that call for transparency and quality have been, in the context of statutory health insurance (SHI), cool (if not hostile) to the idea of sharing cost, utilization and other data with patients; opposition does not come exclusively from providers, as is generally assumed.

Since the changeover from the conservative Kohl government to Gerhard Schröder’s coalition government in 1998, the advisory council was regrouped. But some continuity has been preserved, as a few members who served during the Kohl era are on the current council.^[3] Building on previous reports (notably 1995,1996, 1997), the latest report^[4] hardly differs in tenor or substance from its predecessors, although language may differ, a few goals and solutions are reinterpreted and preferences are strengthened. The explicit empowerment of patients may be considered new.

Two years ago, the council was explicitly asked by the minister of health for possible improvements in the steering capability of health care through quality assurance and new and different forms of reimbursement, while leaving untouched SHI funding and self-governance. The council came up with a number of instruments: quality, transparency and risk pooling; setting health goals; developing morbidity-related criteria; strengthening prevention and health promotion; and empowering patients. The general practitioner or family doctor was recommended to be upgraded to a gatekeeper of access to specialists, yet at the same time a facilitator for interfacing with the four health care sectors: inpatient medicine, outpatient medicine, inpatient and outpatient rehabilitative services, and nursing care at home.

Politicians, a new roundtable of the major stakeholders, and expert reports published in 2001 have repeatedly insisted that a balance between competitive elements and equity and fairness in access to medical, dental, hospital, long-term nursing, and mental health care must be maintained. A few of the more excessive cost-sharing elements enacted by the Right government were scaled back because they were considered inequitable, unjust and politically untenable. However, cost-sharing by patients, which was unacceptable to the Left for a long time, is now one element of reform among others.

When long-term care insurance (LTCI) was enacted in 1994, the federal legislature preferred the institutional arrangements of self-governance over tax-funding as an appropriate steering tool.  In other words, “cozy, cartel-type arrangements” (Brown and Amelung 1999, p. 82) are embraced not only by providers and payers but also for the implementation of LTCI by state offices in the regions and municipalities. Arrangements that allow for non-competitive remedies and behavior tend to be the rule rather than the exception in the major care sectors.

Chancellor Schröder, in light of the forthcoming federal election in September of this year, has urged his minister of health throughout 2001 to prevent SHI-related and other health issues from becoming hotly contested campaign issues. Yet the financing of SHI and nursing care—which experts consider a time bomb in view of an aging population and changing patterns of morbidity—is already a campaign issue. Edmund Stoiber, the nominated chancellor candidate of the opposition (Christian Democratic Union/Christian Social Union, or CDU/CSU) wasted no time in pursuing the issue; the day after he was nominated he announced that, if elected, the Christian Democrats would pursue alternative policies in health, education and unemployment.

If the CDU/CSU coalition is elected, one can expect patient cost-sharing to be raised back to pre-1998 levels.  Some services may be eliminated from reimbursable SHI-services and transferred to tax-funding,[5] and currently reimbursable but ineffective medical and surgical procedures will entirely be eliminated.  However, campaign rhetoric should not be confused with what is politically feasible vis-à-vis the electorate.  All participants in the electoral-political process know that any attack on solidarity and self-governance—real or perceived—is a high-risk political strategy, and that solutions need to be found which built around them.  Yet the interplay of solidarity and self-governance tend to be inherently at odds with competition and an entrepreneurial style.

A policy of increasing access to health security is coherent for a period of the past 125 years, although the same cannot be said about policies for the major components of the health delivery system (e.g., the inpatient and outpatient sectors).  Starting from 10% of the population in 1883 (the lower paid segments of the labor force), coverage was gradually extended by including more occupational groups in the plan and steadily raising the insurance program’s income ceiling, which required those earning less to participate. In 1901, transport and office workers came to be covered by SHI, followed in 1911 by agricultural and forestry workers and domestic servants, and in 1914 by civil servants. Coverage was extended to the unemployed in 1918, to seamen in 1927, and to all dependents in the 1930s. In 1941 legislation was passed that allowed workers whose incomes had risen above the ceiling for compulsory membership to continue their coverage on a voluntary basis. The same year, coverage was extended to all retired Germans. Salespeople came under the plan in 1966, self-employed agricultural workers in 1972, and students and the disabled in 1975.

From the beginning, access to health security and, by extension, medical services was embedded in the value of solidarity. Solidarity is a concept with multi-faceted meanings today, but generally the idea means that the financing of health care includes both rich and poor, the working and the retired, young and old, singles and families. Since reunification, another dimension of solidarity was added; annual transfer payments within SHI from the rich sickness funds in former West Germany to the new sickness funds in the former East Germany were institutionalized. Even the risk adjustment mechanism (Risikostrukturausgleich, or RSA) has been used primarily so far to subsidize sickness funds in former East Germany and help them stabilize their finances. (A genuine risk adjustment mechanism across Germany based on a pooling of high risks is not yet operational, but is planned to be completed by the year 2007.) In the hospital sector, about 360 Billion € are annually transferred from the rich German regions in the West to the poorer regions in the East. Unequal treatment of providers, sickness funds and individuals in the two former parts of Germany had been accepted; yet starting on January 1, 2002, are providers will be treated equally. Is this evidence of competition at work? If it truly were, the East German sickness funds would all have declared bankruptcy already.

 2.  Statutory Health Insurance (SHI)

 Unlike many of the world’s advanced countries, Germany does not provide its citizens with health care through a state-run system. Rather, it provides these benefits via a complex network of independent regional and local entities, some public, some quasi-public, and some private. Many of these structures date from the nineteenth century, and some from even earlier. Because of a highly fragmented decision-making system spread across federal and regional levels, no single group can dictate the terms of service delivery, financing, reimbursement, quality of care, or organization.

According to the Basic Law of 1949,[6] Germany ’s constitution, the federal government has exclusive authority in matters related to SHI and long-term care, mental health, and public health.^[7] The federal government’s authority applies in particular to defining benefits, eligibility, membership, covered risks (physical, emotional, mental, curative, and preventive), income maintenance during temporary illness, and the percentage of payroll taxes levied on employers and employees. However, except for the financing of hospitals, which is the domain of the Länder, and some public health functions administered by the Länder and local and district public health departments, the responsibility for administering and providing healthcare has been delegated to non-state entities. These entities include national and regional associations of providers and sickness funds, Land hospital associations, private insurance companies, voluntary and public agencies, and nursing care funds.  Table 1 summarizes the locus of decision-making on coverage, reimbursement and financing decisions.  

Source: Busse 2000b, p.31; updated by author.

         Today, Germany ’s health care system provides its residents with nearly universal access to comprehensive, high-quality medical care, including their choice of physicians, dentists, hospitals, and long-term nursing care. The portability of coverage, eligibility, and benefits cannot be reinterpreted by insurers, politicians, administrators, and health care providers. Universal coverage is portable across all German regions and must be honored by any medical office or hospital. Check-ins at doctor’s offices, hospitals, and specialized facilities are simple, with a chip card serving as membership identification. Prior to the latest reforms in the 1990s, no one in need of care could be turned away without violating medical ethics codes or Land hospital laws.

About 92% of the population receives health care through SHI.  Individuals who are not insured through SHI, mostly civil servants and the self-employed (about 7.1 million in 2001) carry commercial insurance offered by about 50 private health insurance companies. (An estimated 0.3 percent have no insurance of any kind.) However, everyone uses the same health care facilities, although some 7-10% of SHI members have opted to carry commercial insurance for “luxury” hospital accommodation and treatment by a chief physician.  The bulk of those covered by SHI are working individuals and their spouses and children, the retired or unemployed, and students, whether at community colleges, senior colleges or universities. In principle, children are covered until age 18; this age limit is raised to 23 if the child does not work and to 25 for students. Under certain conditions, the age limit for disabled children can be waived. A breakdown of members in SHI is shown in Table 2.

Status                                                   Old Länder                                  New Länder

Compulsory members(without retired)        23,345                                             5,641

Retired                                                     11,853                                             3,453

Voluntary members                                     5,868                                               693

Spouses and dependents                            17,835                                             2,649

*Numbers in thousands.
Source: Federal Ministry of health, 2001c, p.14.

 SHI is based on a two-tiered system of sickness funds. The first tier is comprised of six types of primary funds, while the second-tier includes so-called substitute funds. Together, they make up what is known as Gesetzliche Krankenversicherung (GKV). In 2001, individuals could be a member of any one of these funds:

·        17 general regional funds known as Allgemeine Ortskrankenkassen (AOK), with one federal association in Bonn

·        12 substitute funds (Ersatzkassen) [Main office: Siegburg]

·        318 company-based funds (Betriebskrankenkassen) [Main office: Essen ]

·        28 guild funds or Innungskrankenkassen (IKK) [Main office: Bergisch-Gladbach ]

·        5 farmers’ funds or Landwirtschaftliche Krankenkassen (LKK) [Main office: Kassel]

·        1 miners’ fund (Bundesknappschaft) [Main office: Bochum ]

·        1 sailors’ fund or See-Krankenkasse [Main office: Hamburg ] ^[8]

The basic structure of these types of funds reveals a high degree of continuity since the last quarter of the 19^th century.  However, the actual number has changed dramatically over time, as illustrated in Table 3.  A process of consolidation started around the turn of the last century, and accelerated dramatically for two reasons: first, German reunification in 1990 and, second, hectic and frequent reform legislation in the 1990s.  

Source: Busse, 2000a , p.27, quoting Federal Ministry of Health, except:
*Updated for 2000-2001 from Federal Ministry of Health, 2001a, p.342.  

A choice of sickness funds was not always possible for members of SHI; instead, membership was determined by occupational status reflecting the stratification of German society into different classes and social segments from 1883/85 through 1993. Since the late 1990s individuals have changed funds, at first reluctantly; then younger individuals discovered the incentives provided by lower payroll taxes of enterprise funds. The bulk of changes in membership occurred from the general sickness funds (with the highest number of the elderly) to the enterprise funds.

German policymakers have been reluctant to legislate rationing. As a result of  reforming the financing of health services, today there is "soft" evidence that some form of “rationing” is happening as physicians refuse treatment for services for which they are not reimbursed, refer patients to inpatient care, postpone treatment, or refuse to do certain tests. The so-called IGEL[9] services made it legal for physicians to bill extra if patients wished to receive services not covered by SHI; for example, mammography is no longer covered and used to cost about 41€. Vaccinations are no longer free. A recent analysis of German hospitals, prior to the introduction of DRGs, report that hospitals refuse or delay treatment when high costs are predictable, refuse to admit emergency patients, discharge patients early only to readmit them later, engage in surgery which is economically worthwhile but medically useless, and transfer patients to the ICU or to another hospital in order to economize (Simon 2001, pp.19-21).  Still, the author of this analysis is careful to stress that his findings are not necessarily representative of all hospitals in Germany .

Observers of international health policy have come to use the term benefits catalogue (as, for reasons of simplicity, this paper does as well); in actuality, this “catalogue” does not denote a refined list and is not comparable to the benefits section of private health insurance. Instead, the concept refers to a composite of different criteria and professional assessments written into law. All decisions on benefits/services under SHI must meet criteria spelled out in the social code (SGB V). Specifically, they must meet the following criteria (Krimmel, 1998, p.20):  quality and efficacy as defined by the state of medical know-how (§2, section 1); medical progress (§2, section 1); sufficiency, efficacy and economy, without exceeding what is medically necessary (§12, section 1; §70, section 1); and must be sufficient and efficacious, according to medical practice and knowledge (§28, section 1).

 2.1.  Benefits
Despite the introduction of co-payments on a large scale in the 1990s, benefits under SHI remain comprehensive. The almost universal access to quality care includes the following:

·        Any type of medical services delivered by an office-based physician

·        Choice of physicians and specialists in the office-sector

·        Choice of sickness fund (since the mid-1990s)^[10]

·        Unlimited hospital care, subject to an annual limit of a co-payment for 14 days per year regardless of repeat admissions

·        Full salary for mothers from six weeks before childbirth to eight weeks afterward, including neonatal care of mother and child

·        Home help

·        Preventive health checkups (though these have been scaled back)

·        Sick leave to care for a relative

·        Rehabilitation and physical therapy

·        Aids to treatment of all sorts, and patient-assisting medical devices

·        Prescription drugs

·        Stays in spas (under certain circumstances)

Prevention and early detection benefits include:

·        Vaccinations (not for leisure trips abroad)

·        Check-ups after the age of 35 years

·        Early screening and detection program for babies and toddlers (nine visits from birth to age six, with one additional check up at the beginning of adolescence)

·        one cancer screening per year for women starting at age 20 and men at 45

·        dental prevention (reestablished after the Kohl government eliminated it)

·        pregnancy and neo-natal and post-natal care (physician or midwife); each woman is given a card (serving as passport), which outlines a schedule for ten visits and includes the results of each visit

             Other benefits include eyeglasses, for which sickness funds pay an amount fixed at the regional level.  While they generally do not pay for frames, a sickness fund will pay at least 9.5% for the frame if new glasses are needed because of changed vision.  Children up to age 14 are exempt from a co-payment for new eyeglasses.  Finally, benefits also include a cash payment designed to serve as supplement to funeral costs.^[11]

A needs-based Sozialklausel, or social clause, has been institutionalized for some time to ensure that no resident is refused medical and other health services because of lack of financial resources. SHI distinguishes between partial and comprehensive social clauses. The partial social clause covers children under the age of 18, who do not pay any co-payments.  It also covers individuals and families according to this formula: individuals with a monthly income of less than DM 1,792 DM (single), DM 2,464 (couple) or DM 2,912 (family with one child).  For each additional child, another DM 448 is added to the limit.[12] This formula is reviewed annually. The income ceiling for prescription drugs and medical supplies is higher.  The comprehensive social clause is applied, irrespective of income, when an individual is a recipient of social welfare or receives aid to unemployment; it applies to veterans, the disabled, or persons in training (Bundesausbildungsförderungsgesetz).  The comprehensive clause also covers disabled persons in home agencies or nursing homes and chronically ill individuals.

For dental care, co-payments are waived for those whose means-tested income is within the needs-based social clause.  However, for those beyond the reach of the social clause, there is no parity of coverage between medical and dental care. Dental surgery is covered, but other necessary dental services require a sliding scale of co-payments. Typically, a sickness fund covers up to 50% of treatment costs; if an individual goes for regular dental check-ups, the percentage can be raised to 60-65%.

Employers must pay the salary of ill individuals in full for the first six weeks; thereafter the sickness funds pay 70% of annual salary up to the income ceiling, but not more than 90% of the last net wage or salary. The maximum wage per day in January 2002 is 112€; the maximum sick pay is 78.75€.  Payments during illness are limited to 78 weeks within a three-year period.  If a child under twelve years of age requires care, a working parent can receive financial aid for ten work days per year for each ill child; single parents are entitled to a maximum of 20 days. If several children are sick, aid can be paid up to 20 days for a parent and up to 50 days for a single parent per year.

Co-payments were introduced for the first time on a large scale beginning in 1982 for  prescription drugs, dental treatment, hospitalization and other services. Successive legislation on healthcare reform in the 1990s has raised the amount of existing co-payments while instituting new ones. Co-payments are now solidly part of the German system; still, they are modest by international standards, as indicated by Table 4.  However, they are also steadily increasing, as Table 5 demonstrates. Chronically ill individuals are granted a waiver for co-payments provided they have paid one percent of annual gross-income for prescription drugs, transportation and medical supplies and non-medical treatments (Verband-and Heilmittel). The waiver is given only to the individual patient, and not the family. For all other members of SHI, a burden of 2% of annual gross income is accepted as the rule (Überforderungsklausel, or excessive demand clause).

*These are legal categories as defined in SGB V.

Sources: BMG, VDAK, as printed in KKH Nachrichten 2002, p. 21, and http://www.bmgesundheit.de/presse/
2001/2001/141.htm. Costs converted from DM by the author (1 € = DM 1,95583).

*      Old Länder only

**   Old and new Länder

Source: Mielck 2000, p.240, relying on works by John, et al., 1998.

 Since Healthcare Reform 2000 was enacted, employers can offer occupational health services, health promotion and other preventive programs. Sickness funds can or should use less than 2.5€ per insured individual for these programs, and 0.5€ for self-help activities for patients. Both of these figures are to be adjusted annually.

 2.2.  Financing

The system has managed all of the achievements outlined above relatively economically. In 1992, about 8.1 percent of gross domestic product (GDP) went into health care. However, this percentage grew to 10.3% of GDP in 1998 and can be expected to go up further as a result of three factors: aging, multi-morbidity, and medical advances.  Another potential cause of increased costs may be political maneuvers that aim to cover up the true nature of the crisis; when these maneuvers have been exposed, the true cost of financing medical and long-term care may be higher than currently believed. The operating principle since the 19^th century has been that no money exchange should touch on the direct patient-physician relation (Sachleistungsprinzip); the result is that large segments of the public do not realize the true cost of medical services, and remain unconvinced that the long-term sustainability of German health care may be in jeopardy.  Some experts warn that the time bomb may go off one day.

SHI is financed through contributions (we follow