The Hospital Industry: The Consequences of the Reforms in Eastern Germany

By Peaucelle, Irina | Journal of Economic Issues, June 2007 | Go to article overview
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The Hospital Industry: The Consequences of the Reforms in Eastern Germany


Peaucelle, Irina, Journal of Economic Issues


The health care system in Eastern Germany was set up after the Second World War (WWII) based on the traditions of social hygiene of the Weimar Republic health system; on the "Beveridge" systems of social security; and, especially on that of N.A. Semachko in the USSR. The personnel in the health sector were employed by the State. Apart from the hospitals, medical services were provided by centers (called "polyclinics") that brought together general practitioners, specialists, laboratories, and other medical activities, distributed through the territories, or based in big enterprises. The Constitution of the German Democratic Republic (article 35) specified that protection of health was an objective of the State.

The Constitution of the Federal Republic of Germany (Fundamental Law) stipulates that the standard of living must be equal in all States (Lander), but it does not explicitly mention health. Social security in the Federal Republic of Germany ensures coverage of only 88% of the population. Compared to the population of West Germany, the overall population of the German Democratic Republic was in better health until the 1960s; and for men into the 1970s, if one uses the indicator of life expectancy at birth as a criterion of health. Life expectancy was 65.1 years for men and 69.1 years for women, versus 64.6 and 68.5 years, respectively, in West Germany (Busse and Riesberg 2004, 10).

After the reunification of the two parts of Germany, priority was given to standardize the health system by rapid implementation of the legislation of West Germany. Once the health care system of the "new" States had assimilated the new legislation, all German States undertook transformations that are still in progress. These transformations are testimony of the search for policies to improve the levying of taxes, the analysis, and especially the control of expenditures. In 2004, public expenditures for health care in Germany reached the highest level in Europe: 10.9% of the GDP.

Hospitals belonging to the sector with the highest technological intensity are considered with detailed attention in the political economy because they play a new role in the structuring of the German "professional" or "knowledge-based" economy.

In this paper, I refer to the lesson of legislative changes in the hospital field based on the experience of the Evangelisches Krankenhacis Paul-Gerhardt Stiftung Foundation in Wittenberg-Luthershtadt, Land of the East Germany Saxony-Anhalt (Discher 1997).

The Role of the Hospital in Offering Care and in the Regional Structuring of Industrial Areas

In the majority of the Organization for Economic Co-operation and Development (OECD) countries, the preponderant share of the health budget is allotted to the hospitals. Such is not the case in Germany where the hospitals' share accounts for only 39% of the budget. If one converts this percentage in total numbers, however, the amount proves to be important--about US$1,099 per capita (in 2002). In 2004, the hospital sector employed 1.8 million people, which accounted for 4.5% of the working population. In 2002, there were 2,221 hospitals.

The distinguishing characteristic of the German health care system resides in its radical distinction between ambulatory care and hospital care. Specialists in the ambulatory sector, offer practically the whole range of care. In East Germany, ambulatory or out-patient care was provided by the polyclinics. After the reunification, the polyclinics were closed to equalize the care service structure. Since that time, ambulatory services have been provided poorly, in the Eastern States, because the private for-profit providers working in their own individual practices did not try to fill the void created by dismantling the former system, especially in rural zones. For this reason, hospitals spend more of their resources on palliative care and the care of people at the end of life, modifying the principal objective of the hospital, which is treatment.

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The Hospital Industry: The Consequences of the Reforms in Eastern Germany
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