Reform of Health Care in Germany

By Hurst, Jeremy W. | Health Care Financing Review, Spring 1991 | Go to article overview

Reform of Health Care in Germany


Hurst, Jeremy W., Health Care Financing Review


Introduction

For the past 45 years Germany has had two health care systems: one in western Germany, the Federal Republic of Germany (FRG) before the unification of Germany, and the other in eastern Germany, the German Democratic Republic (GDR), before the unification of Germany. In the case of western Germany, there were no profound structural changes to its health care system since the foundations of the system were laid by Bismarck in 1883. However, there was much growth in, and adaptation to, the system during its long history, including some significant reforms in the late 1970s and in the 1980s.

In contrast, after World War II eastern Germany was given publicly financed and provided services quite unlike those in western Germany (Light, 1985). Following the reunification of Germany in October 1990, health service financing and delivery arrangements in eastern Germany are once more being radically reformed to bring them back toward the arrangements that have prevailed throughout in western Germany.

This article contains:

* A description of the health care system in western Germany together with some brief references to that in the former GDR.

* An account of recent reforms to the system in the two parts of Germany.

* Some evidence about the performance of the systems in the two parts of Germany.

* An attempt to identify some remaining problems and their potential solutions.

The German Systems of health care

Western Germany

Citizens in western Germany enjoy access to a generous range and volume of health services, provided by a mixture of independent and public providers. Access is unhampered by significant direct charges. About 88 percent of the population is covered by social health insurance, funded mainly by payroll taxes. Most of the rest of the population--mainly higher income earners--have private health insurance. The bulk of expenditure decisions are settled between the statutory sickness funds and the providers. Here, arrangements are both highly decentralized and highly formalized. There are about 1,100 autonomous sickness funds. Regional associations of these funds bargain with regional associations of doctors to determine aggregate payments to ambulatory care physicians. In the case of hospitals, representatives of sickness funds negotiate with individual hospitals on rates of payment for hospitals. These negotiations take place under guidelines for rates of increase of health expenditure set by a national committee (Concerted Action). Germany has a federal system of government, and the regulation of health services is diffused between the Federal, State, and local levels.

Some of the main features of this system can be summarized in the form of diagrams. Figure 1 shows some of the main relationships in a highly simplified form. At the bottom left in the diagram is the population, some of whom become patients during any 1 year. At the bottom right in the diagram are the providers who supply health services to patients. At the top of the diagram are the third-party payers who collect contributions, premiums, or taxes from the population and pay providers or reimburse patients for services delivered to patients. Service flows are shown in solid lines and financial flows are shown as broken lines.

Practically the whole of the population is covered by health insurance. The statutory sickness funds, which cover about 88 percent of the population, pay providers directly for the services supplied to their members. The sickness funds can be separated into State Insurance Regulation (RVO) funds, covering about 60 percent of the population, and substitute funds covering about 28 percent of the population. The insured generally have no choice between the RVO funds (they are compulsory members of a particular fund), so the RVO funds are shown as single. The private insurers, which cover about 10 percent of the population, provide indemnity payments both in the form of cash reimbursements and in the form of payments to providers. …

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