Reducing Health Care Costs with Long-Term Solutions

Today, the “GKV-Schätzerkreis”, a committee that assesses the development of revenue and spending of Germany’s statutory health insurers, forecasted that supplementary health insurance contributions will rise to 2.5 per cent on average next year. This would bring the average total contribution rate to 17.1 per cent. Professor Simon Reif, head of the “Health Care Markets and Health Policy” Research Group at ZEW Mannheim, has commented on that matter:

“The steady rise in contributions over the years is due to a number of factors, in particular increased utilisation of health care services, general price inflation and higher health care costs due to innovative treatments. However, in order to ensure the long-term sustainability of the healthcare system, cost increases must be curbed systematically.

Although short-term initiatives such as reducing VAT on pharmaceuticals or reallocating funds for hospital reform are often discussed in health policy debates, agreements on these issues would only provide temporary relief for the insured. It is far more important to focus on long-term solutions.

The goal of health policy should be to integrate innovations into health care to make care provision more efficient. Otherwise, cuts in services may become inevitable. In many countries, including Germany, the affordability of health care systems suffers from the fact that innovations in treatment are often very expensive but do little to improve care. Examples include new drugs with minimal added value or the digitalisation initiatives of the past 20 years, which have yet to deliver any noticeable efficiency gains.

Germany has had a relatively expensive health care system for years, but it lags behind other Western countries in quality indicators such as life expectancy. One reason for this is that the health care system focuses on short-term measures, both in terms of treatment and financing. A change in the system is needed, with more incentives for long-term cost-saving initiatives, such as prevention and innovative treatments that enhance efficiency.

One possible approach could be to change the incentives in the risk adjustment scheme, which aims to distribute contributions fairly between social health insurances. This would allow insurers to invest more in the long-term health of their members. To encourage service providers such as hospitals and GP practices to introduce cost-saving care innovations, these innovations should not be subsidised directly. Instead, loans should be made available for their implementation, which can be repaid through cost savings. In this context, the health care industry would be required to quantify the savings potential of its innovations and to secure the credit risk.”