ZEW President Wolfgang Franz on missed opportunities to reform Germany’s statutory health insurance

By now, the restructuring of the statutory health insurance (SHI) has gradually taken shape as indicated in the white paper issued on July 4, 2006 by the German federal government. Although several essential details remain unclear, some preliminary conclusions can be drawn.

While many of the proposed changes seem reasonable at first glance, most of them were already implemented as part of the Act for the Modernisation of Statutory Health Insurance (GKV-Modernisierungsgesetz) passed in 2003. For example, the prices of medicines will be changed to maximum prices, to allow pharmacies to negotiate lower prices with manufacturers. Although payment cuts were implemented for procedures meant to treat conditions which were “self-inflicted” (including, for example, complications resulting from cosmetic surgery, piercing or tattoos), benefits covering vaccinations, geriatric rehabilitation and palliative care have been expanded. Still, the range of benefits were not curtailed in any meaningful way for the majority of patients. One such example, coverage for accidents resulting from high-risk sports, now requires voluntary supplementary insurance. The same should also be applied to companies’ continued wage payments in these instances—it should not be an employer's responsibility to pay for the consequences of a bungee jumping or hang gliding accident. On the “funding side”, things look even less impressive. From the introduction of a “health fund” to the lack of explicit details on tax-based funding, nothing looks promising or is explained in sufficient detail. As regards the health fund, employers will no longer transfer social security contributions to the close to 250 health insurance providers, but instead to the collection departments for the fund to be set up in each state. The sole benefit provided by this step is a potential reduction in statutory insurers’ (SI) administrative costs. The fund then pays a fixed amount to the SI for each policyholder, while additional payments are made to manage systemic risk. Should these payments to the health insurance provider not suffice, an income-based or a lump surcharge not exceeding 1% of household income can be levied on policyholders. This rule is utter nonsense. The original goal of the health fund—to strengthen competition between health insurance providers by introducing a non-income-based flat rate payment system—is directly undermined by the introduction of income-based surcharges or deductions in parallel, as providers cannot set competitive flat rates for all clients as originally intended. Furthermore, income-linked premium payments are liable to increase non-wage labour costs and encourage job cuts.  The measures to fund the statuary health insurance system through tax-subsidies are particularly appalling and promise to turn the old adage on its head: one step forward, two steps back. Federal subsidies to SIs meant to cover non-standard services and procedures will be cut from €4.2 billion per year in 2006 to €1.5 billion per year. Originally, the coalition agreement stated these subsidies were to be abrogated completely by 2008. Reversing course, the statutory insurance system will remain partially tax-funded, receiving €1.5 billion from 2008 for the provision of free co-insurance for children (2009: €3 billion euros and expected to increase further). After failing to reform Germany’s healthcare system in any meaningful way, it is clear the federal government has all but abdicated its social responsibility to its citizens.