Health care in Germany

I had my first house call a while ago. I couldn't believe such things were still possible. Here is how the whole system works.

Germany doesn't use a government-run, Medicare-like health insurance plan. They rely on purely private, nonprofit or for-profit insurers that are goaded by tight regulation to work toward socially desired ends. And they do so at average per-capita health-care costs that are less than half of those in the U.S.

To see how this can work, think of the basic functions that any health system must perform:

• 1. the financing of health care, that is, the extraction of the required funds from individuals and households who ultimately pay for 100 percent of all health care
• 2. the pooling of individual risks with the aim of protecting individuals and households from the high costs of medical care in case of illness
• 3. the purchasing of health care from its providers (doctors, hospitals, drug companies, etc.)
• 4. the production of health care goods and services
• 5. the regulation of the entire system so that it operates towards socially desired ends.

Who should perform these functions is based on the principle of social solidarity. It means that health care should be financed by individuals on the basis of their ability to pay, but should be available to all who need it on roughly equal terms. The regulations imposed on health care in Germany are rooted in this overarching principle.

First, Germany mandates that the individual be insured for a basic package of health care benefits.

Many Americans oppose such a mandate as an infringement of their personal rights, all the while believing that they have a perfect right to highly expensive, critically needed health care, even when they cannot pay for it. An insurance sector that must insure all comers at premiums that are not contingent on the insured’s health status — a feature President Obama has promised — cannot function for long if people can go without insurance when they are healthy, but are entitled to premiums unrelated to their health status when they fall ill.

Second, Germany bases the individual’s contribution to the financing of health care on the individual’s ability to pay.

In Germany, statutory health insurance, which covers 90 percent of the population, is financed by a payroll tax. The individual’s premium is not a per-capita levy, as it is in the United States. It is purely income-based. Ostensibly, about 45 percent of the premium is contributed by employers.

An employee’s non-working spouse is automatically covered by the employee’s premium.

Unemployment insurance pays the premiums for unemployed individuals, and pension funds share with the elderly in financing their premiums, which are set below actuarial costs for the elderly.

Finally, premiums for children are covered by government out of general revenues, on the theory that children are not the human analogue of pets whose health care should be their owners’ (parents’) fiscal responsibility. Instead, children are viewed as national treasures whose health care should be the entire nation’s fiscal responsibility.

The health insurance premiums paid by Germans are collected in a national, government-run central fund that effectively performs the risk-pooling function for the entire system. This fund redistributes the collected premiums to some 200 independent, nongovernmental, competing, nonprofit “sickness funds” among which Germans can choose.

For example, if individual A chooses sickness fund X, then the central fund will give to fund X a payment that uses over 80 variables to identify individual A’s actuarial risk. The same payment would be made for this individual to any other fund.

Thus, the sickness funds in Germany only perform the third function mentioned above — acting as purchasing agents on behalf of the central fund and patients.

An outside body of health policy specialists and stakeholders would be able to inform America’s health policy. It could provide insights from detached research and a consensus among experts and stakeholders, in place of the campaign contributions of powerful interest groups that now drive policy.

The Medicare Payment Advisory Commission, for example, could serve as such a body.

To understand how such a body might function, Americans could learn from Germany’s experience with precisely such a body — Der Gemeinsame Bundesausschuss or, in English, the Joint Federal Committee.

Germany’s joint committee was established in 2004 and authorized to make binding regulations growing out of health reform bills passed by lawmakers, along with routine coverage decisions. The ministry of health reserves the right to review the regulations for final approval or modification. The joint committee has a permanent staff and an independent chairman.

Fees paid to providers in Germany are negotiated among regional associations of providers and corresponding associations of sickness funds (self-governing, non-profit insurance plans), so the joint committee does not have to set payment rates. Its main tasks include making evidence-based coverage decisions for ambulatory and inpatient services and medical products and furthering disease-management programs.

To arrive at its coverage decisions, the committee seeks scientific input from its nonprofit subsidiary, the Institute of Quality and Efficiency in Health Care. It conducts cost-effectiveness analyses for particular procedures or medical products, mainly on the basis of research done by academic or other outside research institutes.

In a lengthy interview on Germany’s health system, the country’s minister of health, Ulla Schmidt, explained the role of the committee:

“This is the approach we prefer in Germany — consensus building under a form of self-regulation, but under general government oversight. The federal government provides a general legislative framework for our universal health insurance system. But precisely how to implement it is left to the experts and representatives of the various stakeholders in health care. No political committee can decide whether a new medical procedure should become part of universal coverage or not. We feel that this should be left to the experts who, in our case, are hospitals, physicians, dentists and sickness funds. The Joint Federal Committee also has patient representatives as well, so that patients can be heard, too. … It is our experience that the decisions rendered by the J.F.C. are widely accepted, including by patients. Generally, we then have no additional problems.”

Here is a good link to a comparison with the US system.
http://prescriptions.blogs.nytimes.com/2009/09/29/health-care-abroad-germany/
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