The origins of the German medical system can be traced back to the 19th century, and their concept of social insurance which is based on the principle of social solidarity - the belief that one of the roles of the government is to provide social benefits for all citizens such as medical care. Germany’s first chancellor, Otto von Bismarck, advocated for the existing sickness benefits to cover workers in all low wage occupations. As a result, the Sickness Insurance Act was passed in 1883. This Act represented the first national social insurance program for Germany.
As many know, after WWII, Germany became divided into two entities: East Germany and West Germany. When they eventually reunited in 1990, East Germany adopted West Germany’s laws such as their medical insurance system. This system grew over the years and now every German citizen must have health insurance as required by law. In Germany, there are sickness funds that the public can join. Those with an income less than $35,000 must join a sickness fund. A sickness fund refers to private and not-for-profit insurance companies that collect premiums from both employees and employers. Those who earn more than this baseline can choose to turn to private health insurance although of the 88% of the population that use sickness funds 14% are members who voluntarily join despite the fact that their income exceeds the cutoff. The remaining 12% are covered by private insurance (10%) or police officers insurance, public assistance and student insurance (2%).
The individual health insurance premiums are calculated according to the worker’s income. They are then collected through a payroll tax-deductible; the average deduction in 1993 was 13.4% of the workers’ gross salary. These sickness funds are self-regulating and independent and pay providers for the services provided to their members at rates negotiated with individual hospitals. The sickness funds are also required to provide a set of benefits such as physician ambulatory care, hospital care and home nursing care. Another benefit of these funds is that they provide additional payments to workers who are unemployed because of an illness.
However, there are weaknesses to this system just as they are for any other medical system. Psychiatric services and public health services are minimal. In terms of reimbursement, hospitals are paid on a prospective basis and ambulatory providers are paid on a fee for service basis. In Germany, both private and public hospitals exist in which both employ salaried physicians. In comparison to the United States, physicians at private practices do not have the added benefit of admitting privileges. This is why doctors have invested in well-equipped clinics that are at par if not better than hospitals as they provide various procedures.
The different levels of government in the German health care system each play a crucial role. The central government is in charge of passing legislation on policies and jurisdictions relevant to the health care system. The state governments are responsible for managing their state hospitals, supervising sickness funds and physician associations as well as hospital planning. Finally, the local government manages both public health programs and local hospitals. Sickness funds and physician associations have great autonomy but the government’s intervention was also extensive. This led to the rise of many different acts one of which was the Health Care Reform Act of 1993. This act implemented reforms that provided workers with the freedom to choose among a broad range of sickness funds. These reform act also tackled the issue in which sickness fund costs were rising faster than income was as they allowed for more cost-sharing to decreases health expenditures. They also controlled hospital costs by reducing hospital capacity, hospital expenditure on equipment and inpatient admission as well as changed the hospital payment system from per diem payment to a DRG style prospective payment basis. The German medical system effectively controlled costs because of their institutional framework - they linked medical expenditures to the income of sickness fund members. The effect of this as positive as it was for workers it can be considered negative for physicians as their salaries have consistently fallen over the decades. In fact, in 1993 general practitioners received $64,300 whereas the average German physician earned $75,700.
As well, the effects of controlling costs mean that German hospitals also do not have as much technology as compared to hospitals in the U.S. Another issue that arises is the continued dependence on third party payment that has no role for the cost-conscious consumer. This results in patients having no reason to limit their demand and leaving physicians with no incentive to limit their supply. The reason this is an issue is that there are now no competitive forces that lead to a reduction in costs. German citizens are more likely to visit their doctor which is a good thing but they are also provided more prescription drugs and stay in hospitals longer than other countries. This reduces the number of beds available and can lead to drug addiction. It is hard to say which country has the better or best medical system but according to the majority of German citizens, they are satisfied health care system. At the same time, the system is facing a significant challenge as the German population is ageing dramatically causing significant pressure on social security and health care programs.
Overall, the German health care system has its strengths and weaknesses with its socialized medicine. They are able to control costs and every citizen in Germany has access to health care insurance. That is not to say Germany is void of healthcare disparities. They struggle with the constant pressure on the system and the insufficient amount of technology also affects their procedures. Now, with the ageing population and the struggle of the current global pandemic Germany may need some more reforms.
Written by Emaan Rana
Edited by Joyce Qian
References
Ridic, G., Gleason, S., & Ridic, O. (2012). Comparisons of health care systems in the United States, Germany and Canada. Retrieved February 01, 2021, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3633404/#__sec2title
Such a unique topic!