Federalism and the 'New Politics' of Hospital Financing

Summary

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Federalism is commonly regarded as a major impediment to welfare state expansion, yet its role in times of welfare state retrenchment remains unclear. Complex responsibilities shared between the federal government and those of the Länder make German hospital financing an interesting example in this regard. The paper analyses recent reforms in German hospital financing, showing how federal institutions may impede reforms and how resistance is motivated. It describes the historical compromise behind the foundations of hospital regulation and outlines the transformation process in hospital reimbursement, showing how systems of reimbursement and hospital planning have come into conflict. Against this background, attempts by national and Länder governments to solve this conflict are assessed and more comprehensive reform approaches discussed.

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Extract

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Federalism and the 'New Politics' of Hospital Financing

1 Federalism and Health Care Reforms

In comparative welfare state literature there is consensus that federalism hinders welfare state expansion (Obinger et al. 2005: 3). There is empirical evidence that social policy spending is lower in federal states than in unitary states (e.g. Castles 1999; Huber et al. 1993) and that welfare state development was delayed by federalism (Kittel et al. 2000). Newer research focusing on institutional aspects of federal welfare states to explain the relationship between federalism and low welfare spending draws a more sophisticated picture. Federalism was a major barrier in the phase of welfare state consolidation in federal nation-states where democracy was established at an early stage, but not in federal nation-states where welfare state consolidation preceded democratic consolidation. In the latter, social policy evolved at the national level from the beginning, whereas in the former, social policy was initially the concern of the constituent states, and the bottom-up evolution of the welfare state was hindered by political structures that produced veto points and limits on the possible course of action (Leibfried et al. 2005: 318ff). Given this important role of federalism in the early days of the welfare state, the question arises whether the "silver age" is equally influenced by federalism. In the literature there is no consensus as to whether federal institutions boost or impede welfare state transformation. The veto player theory would suggest that fragmented interests block reforms and so preserve the status quo. Comparative research findings support this thesis but "as in the era of the 'old politics', much depends on context, including country-specific institutional settings, policy structures and actor constellations". (Leibfried et al. 2005: 332)

Veto player theory has been prominent in explaining the slowness of reform in German health policy (e.g. Rosewitz/Webber 1990; Webber 1988, 1989). Beside corporatist actors and interest groups, the federal council, the Bundesrat, has been identified as a relevant veto player in health policy. Because most he...

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