Health care reform in Germany.

VerfasserGerlinger, Thomas

1 Introduction

The German health care system is undergoing a process of fundamental change affecting both its care structures and its financial and regulatory mechanisms. This transformation is an expression of a paradigm change in health policy initiated during the first half of the 1990s. At the heart of the transformation is the implementation of competition--centered structural reforms designed to establish a regulated market in the health service and help modernize structures of medical provision that had come to be regarded as inefficient. These reforms have been accompanied by a progressive privatization of treatment costs. This paradigm change in health policy increasingly favors the goal of adapting the health care system to the perceived requirements of a globalized economy at the expense of the aim of covering the social life--risk of "sickness". Since it began, health policy has proceeded down that chosen development path, generally by means of incremental reforms.

In the following the content of this paradigm change will be brought out in more detail and differentiated from the preceding phase of cost-containment policy (Section 2). Sections 3-5 deal with the effects of this transformation on the care, financial and regulatory structures of the German health care system. Section 6 outlines to what extent the various coalitions that governed between 1992 and 2007 differed in their approach to health policy. Finally I take a look forward at future developments in health policy.

2 Paradigm Change in Health Policy

2.1 Structure-Conserving Cost-Containment Policy

German health insurance is divided into two systems: statutory health insurance and private health insurance. About 90 percent of the population is covered by statutory insurance (generally under compulsory insurance cover), while private insurance--to which only civil servants, the self--employed and high--earning employees have access--covers about 10 percent of the population. Whereas private health insurance is governed by the principles of the insurance market, in the statutory health insurance system the state guarantees members almost universal access to health services, even if these days patients also have to carry considerable charges themselves. Health service financing is accomplished almost exclusively through contributions representing a fixed percentage of gross wages (on the principle of equivalence) and borne in (almost) equal parts by employers and employees. Health service provision is based on the special position of the practicing doctor, generally working in his or her own practice. In the ambulatory sector fund members have the right of free choice of doctor and can consult a specialist directly, but outpatient treatment in hospitals is possible only in exceptional cases. The almost 250 health insurance funds--between which the insured can choose freely--and their umbrella organizations are of primary importance for regulating the system. Within a given legal framework the insurance funds (and their umbrella organizations) conclude contracts with service providers (doctors, hospitals, pharmaceutical manufacturers, etc.). The regulatory system is strongly sectoral differentiated, with each individual sector characterized by its own complex mix of state, corporatist and market management elements. Corporatist elements are strongest in the ambulant sector, state management elements in the stationary sector and market management elements in the pharmaceuticals sector (Rosenbrock and Gerlinger 2006).

Although the German health care system can (still) be relatively clearly classified as a health insurance system in the typology Thomas Gerlinger used in health system research, it turns out to be relatively resistant to simple classification in welfare state typologies, containing as it does pronounced features of the conservative, the universalist and the liberal welfare state models.

During the post-war decades the development of the statutory health insurance system was characterized by an acceleration of the process of 'double inclusion' (Alber 1992: 24ff), in other words the integration of a growing part of the population and an expansion of the range of services covered. During that heyday of Fordism the corporatist/conservative welfare state model became permeated with features of the social democratic welfare state, at least in relation to aspects of social security relating to health (Esping-Andersen 1990). Many contemporaries recognized that the expansive development of spending in the statutory health insurance system was not unproblematic, but any doubts raised could always be dispelled with reference to the continuing high rate of economic growth. At the same time the statutory health insurance system institutionalized and stabilized the demand for health services, which in turn fostered growth in employment in the health sector.

Post-war prosperity not only provided the framework for expanding welfare state services for the case of illness, but also for establishing a system of care characterized by all kinds of inefficiencies. These expressed themselves, for example, in:

* payment rules for practicing doctors (fee-for-service) and hospitals (cost coverage principle), which favored an expansion of provision (Gerlinger 1997; Simon 2000);

* separate institutional responsibility for ambulatory services (the associations of statutory health insurance physicians) and stationary provision (the federal states), which led to a fragmentation of care and reduced the performance of the health care system as a whole;

* the associations of statutory health insurance physicians being given a state-sanctioned monopoly on concluding medical care contracts with the health insurance funds, which led to a structural dominance of the health insurance physicians over the insurance funds.

There are various reasons for these developments. Generally, there was rather little pressure to create more efficient health-care structures in view of steadily rising insurance fund revenues. Furthermore, a slew of inefficient structural elements, especially the contractual monopoly held by the associations of statutory health insurance physicians, was rooted in the political elites' unwillingness--for clientelist political reasons--to challenge established structures.

These characteristics point to a special feature of the health care system within the social security system as a whole. Management of the statutory health insurance system--unlike the pensions insurance system and large parts of the unemployment insurance system--is not 'only' about social redistribution or covering particular life risks but also involves managing personal services that represent a significant branch of the economy. Thus efforts to influence health policy take place in arenas where large numbers of actors are active, often organized in powerful associations each with their own interests and strategies. These include state actors (national and state governments), corporatist and para-state actors (health insurance funds, associations of statutory health insurance physicians, medical associations) and private actors (doctors, hospitals, the pharmaceuticals industry and not least, of course, patients).

A strategic reorientation in health policy set in during the mid--1970s, as the end of the 'brief dream of everlasting prosperity' loomed into sight (Lutz 1984). The drastic rise in unemployment and a slowing of the dynamic economic growth rates of the postwar decades led political and administrative decision-makers to make cost containment the most urgent goal of health policy (Rosewitz and Webber 1990). Since then the declared aim has been that health insurance spending should cease to exert upward pressure on wage costs, in order to avoid weakening Germany's international competitiveness.

Until the early 1990s these cost-containment policies left the existing incentive structures for actors basically unaltered, and structural reform of the health care system--measures that would have involved a 'redistribution of competencies and responsibilities with respect to the financing, provision and regulation of medical services'--was not undertaken (Webber 1988: 157). Incentives either promoted an expansion of the volume of services or at least failed to lead the actors to effectively restrict the provision, financing or take-up of services in their own financial interests. To that extent this traditional cost-containment policy was characterized by the contradiction between the global goal of keeping the level of contributions stable (or restricting spending) and the provision of financial incentives for the individual actors. On the part of the service providers it was the instruments of funding and payment (especially the cost coverage principle in stationary provision and the fee-for-service system in the ambulatory sector) that provided strong incentives for quantitative expansion. A largely rigid system of allocating members to funds gave the health insurance funds a de facto guaranteed existence. Even under these conditions the funds attempted to avoid raising the level of contributions, but that said, the negative effects of any increases on the fund itself were limited.

2.2 Paradigm Change in Health Policy: The Transition to Competition--centered Structural Reforms

A really fundamental change in health policy did not come about until the first half of the 1990s. The background was an accumulation of problems both in the social environment in which the health system operated and within the statutory health insurance system itself: the sharpening of international economic competition, the recession and the accompanying increase in unemployment that followed the reunification boom, and a strong increase in spending in the statutory health insurance system. At the same time the failure of the 1989 Health Reform Act (Gesundheitsre-formgesetz) (trumpeted as...

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