A long farewell to the Bismarck system: incremental change in the German health insurance system.

VerfasserGerlinger, Thomas

1 Introduction

Germany's health insurance system represents the archetype of the health-care arrangement generally known as the "Bismarck model". In the decades following its establishment in 1883 it served as the model for numerous other states setting up and designing their own health systems. Nations in continental western and central Europe were first to follow the German example, later joined by countries in Asia and Latin America. Since the collapse of the communist bloc, elements of the German-style health insurance system have come to play an important role in many central and eastern European states. In international comparative research the Bismarck model is identified today as one of three or four classic types of health system (e.g. Wendt 2008). For all the differences of detail, health insurance systems are characterized by the following shared core elements:

- Healthcare is managed by self-governing corporatist bodies, where a distinction must be drawn between self-government of the sickness funds by their members and employers and self-government of healthcare services in the sense of the state delegating to sickness funds and service providers (corporatist partners) the authority to flesh out the details of a broad policy framework (collective negotiations and collective agreements play a central role here).

- Healthcare is funded primarily by income-related contributions, not by taxes.

The health systems of the OECD countries have been in a dynamic transformation process since the early 1990s, and Germany is no exception. Change in the German health system has proceeded at a pace and to an extent that would have been almost inconceivable just a few years ago. We currently have a situation where elements of different systems exist side by side. In this contribution we argue that this transformation has already robbed the core elements of the Bismarck system of a great deal of their importance, and that it must be expected that their significance will continue to decline as the reform process progresses--probably to a point where they will be only a marginal factor in a health system that is fundamentally shaped by other structural elements. Further, we argue that the underlying paradigm shift for system transformation was accomplished in the first half of the 1990s by the Health Care Structure Act that came into effect in 1993, but that since then restructuring has been more a process of progressive incremental change. The decisions of policy-makers are shaped by two factors whose inherent dynamics lead away from core elements of the Bismarck system: a strategic health policy paradigm that strongly prioritizes economic incentives (especially competition mechanisms) and pragmatic problem-solving in situations arising from earlier health policy reforms ("muddling through").

In the following we will first describe the basic thrust of the health policy transformation, before turning to the aforementioned core elements of the Bismarck system and the reasons why their importance has declined since the early 1990s. In a concluding section on the outlook for the future we explain why the process of sidelining these core elements is likely to continue.

2 The Transformation of the German Health System

At the heart of the health policy transformation is the goal of reducing public spending on health and with it the financial burden on employers--whether in the form of taxes or social security contributions--in order to enhance their competitiveness in an increasingly globalized economy. The first efforts to contain costs began as the Fordist growth model expired around the mid-1970s, but these were largely restricted to cautious modification of existing structures (e.g. Rosewitz/Webber 1990; Alber 1992; Rosenbrock/Gerlinger 2006). Efforts concentrated on limiting administrative spending, a moderate shift of treatment costs to patients and minor corrections to the existing regulatory system. A series of cost-containment laws passed after 1977 left the inherited structures of financing, care and regulation largely untouched. The measures adopted in this period included attempts to encourage service-providers to restrict spending through modifications to the reimbursement system and a cautious strengthening of the funding bodies (sickness funds). This era was characterized by an expansion of corporatist regulatory powers with the goal of enabling the collective organizations of sickness funds and service providers to urge their members to contain costs (Dohler/Manow-Borgwardt 1992a). Overall, however, this structurally conservative policy was unable to effectively curb rising contribution rates in the statutory health insurance system (Rosenbrock/Gerlinger 2006: 113--17).

Fundamentally, the existing incentive structures remained unaltered in an environment of revenue-led spending policy. Fee-for-service in the ambulatory sector and the principle of cost-coverage in the hospital sector continued to provide incentives to expand volume, while on the funding side the sickness funds enjoyed a de facto guarantee of continued existence through the largely rigid system of assigning members mostly according to their professional status. Their competition for members was restricted to the minority of members who were permitted free choice of fund (primarily salaried employees and voluntary members; Enquete-Kommission 1990: 358--465). Of course even under these conditions sickness funds strove to avoid increasing contribution rates--but the negative repercussions of increases remained predictable and containable. To that extent these traditional cost-containment policies were characterized by the contradiction between a global goal of stability of contributions and the financial incentives for individual actors.

At the beginning of the 1990s about 90 percent of the population was members of a statutory sickness fund, while the remaining 10 percent had private health insurance and were subject to the principles of the insurance market. The state granted members of the statutory sickness funds almost unrestricted access to healthcare services. The statutory sickness funds were financed exclusively through contributions representing a fixed percentage of the gross wage or salary (until a set upper limit was reached) that were paid in almost equal parts by employers and employees. Non-working spouses and children were (and still are) co-insured without extra charge. At this point funding of the statutory health insurance system was channeled through about 1,100 health funds, most of whose compulsory members were assigned to them automatically, generally on the basis of their professional status (Enquete-Kommission 1990: 358--465). Care was based on the outstanding position of office-based doctors. In ambulatory care patients had the right to consult any doctor they chose, whether general practitioner or specialist. Outpatient treatment in hospitals, on the other hand, was permitted only in a few exceptional cases (Simon 2008).

The regulatory system at the beginning of the 1990s was characterized by a complex mix of management types (Alber 1992). Each healthcare sector had its own regulatory system with its own particular mix of state, corporatist and free-market elements. Hierarchical state management elements dominated the hospital sector, corporatist elements the ambulatory sector and competitive elements the pharmaceuticals sector (Rosenbrock/Gerlinger 2006).

The German health service was characterized by a legislative framework within which the state delegated far-reaching powers to corporatist management bodies made up of equal numbers of representatives of the sickness funds and the doctors or hospitals ("collective self-government") to negotiate the details of implementation and regulate price, quantity and quality of services in binding collective agreements (Gerlinger 2002). The state maintained oversight over these associations and institutions, but allowed them a great deal of latitude.

In ambulatory care the collective bodies representing the sickness funds had to negotiate agreements with the regional associations of statutory health insurance physicians, which held the monopoly on representing the interests of office-based doctors. In the hospital sector, on the other hand, the collective bodies representing the sickness funds signed contracts with each individual hospital. Here too they had an obligation to contract with any hospital the state health ministry included in the state hospital plan. Through their duty to prepare a hospital plan and their influence on national legislation affecting hospitals the states played a key role in shaping hospital care (Simon 2000).

The sickness funds managed their own affairs through self-government by representatives of employers and members, within a framework set by the state and under state oversight. Among their most important powers was independently setting their own contribution rate.

For years the German health system was regarded as largely unreformable. Various different reasons were cited for this: the power of organized interests in the health system, the necessity to form coalition governments (where the Free Democratic Party, especially, was able to water down or even prevent reforms that would have weakened the position of service providers) and the strong position of the states in the reform process, which above all blocked restructuring of the hospital sector (e.g. Rosewitz/Webber 1990; Simon 2000).

Structural reform in the health system--in the sense of measures to bring about a--redistribution of powers and responsibilities relating to the funding, provision and regulation of medical services" (Webber 1988: 157)--was not initiated until the early 1990s. It was in the subsequent years that health policy developed the dynamism that continues to the present day. This trend can also be observed in many other health systems outside...

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