German cabinet approves health system overhaul

November 8, 2006

Free Market Foundation

The German government’s cabinet approved a plan to overhaul the state health care system which costs 140 billion, or $176 billion, and is among the world’s most expensive, with only the United States and Switzerland spending more on health care per capita. The plan has been opposed by economists and doctors, says the Wall Street Journal.

Most aspects of the bill, which requires approval by parliament, are to take effect on April 1. The “health-care fund,” which launches a new distribution of money between the 250 health insurers, will start in 2009:

Germany’s aging society is expected to boost health-care costs in the years ahead, with the risk that the country’s labour costs will rise, since insurance contributions are traditionally split between employees and employers.

The bill aims to slow growth of insurance premiums paid by employers and employees, but the premiums still are expected to rise to around 14.7 per cent of employees’ gross income from the current 14.2 per cent, according to the government.

The overhaul also aims to fix insurance contributions from 2008. Insurers can demand extra payments if their costs exceed their intake; those extra contributions will be limited to 1 per cent of household income, according to the government.

Analysts, however, have said the measure doesn’t bring costs under control and is too bureaucratic:

Funding of children’s health insurance will be financed partly with taxpayer money, which should rise to 3 billion ($3.8 billion) in 2009 from 1.5 billion ($1.9 billion) in 2008 and further in the years ahead. It’s unclear how this will be funded.

Under the bill, drug prices won’t be fixed, but there will be price caps in a bid to boost competition and reduce costs when negotiating prices with pharmaceutical companies.

Source: Andrea Thomas, German Cabinet Approves Health-System Overhaul, Wall Street Journal, October 26, 2006.

For text (subscription required): http://online.wsj.com/article/SB116181295317303877.html

For more on Health Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=16

FMF Policy Bulletin/ 31 October 2006