|Implemented in this survey?|
Since January 2009, pooling and allocation of funds within the statutory health insurance (SHI) has been carried out by a new entity, the health fund. The Government sets a uniform contribution rate. Drawing on employer and employee contributions as well as on taxes the health fund pays out a risk-adjusted amount for each insured person to each sickness fund. The health fund represents a consensus model and could serve as a stepping stone for further reforms in Germany.
On 1st of April, 2007, the "Act to Strengthen Competition in Statutory Health Insurance" became effective in Germany. The reform introduced several structural changes related to the funding of the German health care system to be effective from January 2009. The main purpose of the health financing reform is to implement a sustainable financing mechanism for the German health care system. The core elements of the reform are:
Since January 2009, a uniform contribution rate, currently (May 2009) amounting to 15.5% of the contributory income, has applied to all German sickness funds. The contribution rate is fixed by the government and can be adjusted whenever at least 95 % of the expenditure of sickness funds cannot be covered by the health fund. The contributions from employers and employees, which are calculated on the basis of contributory income as before, flow into a new centralized health fund together with a subsidy from the government budget. The contribution rate for employees includes a surcharge of 0.9 percentage points. Consequently, insurance payments amount to 7.3 % and 8.2% of the contributory income up to a limit of €3 675 per month (contribution assessment ceiling for 2009), for employers and employees respectively. Dependants (children and non-employed spouses) are insured at no extra cost.
The aim of the government subsidies is to enable the health fund to cover the costs for children's health insurance. The allocations from the government budget of €2 500 million in 2008 and €4 000 million in 2009 for this task do not correspond, however, to the overall costs of insurance cover for children (Göpffarth/Henke 2007). From 2010 onwards, the government subsidy is to increase by €1 500 million per year until it reaches €14 000 million. The increase in government revenues flowing into the health fund is intended to lead to a reduction in the contribution rate and relief for non-wage labour costs.
Following a period of transition when insurance contributions are still collected by the sickness funds, regionally organized collection points are then planned to take over this task. These collection points will receive the entire social security contributions, passing it on proportionally to the bodies responsible for pensions, health care and unemployment benefits. In order to prevent cash-flow problems in case of fluctuations in incoming contributions and unpredictable drops in income throughout the course of the year, both a liquidity reserve for the health fund and an additional government loan are planned.
For each insured person, sickness funds hypothetically receive a uniform flat rate from the health fund. According to the risk-structure of the individual insuree, there are deductions or increases. Since January 2009, morbidity-based categories complement the previously existing risk structure compensation scheme. Hence the morbidity-oriented risk structure compensation scheme (morbi-RSA) aims at more accurate distribution of funds, corresponding to morbidity-related expenditure of sickness funds (c.f. HPM report "Morbidity-based risk structure compensation").
The basic idea behind the health fund, the centerpiece of the health reform of 2007, is to separate the income-based contributions to health insurance from the risk-based allocations to health insurers (sickness funds). A fund structured in such a way is intended to offer more transparency and competition among insurers, as well as less bureaucracy.
Sickness funds that operate efficiently can refund part of their allocations to their insured clients or offer additional benefits. Additionally, if a sickness fund exploits the possibilities for competition within the marketplace regarding new types of medical care (family practitioner model, integrated care, optional tariffs, bonus programs), then it can grant its respective insurees a share in its success and refund some of their insurance contributions. In turn, this sickness fund may become more popular and potentially attract new insurees.
If a sickness fund is unable to cover its costs with the funds allocated to it, then it may levy a surcharge in the form of an income-dependent contribution or a flat rate. This can happen, however, only to a limited extent. Sickness funds may demand a maximum surcharge of one per cent of the contributory income (overburdening clause). Surcharges of up to €8 can be levied without any revision of the level of income and can amount to more than 1 % of the contributory income.
In case a sickness fund has to levy a surcharge or to decrease the amount it is able to refund, it has to notify its insurees of their right to cancel membership under exceptional circumstances. Insurees are allowed to leave their old sickness fund and join a new one within two months of a surcharge coming into force. There are no surcharges for children and co-insured spouses. The local social services departments finance the surcharge for recipients of social security or basic welfare.
Sickness funds, the insured, taxpayers, employers, providers
|Degree of Innovation||traditional||innovative|
|Degree of Controversy||consensual||highly controversial|
|Structural or Systemic Impact||marginal||fundamental|
|Public Visibility||very low||very high|
Degree of innovation: The health fund constitutes a new approach to health insurance in Germany
Degree of Controversy: The health fund in its current form remains highly controversial - a situation which may disappear with time (and tax money).
Structural or Systematic Impact: The health fund and the integral morbi-RSA entail a major reorganization of the financial flows between sickness funds.
Public Visibility: The topic is very prominent among stakeholders and the general public
Transferability: Health funds exist in other countries and transferability is possible to a certain extent.
The 2007 health care reform was passed by the grand coalition of Christian Democrats and Social Democrats, which came into power in September 2005. Reform of the health care system was declared one of the top priorities of the coalition government even though the views of the two coalition partners appeared to diverge fundamentally at the beginning of the legislative period.
The coalition agreement of November 2005 stipulated among other things the following objectives: long-term sustainability of the health care system; protection and creation of employment that is subject to social insurance contributions; more efficiency through competition among insurers as well as service providers; preservation of the pluralistic health care system (statutory and private health insurance); promotion of patient rights and widening of patient choice with regard to providers and insurers (Koalitionsvertrag zwischen CDU, CSU und SPD 2005).
The reform of the health financing system, which entails the creation of the new health fund, was introduced as a response to the financial pressure, arising from ever increasing healthcare expenditures and decreasing revenues. Due to technological progress and an aging population, health care expenditures have been steadily rising over the years.
On the income side, a financial crisis was deemed as unavoidable under the previously existing system (Busse/Riesberg 2004: 210). The reasons for this are manifold. The high level of unemployment in the country narrows the financial base of SHI contributions. Given the demographic and socioeconomic trends in the country, the particular construction of the health financing system based on the pay-as-you-go principle has led to a growing share of wages contributed to social insurance. This in turn is perceived to raise unemployment and decrease economic growth.
The fact that contributions have been based only on income from gainful employment (up to a certain threshold) has led to reduction in the revenues flowing into the statutory insurance system. One explanation for this is that labour is responsible for a steadily decreasing share of the national income, while the share of capital is increasing. Over the last 25 years, revenues from contributions have increased slower than both GDP and health expenditures (Busse/Riesberg 2004: 59).
The shrinking income base of sickness funds has led to frequent deficits and increasing debts. As the sickness funds are not allowed to incur long-term debts they have been forced to raise contribution rates. Rising contribution rates may have increased unemployment, which in turn further diminished the contribution base.
Another reason for the shrinking income base of the SHI has been the possibility to opt out. Civil servants are not covered by the SHI but by private insurance. Self-employed, better-earning, healthier and younger people, as well as singles and double-income earners have incentives to take out private health insurance and avoid the solidarity-based contributions within the SHI, which is financed on a pay-as-you-go basis.
Coalition paper of the grand coalition (Koalitionsvertrag zwischen CDU, CSU and SPD: Gemeinsam für Deutschland. Mit Mut und Menschlichkeit, 11 November 2005)
|Implemented in this survey?|
Within the framework of a grand coalition the challenge of reforming the healthcare system appeared particularly large. The health fund model was seen as a compromise solution between two seemingly divergent reform proposals pertaining to the health financing system: a citizen's insurance scheme, favored by the Social Democrats, and a flat rate premiums scheme for SHI, favored by the Christian Democrats.
The debate about the reform of the German health funding system goes back many years. Two policy alternatives were submitted in 2003 by an ad-hoc commission, the so-called "Commission for financial sustainability of social security systems". This commission, also called the Rürup Commission, was established by the then governing coalition of Social Democrats and the Green Party with the task to develop proposals on how to reform the German social security system (c.f. HPM report "Proposals for SHI reform" survey no: (2)2003).
This reform debate serves as a point of departure for the introduction of the health fund solution. Because of the perceived fundamental divergence between the citizens' insurance and the per capita premiums model, the government agreed on a compromise model. Following the next general elections a new left-leaning government should be able to move towards its desired taxation solution, and a new right-leaning government towards a per capita model.
Against this background, the party leaders saw the consensus model put forward by the scientific committee to the German Ministry of Finance (2005) as a basis for a political compromise. In the original compromise model, income-related contributions are levied for health insurance purposes and then transferred to a central collection point. Every insuree receives a voucher for the same absolute amount, enabling him or her to purchase insurance cover. Each sickness fund is free to fix its own premiums competitively, while obliged to cover all the standard and compulsory services. Private insurance companies have to abide by an obligation to contract if they want to take part in the provision of standard health services.
Every compulsory insured citizen is obliged to take out insurance cover, paying for his or her insurance premium with the issued voucher. Premium surcharges or refunds should enable competition between sickness funds. The scientific committee expected this reform to trigger significant competition between sickness funds, especially in the range and provision of healthcare services.
The compromise solution was intended to serve as a stepping stone for further reform efforts, which could move in the direction of a citizen's insurance (if the pool of insurees is extended to cover the whole population and all forms of income are included in the calculation basis) or a flat-rate premiums scheme (if every insuree pays a uniform, income-independent insurance premium and low-income households are subsidized from tax revenues).
The committee's short statement, published in October 2005, however, did not elaborate upon the compromise proposal in detail, nor did it examine its feasibility, e.g. as regards the implementation of the proposed voucher system.
In the course of the political debate, some aspects of the original proposal of the committee were altered in order to accommodate the political views of the governing parties and the interests of other stakeholders. The concept of a health fund became one of the cornerstones of the health reform of 4th July 2006 and ultimately part of a government bill to reinforce competition within statutory health insurance.
The approach of the idea is described as:
new: The introduction of a health fund constitutes a new approach to health insurance in Germany. The notion of a health fund itself is not a new one. In the Netherlands health insurance has been organized through a health fund for around 70 years.
Government: The coalition government agreed on the health fund model as a compromise solution between the two major reform proposals: citizen's insurance and flat-rate (per capita) health premiums. The two governing parties, however, were divided over the detailed design of the health fund. The integration of private health insurers into the health fund was a major contentious issue. CDU and CSU generally promoted the health fund idea but demanded the maintenance of the pluralistic system of statutory and private health insurance as stipulated in the coalition paper. Moreover, they wanted to freeze employer contributions in order to stabilize labor costs. The left wing of the Social Democratic Party opposed the health fund model, especially the idea to freeze employer contributions and to permit sickness funds to charge a nominal premium in case the allocations from the health fund are not sufficient. They demanded the integration of private health insurers into the new health fund and the abolition of the contribution assessment ceiling.
Scientific community: The scientific committee to the German Ministry of Finance developed the health fund model as a consensus solution and a stepping stone towards further reform efforts. The committee of experts (Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung (SVR)) has criticized some crucial aspects of the adopted health fund version, such as: the retention of the old system of collection of insurance contributions by the sickness funds (SVR 2006: 218) and the particular construction of the health fund in conjunction with the overburdening clause. (SVR 2006: 218-220).
Payers: Representatives of the sickness funds generally opposed the health fund and argued that the health fund would increase bureaucracy. Private health insurers were against the health fund model. They argued that keeping the current pay-as-you-go system would not make the German health care system sustainable in the long run. They also strongly rejected the idea to integrate privately insured people into the fund.
Civil Society: The unions were against the health fund because they feared that the rising costs in health care would be borne by the employees alone. They demanded an increase in tax-financed revenues, integration of private health insurers into the health fund scheme, broadening of the contribution base to include income from capital investments, abolition of the income threshold for compulsory insurance and retention of the risk structure compensation scheme.
Providers: The Federal Association of Statutory Health Insurance Physicians was against the unitary contribution rate and the overburdening clause, because they feared that this would lead to rigorous cost-containment measures from the side of the sickness funds and hence hamper investment in innovative healthcare provision.
|Grand Coalition||very supportive||strongly opposed|
|Federal Association of Statutory Health Insurance Physicians||very supportive||strongly opposed|
|Sickness funds||very supportive||strongly opposed|
|Private health insurance companies||very supportive||strongly opposed|
|Trade unions||very supportive||strongly opposed|
|Scientific committee to the German Ministry of Finance||very supportive||strongly opposed|
|committee of economic experts||very supportive||strongly opposed|
On 1st of April 2007, the "Act to Strengthen Competition in Statutory Health Insurance" (GKV-Wettbewerbsstärkungsgesetz) became effective in Germany. The health fund was introduced on the 1st of January 2009. The final concept of the health fund deviates from the original proposal of health experts and accommodates the political views of the two governing parties in the grand coalition.
|Grand Coalition||very strong||none|
|Federal Association of Statutory Health Insurance Physicians||very strong||none|
|Sickness funds||very strong||none|
|Private health insurance companies||very strong||none|
|Trade unions||very strong||none|
|Scientific committee to the German Ministry of Finance||very strong||none|
|committee of economic experts||very strong||none|
The implementation of the original concept of the health fund was hampered by hefty opposition from the sickness funds associations, which claimed to fear that the health fund would significantly increase bureaucracy (in reality, they also feared a loss of influence and power due to a loss of staff if contribution collection is taken away from them). As a consequence, the legislation ultimately included a clause which stated that the collection of contributions would initially remain unchanged (i.e. businesses still have to transfer the social contributions for their employees to the currently [May 2009] ca. 200 sickness funds) and that the sickness funds would be responsible for transferring payments to the health fund. Hence, the administrative savings, which would have arisen in particular for employers if the latter had to pay the money to just one single collection point, are not yet achieved (SVR 2006: 218).
Monitoring of the health fund is carried out by the Federal Social Insurance Authority, which was also entitled to submit a proposal for the uniform contribution rate. The Federal Social Insurance Authority, furthermore, supports continuous improvement of the morbi-RSA. A systematic evaluation of the health fund and the morbi-RSA is not yet planned.
The centralized health fund is expected to render the flow of financial income and expenditure in statutory health insurance more transparent and equitable. Whereas in the previously existing system approximately 92% of sickness funds' expenditures were subject to redistribution through the RSA (while e.g. administrative costs were excluded) the current RSA starts with 100% in 2009 and will cover at least 95% of expenditures in the future. This is expected to diminish the incentives for risk selection and to increase equity in the SHI. Strictly speaking, an inclusion of administrative costs into the RSA would have been theoretically possible without the health fund, but it was only politically feasible as part of a larger package.
The introduction of the health fund politically enabled the improvement of the risk structure compensation scheme (RSA). The initial RSA equalized differences in income-related contributions and differences in expenditure of sickness funds due to age, sex and invalidity. It did not, however, sufficiently equalize differences in expenditure levels of sickness funds arising from different morbidity structures. Unadjusted differences in morbidity levels were deemed to promote risk selection by sickness funds and hamper efforts to improve quality and efficiency. While the original RSA was later amended to include participation in Disease Management Programmes, it did not become truly morbidity-oriented. Strictly speaking, a morbidity-orientation would have been theoretically possible without the health fund, but it was only politically feasible as part of a larger package.
The introduction of morbidity-based risk structure compensation scheme (morbi-RSA) will lead to a major reorganization of financial flows, as almost half of the €168 billion pooled in the health fund will be redistributed according to a morbidity-based risk adjustment. Increased morbidity-orientation may result in a more patient-centred health care system. It can serve as a stimulus for innovative health care management by challenging the traditional strategy of sickness funds: to attract primarily healthy and affluent insurees. Sickness funds can, for the first time, profit from sick insurees. This paradigmatic shift could significantly enhance quality of care for patients with chronic conditions included in the morbi-RSA (and possibly disadvantage those whose diseases are not included, see also HPM report "Morbidity-based risk structure compensation").
The increase in tax revenues flowing into the health fund will enhance equity by broadening the income base of the SHI. Furthermore, it is expected to strengthen the financial sustainability of the statutory health insurance. Tax-financed revenues are intended to result in relief for non-wage labour costs by lowering employer/employee contributions and hence giving employers incentives to invest in new jobs.
The health fund is intended to give insurees more clarity about the efficiency of individual sickness funds. It enables sickness funds to pass on to their members competitive advantages arising from differentiated service provision in the form of refunds. Refunds and surcharges can be levied in absolute amounts. Employers neither have to pay the surcharge, nor do they gain from the refund offered by efficiently operating sickness funds. Compared to percentage points, many economists claim that the price signal is expected to become clearer and will no longer be distorted by the employer's contribution. This advantage, however, is restricted by the legal possibility of levying an income-dependent surcharge and the limitation of the surcharge to 1% of the contributory income (overburdening clause) (Schawo/Schneider 2006, Henke 2007). It remains to be seen empirically whether the signal is really stronger - especially as higher-income insurees will gain less by changing their sickness fund than under a percentage system. Higher-income insurees in particular were more likely to change funds in the past.
Experts expect 2009 to be a year of transition where many sickness funds will struggle to survive. In the initial stage, cost containment is expected to be the main strategy of sickness funds in order to avoid levying surcharges. This in turn is expected to diminish investments, which in the medium and long term could increase the efficiency and quality of health care (Gress/Wasem 2008: 11). By mid 2009, the first sickness funds are expected to levy surcharges from their insurees. The head of the Federal Social Insurance Authority has hinted that around 4 million insurees may be affected. Financial problems are expected to lead to market concentration.
In the long run, competition between the sickness funds is expected to increasingly focus on services. Because the autonomy to raise the unitary contribution rate is in political hands, the competitive parameters are expected to focus on health care provision (quality, service, monitoring, types of care) and hence on the management of services and costs. Selective contracting with service providers can play an important role in this respect. Participation in new types of patient care like general practitioner models or structured treatment programmes can be combined with surcharge discounts or reimbursements. Non-financial factors, such as a dense network of branch offices are also expected to gain importance in the competition between sickness funds.
Some experts argue that the current construction of the health fund with the possibility for sickness funds to levy a surcharge or pay a refund in conjunction with the overburdening clause could lead to considerable competitive disadvantages (SVR 2006, Schawo/Schneider 2006, Greß/Wasem 2008, Henke 2007). Compared to the overall pool of insured, the members of a particular sickness fund represent a very small and arbitrarily limited group of persons to finance a social balance. A sickness fund with many low-earners which needs to levy a surcharge, might not be able to raise the money to finance its extra expenditure from these low-earners due to the overburdening clause and would have to raise its surcharge overall. This would make that sickness fund unattractive and give insurees with a relatively high income incentive to change the insurer, leaving the financial situation of the sickness fund in an even worse state (SVR 2006: 221).
In order to eliminate these disadvantages, the committee of experts proposed an income balance for the surcharge via the taxation and transfer system or via the centralized fund (SVR 2006: 223-4). In this way, the surcharge would still remain limited to a certain percentage of income. The difference between the amount paid by an individual policy holder and the overall premium surcharge would be covered by general subsidies or the centralized fund. This solution, however, could diminish the incentives for sickness funds to operate efficiently, since premium surcharges arising from inefficiency cannot be decoupled from the compensation payments covered by tax subsidies or the health fund (Schawo/Schneider 2006: 24).
The degree of competitive disadvantages arising from the overburdening clause basically depends on whether there will be any sickness funds which can afford to pay a refund instead of levying a surcharge, and if so how many. Owing to the high significance of a refund relative to the income of low-earners, the motivation for this income group to choose a sickness fund with refunds is expected to be notably high, unlike until 2008 when it was particularly low. The first sickness fund (IKK Suedwest-direkt) started on April 1, 2009 to pay a refund of € 100 per year. Whether this will really motivate a significant amount of insurees to change sickness funds, remains to be seen.
If a sickness fund has to increase its surcharge, it becomes attractive for policy holders to make use of their right to cancel membership under exceptional circumstances, even if they themselves remain unaffected by the increase thanks to the overburdening clause, simply because they are then entitled to change to a sickness fund offering refunds. Hence, the right to cancel membership in the case of a surcharge increase protects members from having to pay the surcharge (Henke 2007: 9).
Another problematic point addressed by the committee of economic experts is the different family structure in the membership of sickness funds (SVR 2006: 222-223). The legislation foresees only the members of a sickness fund and not their dependents paying a surcharge or receiving a refund. Sickness funds with relatively few dependents would be at a competitive advantage regarding a premium surcharge because they could distribute the costs they need to cover through the surcharge among a higher proportion of policy holders. With regard to premium refunds, the opposite would be the case: sickness funds with a relatively high proportion of co-insured family members would be at an advantage because they could pay a higher refund. Therefore, a regulation is to be found which prevents the sickness fund's premium surcharge or refund from being linked to the family structure of its membership.
Finally, the advantages of the health fund become more apparent when considering what the current situation would be like without it: worldwide economic crisis, rising unemployment and a shrinking income base would already have forced many of the sickness funds to increase their contribution rates - and this in the middle of an election season. Instead, as a part of its economic crisis package, the government has earmarked another € 6 billion in tax revenue for the health fund and will decrease the uniform contribution rate to 14.9 % as of July 2009. To compensate for the shrinking income base, the government authorized an additional loan of € 3 billion for the health fund. Many commentators suspect that this loan will never be paid back. It is ironic that the sickness funds were previously admonished for making deficits by the same politicians who have voted for these measures.
|Quality of Health Care Services||marginal||fundamental|
|Level of Equity||system less equitable||system more equitable|
|Cost Efficiency||very low||very high|
Impact on quality of health care services: The overall impact of the health fund on the quality of healthcare services cannot be assessed yet. While competition between sickness funds is expected to increasingly focus on health care provision and the quality of health care services, competitive distortions within the current construction of the health fund are expected to offset such advantages. The morbi-RSA may improve care for patients with certain chronic diseases, but its overall impact on the quality of health care services for the whole population cannot be assessed yet.
Level of equity: The increase in tax revenues flowing into the health fund will enhance equity by broadening the income base of statutory health insurance. The centralized health fund is expected to render the flow of financial income and expenditure in SHI more equitable by expanding the RSA to cover 95 % of all expenditures. The introduction of a morbidity-oriented RSA could lead to a more equitable distribution of funds, corresponding to the morbidity-related expenditure of sickness funds. Competitive distortions within the current construction of the health fund might reduce equity.
Impact on cost-efficiency: Cost-efficiency is not expected to improve. Whereas the original concept of the health fund would have resulted in administrative savings for employers, if the latter had to transfer the money to just one single collection point, the current form of the health fund hinders such savings. Additional costs are expected to arise for the collection of surcharges in conjunction with the overburdening clause.
Busse, R./Riesberg, A. (2004): Health care systems in transition: Germany. Copenhagen, WHO Regional Office for Europe on behalf of the European Observatory on Health Systems and Policies
Expertise der Spitzenverbände der Krankenkassen (2006): Ein Gesundheitsfonds mit Beitragseinzug schafft nur Probleme und baut neue Bürokratien auf, statt bestehende Strukturen zu nutzen.
Göpffarth, D./Henke, K.-D. (2007): Finanzierungsreform und Risikostrukturausgleich - Was bleibt vom Ausgleichsverfahren? In Franz, W. (Hrsg.), Jahrbuch für Nationalökonomie und Statistik, Mannheim
Greß, S./Wasem, J. (2008): Auswirkungen des Gesundheitsfonds und Optionen zur Weiterentwicklung, Policy Paper für die Hans-Böckler-Stiftung
Henke, K.-D. (2007): The health fund: Political and Economic Aspects and its roles as a Competitive instrument, Manuscript
Koalitionsvertrag zwischen CDU, CSU und SPD: Gemeinsam für Deutschland. Mit Mut und Menschlichkeit, 11 November 2005
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Lisac, M./Reimers, L./ Henke K.-D./ Schlette, S. (2007): Access, Choice and Guidance in German Health Care: An account of health policy reforms since 2004, TU Berlin, Wirtschaftswissenschaftliche Dokumentation
Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung (2006): Widerstreitende Interessen - Ungenutzte Chancen, Jahresgutachten 2006/2007, Wiesbaden, S. 213-236
Schawo, D./Schneider. W. (2006): Die Wirkung der Härteregelung beim Zusatzbeitrag im Fondskonzept der Bundesregierung. Eine statistische Simulationsanalyse, AOK-Bundesverband, 24. August 2006
Wissenschaftlicher Beirat beim Bundesministerium der Finanzen (2004): Nachhaltige Finanzierung der Renten- und Krankenversicherung, Schriftenreihe des Bundesministeriums der Finanzen, Band 77, Berlin
Zimmermann, M. (2006): Health financing reform idea: health fund. Health Policy Monitor, June 2006. www.hpm.org/survey/de/b7/1.
Ognyanova, Diana and Reinhard Busse