Home > Outreach > American & German Healthcare : Ulla Schmidt - Universal Healthcare?
Health Policy and Health Economics in Germany
Speech by Ulla Schmidt, German Federal Minister of Health
on the occasion of her visit to the United States of America
Minneapolis,
June 5, 2006
Ladies and gentlemen,
I am really delighted to be with you here today. Thank you very much for giving me the opportunity to be here and give a short overview of the current discussion about the health care system and further health care reform in Germany.
By any account, health policy is one of the most important fields of policy. It is equally important in the United States of America as it is in Germany or anywhere else in the world.
Health, and of this I am firmly convinced, constitutes an indispensable basis for the wealth of a nation and for the well-being and happiness of its people. There is no other policy field where hopes and aspirations, concerns and fears play such a great role as in health policy. Regardless of how comprehensive any health care system might be, as a normal citizen you will always feel it's not quite enough.
And that is why there is hardly any other political office that is subject to so much permanent criticism from the public as that of a health policy maker.
The American economist Uwe Reinhardt, who was born in Germany, and with whom some of you may be familiar, ventures the hypothesis that health ministers must have done some really awful things in their past lives. Otherwise they wouldn't be appointed minister of health.
Ladies and gentlemen,
After more than five years in office, I am now the longest-serving health minister in Europe. I'm not so sure about this, but according to Uwe Reinhardt's logic, in one of my past lives I must have done something worthy of a Greek tragedy. Nevertheless, I can assure you that I still enjoy my work.
Although the USA and Germany have different approaches in health policy, I am convinced that each of us can learn and benefit from each other's solutions. After all, in a globalised world, it is not only the markets for goods and services that have moved closer together, but the competition on the marketplace of ideas is proving to be stimulating and fruitful as well.
In both your country and mine, the health care system is a vital—and highly sensitive—sector of the economy. In Germany, roughly 290 billion dollars are spent every year on health services in the broadest sense; about 175 billion dollars out of this total are accounted for by the statutory health care system.
Approximately 70 million out of a total population of 82 million people are covered by the social health insurance system, to which they pay a percentage of their wages and salaries as contributions. At present, employees pay an average 7.5 per cent of their salary for health insurance coverage. Their employers contribute 6.6 per cent but will have to continue payment of wages for 6 weeks in case of illness.
Our statuary health insurance is a family insurance, meaning that children and non employed spouses are co-insured free of charge. The principle is that the rich pay for the poor, the young for the old, the healthy for the sick. Blue and white-collar workers who earn less than 4,700 dollars a month, are insured on a mandatory basis, as are persons who are unemployed, pensioners, students, disabled persons, poor and homeless people. They are all covered in the statutory health insurance system according to the same provisions and enjoying equal access to health benefits and services.
Our funding of statutory health care and the access to it are based on the concept of solidarity. This means that contributions are made according to ability to pay and people receive benefits according to their health care needs.
Individuals with an income above 4,700 dollars per month or those who are self-employed, can either stay in the social system on a voluntary basis or opt out and purchase private health insurance. Some 10 percent of the population are privately insured and only a small number is covered by special state programmes (for example federal policemen or soldiers).
Members of a private health insurance pay premiums that reflect their health risk. Bad risks are turned down by private health insurers. However, in Germany, only a relatively small number of persons—about 300,000—are uninsured. These are mostly people who have been unable to pay their contributions due to financial difficulties.
We worry about the fact that their number has been growing. Therefore the new Federal Government has decided that, in the future, no one may lose their insurance coverage. Persons who lost their coverage because they were unable to pay their private health insurance premiums, are to be given a right to reinstatement without a new risk assessment. I consider this as an extremely important step towards the system which I favour—one of mandatory insurance for everyone living in Germany.
Insurances in Germany offer a comprehensive package of services. They cover, for instance, outpatient and hospital treatment, all necessary medication, dental treatment, denture, as well as rehabilitation. In other words, they cover whatever is necessary.
The health care sector in Germany supplies safe and well-paid jobs for more than four million people. And both in your country and mine, the health care sector accounts for far more than ten per cent of the gross domestic product. Only Switzerland and France can compete with us here on a per capita basis. While this figure is an indicator of material wealth, there is also a downside to it.
Rising expenditure leads to higher contributions and thus to economic difficulties—in the US as well as in Germany.
Rising contribution rates lead to reduced real earnings, they raise the non-wage labour costs, weaken the investment capacity of companies and impair their competitive capacity as compared to abroad.
Back home in Germany however, it is not only the employers who view rising health insurance expenses as an economic threat. Employees themselves are not happy either when contribution rates or premiums go up. After all, these increases eat up their disposable net income and force people to cut down on other purchases.
This, and the advancements in medicine, pharmacology and medical technology along with demographic, social, and economic change will increase pressure for further rationalisation measures on our health care system. Services provided under statutory health insurance therefore need permanent monitoring as to their medical necessity, quality and efficiency. And that is where the real trouble starts.
How can we meet these challenges for cost control?
For one, all industrialised countries are facing demographic change. There can be no doubt that with aging a moderate increase in health spending is inevitable. Medical progress, too, is a source of added expense. Finally, it is obvious that rising wealth also leads to greater health needs and demands.
Does that mean that we face a no-win situation? Are we even headed for disaster, as some proclaim?
I do not believe one word the doom-mongers say. It is, indeed, possible to manage trends in health care expenditure and to guarantee high quality health care for all at affordable prices. The prerequisite, however, is that policy-makers do not allow their good intentions to be co-opted by lobbyists.
As you can well imagine, there is no shortage of powerful health lobbyists either in the US or in Germany. The pharmaceutical industry, in particular, spares neither costs nor efforts when it comes to influence politicians.
Now, what can a forward-looking funding of health care services look like?
The Achilles heel of Germany's social health insurance is the fact that contributions are exclusively wage-indexed. Health insurance contributions are only charged on earned income or its replacement (such as pensions). Other types of income have been disregarded so far.
Precisely this is the topic of the discussion currently being held in our bi-party government. While the Christian Democrats wish to replace the income-dependent contribution with a standard premium (supplemented by state subsidies for low-wage earners), at least for those persons covered by the statutory health insurance, we Social Democrats want to maintain income-related contributions. But we want all citizens to pay contributions and contributions to be paid from all kinds of income. As you know, it isn't easy to find a compromise.
However, where will the money come from in the future? Who will pay, and how much? Finding answers to this questions is among the most challenging topics on the agenda of the current coalition Government. The details have yet to be hammered out in the course of tough negotiations.
To begin with the coalition parties do agree on the aims.
The reform must:
• stabilise the financing of the health care system,
• ensure that burdens are shared and the reform must
• reduce labour costs and thus help to boost the competitiveness of our national economy.
I am sure we shall find a practical solution to combine those goals in a substainable health care financing system by July. We have a lot of experience with bi-partisan health care reforms. I can give you some examples.
We already have reformed the hospital sub-sector in such a way that it is interesting for citizens from other countries to seek treatment in Germany. This is already the subject of agreements with insurances from Switzerland, the Netherlands, Norway and other countries. We offer excellent medical care at affordable prices in highly efficient hospitals.
By the way, I don't want to conceal from you that a considerable number of German hospital physicians earned their first merits in the US. And all of us are grateful for this excellent opportunity to learn from you.
Ladies and gentlemen,
This year we will be testing the infrastructure for the electronic health card that is to be provided to all people in Germany as early as possible. The challenger is huge. This IT-System will link 82 million insured, more than 100,000 office-based physicians, round about 60,000 dentists 22,000 pharmacies, 2,200 hospitals and roughly 300 private and statutory health insurers.
The electronic health card will hold all of the life-saving data that are needed in case of emergency. It will allow health professionals to store a medication history and keep a patient record. Thanks to this card, every physician—anywhere in Germany—will have easy access to the health details of their patients and be able to avoid treatment errors. It goes without saying that the storage of these data will have to satisfy the most stringent security precautions.
The e-health card project currently is the biggest of its kind in the world. By providing better information while reducing paperwork, it will help avoid errors, improve quality and care coordination and generate major savings.
Ladies and Gentlemen,
Germany was once known as the world's pharmacy. That was a long time ago. This perception of Germany was linked to the somewhat Biedermeier-style image of the lone, outstanding scientist peering out at the world from behind his thick glasses, undertaking research for the benefit of mankind and discovering morphium and aspirin in the process.
Those days are gone. Germany, however, is in the process of organising its comeback to the ranks of the leaders in the area of health.
Health care policy will always be a choice between conflicting objectives. While it is our aim to promote innovation and economic growth, control of expenditure and cost reduction are also just as necessary. Choices and the need for priority setting are particularly evident in the case of drugs and medical devices in Germany. The area of pharmaceuticals seems to be very "sensitive" to cost increases that cannot be justified by medical reasons alone. I am well aware of the fact that some of our statutory measures are viewed quite critically in the USA and therefore I am more than willing to dwell a bit longer on this issue.
Germany is about the only country in which all statutory and private health insurances pay for each and every newly licensed drug and medical device.
In the case of drugs, the manufacturer is able to set the price freely; neither prices nor profits are controlled—in contrast to other countries. Nevertheless, the statutory health insurance funds in Germany do not reimburse every price demanded by the manufacturer for every product. Only new products that show evidence of a better treatment outcome compared with already existing products are fully reimbursed by the statutory health insurance at the price set by the manufacturer for the duration of patent protection. For all other products, the health insurance funds are allowed to fix maximum reimbursement rates based on the price of comparable products.
Prices for medical devices are generally negotiated between the health insurance funds and the product manufacturers. If they form part of a comprehensive hospital treatment, they are factored into the hospital rates.
On the whole, hospital rates in Germany are now being calculated according to the Australien DRG model. Innovations can be introduced into hospitals immediately without having to overcome any special hurdles. This is taken into account as quickly as possible in the pricing process. In order to further accelerate the process of innovation, special contractual agreements can be made.
I hope that these examples show that Germany takes its responsibility for an efficient, innovative but also affordable health care system very seriously.
Ladies and Gentlemen,
The rules for providers of health care services and health products have also been changed. We liberalised sectoral limitations, we support competition and we promote better quality. For example, it is now possible for non-panel doctors to provide out-patient services at medical care centres—something which was not possible before.
As some of you may know, Germany is the only country that has a parallel structure for specialist care. Specialists are employed in hospitals and at the same time there are well-equipped specialist clinics that provide outpatient care. Our debate on the need for changes to a duplicate, wasteful system was a hefty one! Some opponents went as far as to accuse us of planning kind of a state run, socialist medicine....
Today it is hard not to see the first achievements of the recent German reforms. Medical care centers—i.e. multidisciplinary group practices—are set up all over the country. Today there are well over 420 such centers, with some 1,700 physicians, of which 1,000 work as employees.
Hospitals are beginning to deliver outpatient care. It should also be mentioned that office-based physicians who see themselves as "independent single fighters" do see the current trend towards larger practices and medical centers with growing uneasiness. Nevertheless this trend is a powerful, irreversible one that can no longer be stopped.
Now what can we learn from the US health care experiences? I must say that in Germany, we are very much impressed by your discussions around the concept of Managed Care, particularly its use in the context of integrated care, chronic care management, and disease management programs: we are carefully assessing which elements could be transferred and adapted to our setting.
We have modified a number of American approaches, adopting them in a way that DMPs now constitute a real success factor in our system. Over two million people are already enrolled in Disease Management Programs. We are also fostering competition among all providers wishing to overcome the rigid fragmentation of the health care system.
Those who are willing to participate in the new system—which we call integrated care—receive payments from a special fund. The financial incentive towards more and better integration and coordination of care constitutes a clear proof that new ground has been broken in Germany.
Ladies and Gentlemen,
in Germany, we have granted patients and their advocacy groups a greater say in the health policy decision making process. Whereas in the past representatives of health insurance funds, physicians, and hospitals used to take treatment decisions and decisions on reimbursable services without the participation of those affected, today patient and consumer representatives have a place at the table. This table, a tri-partite entity called Joint Federal Committee, has contributed to considerably improving the transparency, and culture of the decision-making processes. Informed patients who manage their own health status are indispensable partners in a modern health care system—I am firmly convinced of that.
Ladies and Gentlemen,
I never had the dream that the German health care system could be stabilized permanently with a single reform. Health care reform has got to be a long-term, ongoing effort.
In the weeks and months to come, we will thus initiate more proposals for reform. The purpose of these proposals are
- to further increase efficiency in the prescription of drugs, especially of the very expensive ones,
2. to further liberalize medical professional activity and the traditional structures of the German health care system,
3. to strengthen prevention
4. and finally to reorganize the financial basis and the organization framework of the system—probably the biggest nut to crack.
The Government has come to conclude that not only domestic experience and concepts be evaluated. We will also take a thorough look at what is happening internationally, and at what other industrialized countries are doing—and to learn in and from the United States.
So I have come to your country to find out more about new approaches and strategies. I am grateful that the transatlantic networks in the area of the science and practise of health care are closely knit. In fact, they are so closely knit that health policy is no longer looked at on a national level alone. With an intensive and free exchange of ideas and concepts innovative and future-oriented health care policy will be possible.
I cannot offer ready-made solutions to all unanswered questions today, but I can promise that German health policy reform will continue to be exciting and that we shall follow a reasonable path. A reasonable path means that the criteria for further reforms of the statutory health insurance must not be subjected to search of perfection:
- Fair distribution – quality improvement
- Reduction of the wage dependency of financing systems to give incentives for employment,
- Sustainability of financing
These are the guiding principles for the forthcoming reform. Our policy is not made in an ivory tower but we have to base our work on a historically grown system into which millions of people place their trust.
Ladies and Gentlemen,
Our health care systems are dynamic. They are receptive to new methods of treatment. They are open to co-operation among medical specialties. Those who stand still will eventually lose. Those who just look backwards instead of looking ahead will be left behind.
Maybe—who knows—there is another life in the future. And, if I do a good a job in this life, who knows what lies ahead for me.
Thank you for your attention.