Forming and reforming the market for third-party purchasing of health care: a German perspective

Abstract

Germany is known for its comprehensive health care coverage by sickness funds and private health insurers and its successful cost containment policy. The stabilization of health care expenditures as a percentage of GNP was enforced by five cost containment laws since 1977. The last one became effective in 1993 and the next ones are planned for 1996 and 2000. The 1993 law has initiated drastic changes of the system. Office based physicians will be paid by a mixture of capitation, fee-for-service and fees for combined service packages. The hospital financing will be transformed from the current per diem remuneration to a payment system where per diems are combined with payments based on diagnostic related groups and patient management categories. Up till now many restrictions exist for insurees to switch sickness funds. These limitations were removed by the 1993 law. To allow unbiased competition between sickness funds, a risk compensation pool, some kind of statutory reinsurance, will transfer financial resources from sickness funds with good risk structure to those with many bad risks. In many respects health policy has imposed what health economists have recommended for a long time. However, there is some doubt whether increased competition will really increase efficiency of providing medical care because it takes place in a highly regulated market.