the German Patient

Who Pays for Rising Health Care Costs?

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Because of hospital reforms, payments to hospitals and clinics will increase in most parts of Germany.
  • Why it matters

    Why it matters

    The growing costs of maintaining Germany’s expensive health care system could pose a threat to its global competitiveness, as businesses would need to help pay the bill.

  • Facts

    Facts

    • The latest health care reforms may add an extra €40 billion to Germany’s health budget by 2020.
    • In some parts of Germany, overcapacity means a quarter of all hospital beds are empty.
    • Employer health insurance contributions were frozen in 2010 but employee contributions have continued to rise.
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    Audio

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The new year kicked off with a number of new laws in Germany, perhaps none so sweeping as the 10 new regulations affecting health care provision in the country. They include a substantial reform of hospitals, expansion of long-term care insurance and better provision for patients with chronic pain.

The health minister, Hermann Gröhe, a member of Chancellor Angela Merkel’s Christian Democrat party, said the reforms were intended to provide “optimized care” for the more than 70 million people covered by the country’s statutory health insurance companies.

While the new mandatory provisions are good news for health insurance customers, insurance companies are less than pleased with the prospect of large cost increases.

“The health system was flush with cash in recent years, but politicians wasted the opportunity,” said Martin Litsch, the new national chairman of the AOK, the largest group of statutory insurance companies. “They failed to implement real structural reform. Now there’s a lot less money coming in, but the spending floodgates are wide open, and will be for years.”

Mr. Litsch knows what he’s talking about. For nearly 10 years, he was head of the AOK in the industrial Ruhr area, one of the largest of the insurance company’s regional subsidiaries. There, inefficient reforms pushed through by Berlin have led to 25 percent of hospital beds lying empty.

“The health system was flush with cash in recent years, but politicians wasted the opportunity, failing to implement structural reform.”

Martin Litsch,, AOK National Chairman

“Inefficient structures cost a huge amount of money,” Mr. Litsch told Handelsblatt. “That could be better spent elsewhere. And things look likely to get worse.”

Because of Mr. Gröhe’s hospital reforms, payments to hospitals and clinics will increase in most parts of Germany, according to Mr. Litsch. “Soon we’ll pay even more for unnecessary hospital beds,” he said.

Mr. Litsch is known as a frugal manager who has taken a dim view of Germany’s lavish spending on health in recent years. He blames Berlin for most of the errors made. “The first serious mistake was made by Mr. Gröhe’s predecessor,” he said. “In 2011, he increased mandatory health insurance contributions to 15.5 percent of taxpayer’s salaries.”

These contributions are jointly paid by employers and employees. Their increase, and the booming economy, led to plenty of cash for public healthcare funds.

“We had three straight years of surpluses for the statutory insurance companies; healthcare companies saw that and started getting greedy,” Mr. Litsch said, adding that politicians have been giving healthcare companies everything they’ve asked for over the past two years. “Given the overall national budget deficit, the only word for that is negligence.”

As an example, Mr. Litsch pointed to Mr. Gröhe’s hospital reforms, which were meant to get rid of excess hospital capacity. “But in the end,” Mr. Litsch said, “we got a reform that will bail out failing clinics, the ones close to bankruptcy because they are just not needed.” Hospitals in former East Germany,  he added, were thoroughly reformed during German reunification, but in the West, nothing similar took place, and now another chance had been wasted.

 

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Doctors’ fees are expected to continue rising. Source: Patrick Pleul/DPA

 

One glimmer of hope might be new structural funds, intended to convert underused hospitals into out-patient treatment or rehabilitation centers, but Mr. Litsch has his doubts. “There’s a risk they will just change the names and carry on as before,” he said, also expressing his skepticism about new national quality criteria, which will supposedly winnow out weaker hospitals. “This may be just another way of putting things off,” he said. “We already have the metrics. We just haven’t used them.”

To make things worse, doctor’s fees, which have risen repeatedly in recent years, will go up even further in 2017. There is only one solution, according to Mr. Litsch. “We need a serious change in direction. Only real structural reform can stabilize taxpayer contributions while ensuring high-quality care,” he said.

Health economists largely agree. “When it comes to hospitals, we are paying for over-capacity. And at the same time, we aren’t investing enough,” said Jürgen Wasem, an economist specializing in the health sector. It may be true, he added, that a prosperous and aging society should pay more for its health, but that should not mean “simply waving through inefficiencies.”

Mr. Gröhe has made some good efforts to improve the quality of care, according to Andreas Beivers from Munich’s Fresenius University of Applied Sciences. But in a report published shortly before the new hospital reforms, he warned that these efforts could be undermined if too much money were thrown at the hospitals. And that is exactly what happened, due to pressure from the powerful hospital lobby. Overall, Mr. Beivers is critical of the health minister, whom he said has “barely begun” to put health financing on a solid, demographically-sound footing.

Hospital overcapacity is only one of the structural imbalances plaguing the German health care system. Spending on outpatient medical care is also sharply increasing, up €11 billion, or $12 billion, this year alone, according to figures from the Federal Social Insurance Authority. This will surely result in additional contributions being levied on individuals, possibly a further 1.8 percent on incomes by 2019.

“I doubt if individuals will get real value for that extra money,” said Doris Pfeiffer, chair of the association of statutory health insurance companies, BKK. “The government has simply failed to implement structural reform, especially with hospitals.”

Studies carried by the Rhine-Westphalia Institute for Economic Research, RWI, suggest that Mr. Gröhe’s reforms may mean additional costs of €40 billion by 2020. “Gröhe is probably the most expensive health minister this country has ever had,” said Boris Augursky, a health economist at the RWI.

Günther Neubauer, head of the Munich-based institute for health economics, IfG, is also critical of the health minister. “Gröhe makes use of high surpluses and reserves, and he has let spending off the leash,” he said.

Mr. Gröhe seems serenely indifferent to his critics. His spokeswoman was unapologetic. It was very much in the interests of health insurance customers to have better care for the seriously ill, more nursing staff in hospitals and the quick introduction of new drug treatments, she said. Anyone who criticized health costs, she added, should be clear on what cuts they are proposing.

“Gröhe is probably the most expensive health minister this country has ever had.”

Boris Augursky, Health Economist, RWI

In the current financial climate, higher individual contributions seem unavoidable. In his next round of reforms, Mr. Gröhe will inevitably have to face up to the finances of health care.

The serious political fighting over health funding may have already begun. Some members of the center-left Social Democratic Party, the smaller partner in the ruling coalition government with the conservative Christian Democratic Union and the Christian Social Union, are pushing to increase employer contributions to the statutory health care system. These were frozen in 2010, leaving employees to pick up the cost of increased healthcare spending through higher individual contributions.

Mr. Gröhe wants to keep the freeze on employer contributions. But with a federal election due next year, the Social Democrats may be tempted to play a populist card. Some in the party are already making this case. Hilde Matheis, SPD parliamentary spokesperson on health, is one of them. “Employees are the only ones paying higher contributions,” she said. “Conservative rhetoric can’t conceal that fact.”

Numerous companies have reacted with anger to a possible increase in their contributions. They argue that they are already contributing extra by continuing to pay the salaries of employees who fall ill. And the country can simply not afford to load more costs on business if it intends to stay competitive globally.

 

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Peter Thelen writes about social security systems, the job market and labor topics. To contact the author: thelen@handelsblatt.com

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