HANDELSBLATT EXPLAINS

Why Germans Love Their Health Insurance

US German healthcare Getty Images
Why not move to Germany? Credit: Getty Images

For the better part of a decade, the United States has fought a fierce partisan battle over whether Americans are entitled to a service that people in Germany and many other industrialized nations take for granted: universal, comprehensive health insurance. This debate touches a society’s core values. Many Americans struggle to reconcile their convictions about personal freedom, individual responsibility and the free market with a humanitarian imperative to ensure that no sick person goes without medical treatment because they cannot afford it.

In Germany, health insurance is not a partisan football. Germans believe strongly in a value rarely mentioned in the political discourse in the United States: solidarity. This principle is the foundation of Germany’s statutory health insurance system, which in turn is the cornerstone of a social democracy that values equality as much as personal freedom.

What does solidarity mean in the context of health insurance? Germany’s largest health insurer, AOK, defines it this way: “The wealthier pay for less well-off citizens, the younger for the elderly, singles for families, and often, men for women.” As a result, almost nobody (less than 0.1 percent of the population as of 2015) lacks health insurance. And 84 percent of Germans like the system, according to an April 2017 survey by the pollster Forsa and the health insurer TK.

Around 85 percent of Germans are insured through the public, statutory insurance program that has its origins in Bismarck’s 1883 law.

The German system is nearly as old as Germany’s modern statehood. In 1871, after waging war in Europe to unify more than two dozen German-speaking principalities into a new state, Otto von Bismarck faced the task of consolidating Germany’s institutions at home. Confronted with rising agitation among the working class, Bismarck sought to defuse this “social question” and to win the loyalty of the proletariat. So he passed a raft of social insurance measures, including an 1883 law that required laborers to insure themselves through sickness funds. Laborers paid two-thirds of the costs of their insurance, employers paid the other third.

Bismarck was no progressive and he was certainly no socialist. He was a deeply conservative, authoritarian Prussian nobleman who banned most forms of socialist political activity and sought to limit the power of parliament. But as a practitioner of Realpolitik, he viewed social insurance programs as good statecraft to maintain social stability and to avert class warfare.

Despite Germany’s turbulent history, its health insurance system is one of its few institutions that has largely survived intact since the days of Bismarck. Today, around 85 percent of Germans are insured through the public, statutory insurance program that has its origins in Bismarck’s 1883 law.

Germans choose their primary care physicians, specialists and the hospitals they visit. In the German system there is no conflict between personal freedom and solidarity.

Though mostly public, the German health insurance system is not a state-run system like the National Health Service in the United Kingdom. In fact, more than 100 different health insurers, known as sickness funds, compete for members in Germany’s comparatively decentralized system. These sickness funds are non-profit, non-governmental organizations that operate autonomously.

The government does play a key role in setting standards. For example, all sickness funds are required by law to offer the same comprehensive benefits package, which covers virtually all health care needs. But it is a non-governmental body, the Federal Joint Commission, which decides what benefits are covered. The commission has 13 voting members, including 5 from the sickness funds, 5 from doctors and hospitals and 3 neutral members. The German system is thus not state-run. Nor, however, is it a private, for-profit system like America’s. The sickness funds are non-profit organizations, and generally speaking, no money is exchanged at the point of service when Germans go to the doctor.

Most Germans’ health insurance contributions are deducted from their paychecks by their employers. The amount, however, is capped at 14.6 percent of a person’s salary, split fifty-fifty between the employer and the employee, so 7.3 percent each way. But coverage is not dependent on the employer, so when Germans change or lose their jobs, nothing changes in their health insurance. Premium contributions, moreover, cover the full range of benefits. Co-payments do exist in Germany, but they are limited. For example, Germans have to pay €10 per quarter for outpatient care, between €5 and €10 for prescription drugs and €10 a day for hospital stays.

The sickness funds do not limit which doctors their beneficiaries can see, as is often the case with private health insurance in the United States. Germans choose their primary-care physicians, specialists and the hospitals they visit. In the German system, therefore, there is no conflict between personal freedom and solidarity.

Because the contributions are higher, patients with private insurance are a more lucrative business for doctors. As a consequence, they often receive service faster.

Though Germans are overwhelmingly satisfied, Bismarck’s system does face challenges in the 21st century. As in other rich economies, health care costs are rising in Germany as the population ages. In 2015, Germany spent €4,213 per person on health care, which adds up to 11 percent of gross domestic product. To deal with rising costs, the government has started subsidizing the sickness funds with tax money to the tune of €14.5 billion this year.

Private insurance exists but is controversial. Anyone who makes more than €57,600 a year can opt out of the public system and purchase a private policy. Nearly 9 million people have done this. Because the contributions are higher, patients with private insurance are more lucrative for doctors. As a consequence, they often receive service faster. An 2013 investigation by the news group Welt N24 found patients with public insurance often had to wait weeks longer to see a doctor.

Hoping to remove such disparities, the left parties in German politics have called for a sweeping reform that would in effect abolish the private insurance system and cover everyone in Germany under the public, statutory system. Frank Ulrich Montgomery, president of the German Medical Association, the main doctors’ organization, argues that this would lead toward a system of state medicine with rationing and long wait times. Proponents of the reform say that doctors simply don’t want to lose the extra profits.

Proof, in other words, that healthcare is controversial all over the world. And yet Germans could not imagine discussing healthcare with the bellicosity and hysteria that Americans bring to the subject.

Spencer Kimball is an editor with Handelsblatt Global. To contact the author: s.kimball@extern.handelsblatt.com.