I had the opportunity to attend a swanky event hosted by the California HealthCare Foundation with the German Minister of Health, Ulla Schmidt. Through a UN-like interpreter service, Ms. Schmidt described recent reforms that the country has taken to try and control skyrocketing costs.
Unlike some of their European counterparts that have universal healthcare system controlled by a central government entity, Germany’s system is based on coverage through private non-profits that arose out of sickness funds created in the late 1800s, that compensated workers in certain professions (who were required to pay into the system) from losing income when they got sick. Still, with this decentralized (and privatized) healthcare system, the country manages to cover 90 percent of its citizens.
As a result, Germany is struggling with many of the same issues of a private health care system that we are here – including the balance between regulation and encouraging free-market competition.
Perhaps we can borrow from lessons Ms. Schmidt has learned:
“Whoever calls for more competition in health services will usually not want that principle applied to themselves.’’
The system is now a patchwork of 292 sickness funds (down from 1,200 a decade ago) and workers can choose to move between the funds. The funds are required to contract with any applicant (guaranteed issue!). The result has been that younger, healthier and wealthier have fled to “sickness funds’’ that are cheaper (sound familiar?).
The way they’ve chosen to deal with this, Schmidt said, is that just this year, the federal government is starting to pool together all the contributions and distributing to the sickness funds based on the make-up of each funds subscriber base. So if one sickness fund has sicker people, then they’ll get enough money to assure that those people get proper preventive and maintenance care. This, Schmidt hoped, would take away the incentive for sickeness funds to design plans that attracted healthier people – AND reward efficient funds.
Funds that could take care of their members well – keep them healthy with existing dollars – would be rewarded. If they really used their money wisely, then they’d be able to refund subscribers
On the other side, inefficient funds that ran out of money would have to ask their subscribers for additional money. Those subscribers would then become disgruntled and be free to move to another plan.
Additionally laws in Germany require coverage and contribution based on income, mandate a very high level of benefits, and protect consumers from having to pay too much out of pocket already. We don’t have that here. But Schmidt said that’s the role that government plays – to assure those rules are followed.
In a sense, that’s what we’re trying to do this year: create more rules.
It was encouraging to hear from Schmidt, who presented ideas we might be able to borrow from.
Germany, however, has a very strong sense of solidarity among its citizens, that I’m not sure exists in all parts here, that could be more of a barrier for us. “Everybody has to contribute from their income to the health care system. That’s the principle. The healthy pay for the sick. The young pay for the old. The people with no kids pay for people with kids. That is the system.”