THE HEALTH CARE SYSTEMS OF GERMANY AND SWITZERLAND

Merely slouching towards “Regulated Competition”

WWS 597 Reinhardt

SOCIAL INSURANCE WITH PRIVATE PURCHASING

SOCIAL INSURANCE

(Ability-to-Pay Financing)

NO HEALTHINSURANCE

Single Payer

Multiple Carriers

PRIVATE INSURANCE

(Actuarially fair premiums)

Non- Profit

For- Profit

THE FINANCING OF HEALTH CARE

OWNERSHIP OF PROVIDERS

Government

Private, but non-profit

Private, and commercial

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

Out-of- pocket

First, some comparative statistics

International Comparison of Spending on Health, 1980–2007

0

1000

2000

3000

4000

5000

6000

7000

8000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

U.S.

Switzerland

Netherlands

Germany

Average spending on health per capita ($US PPP)

Source: OECD Health Data 2009 (June 2009) cited in http://www.commonwealthfund.org/Content/Publications/Chartbooks/2009/Multinational-Comparisons-of-Health-Systems- Data-2009.aspx

International Comparison of Spending on Health, 1980–2007

5

6

7

8

9

10

11

12

13

14

15

1619

80

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

U.S.

Switzerland

Germany

Netherlands

Total expenditures on health as percent of GDP

Source: OECD Health Data 2009 (June 2009) cited in http://www.commonwealthfund.org/Content/Publications/Chartbooks/2009/Multinational-Comparisons-of-Health-Systems- Data-2009.aspx

Percentage of Population over Age 65  with Influenza Immunization, 2007

77.5 77.073.5

69.066.7 64.9 64.3 63.7

58.956.0 56.0

0

10

20

30

40

50

60

70

80

AUS* NETH UK FR US ITA CAN NZ OECDMedian

GER SWITZ

* 2006

a

Source: OECD Health Data 2009 (June 2009).

Percent

34.3

26.5

24.0

15.413.6

11.2 10.5 10.2 9.9 9.0 8.1

0

5

10

15

20

25

30

35

US* NZ UK CAN GER** NETH FR* SWE ITA NOR SWITZ

Obesity (BMI>30) Prevalence Among Adult  Population, 2007

* 2006** 2005Note: BMI = body mass index. For most countries, BMI estimates are based on national health interview surveys (self-reported data). However, the estimates for the US, UK, and New Zealand are based on actual measurements of weight and height, and estimates based on actual measurements are usually significantly higher than those based on self-report.Source: OECD Health Data 2009 (June 2009).

Percent

Potential Years of Life Lost Because of Diabetes  per 100,000 Population, 2007

1925

29313335363637

64

99

0

20

40

60

80

100

US** NZ** NOR* SWE* OECDMedian

GER* NETH ITA* FR* UK SWITZ*

* 2006** 2005Source: OECD Health Data 2009 (June 2009).

Health Care Expenditure per Capita by Source of Funding, 2008 In Purchasing‐Power Parity Dollars (PPP $s)

3,5074,213

2,736 2,863 2,875 2,8692,263 2,585

3,119

467616 648 382

494

912

756

1,424 600 273 487543 605

2,841

35

19788 347

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

US NOR SWITZ CAN FR GER SWE AUS* UK

Out-of-pocket spendingPrivate spending Public spending

* 2007

Dollars

$7,538

$5,003$4,627

$4,029$3,796 $3,737

$3,472 $3,362$3,319

SOURCE: OECD DATA BASE 2010, cited in Anderson and Markovich, “Multinational Comparisons of Health Systems Data, 2010, Commonwealth Fund International Symposium, 2010.

Out‐of‐Pocket Health Care Spending per Capita, 2008  In Purchasing‐Power Parity Dollars (PPP $s)

$232$273

$347$372

$487$492$543$605$600

$756

$912

$1,424

$0$100$200$300$400$500$600$700$800$900

$1,000$1,100$1,200$1,300$1,400$1,500$1,600

SWITZ US NOR CAN AUS SWE OECDMedian

GER NZ UK FR NETH

SOURCE: OECD DATA BASE 2010, cited in Anderson and Markovich, “Multinational Comparisons of Health Systems Data, 2010, Commonwealth Fund International Symposium, 2010.

Dollars

2006

Hospital Discharges per 1,000 Population, 2007

84

109126126135139

162163165166172

227

274

0

50

100

150

200

250

300

FR GER NOR SWITZ SWE OECDMedian

AUS* ITA* NZ US* UK NETH CAN*

* 2006Source: OECD Health Data 2009 (June 2009).

Number of Practicing Physicians per 1,000 Population,  2007

2.2

3.9 3.9 3.93.7 3.6 3.5 3.4

3.2

2.8

2.5 2.4 2.3

0

1

2

3

4

NETH NOR SWITZ ITA SWE* GER FR OECDMedian

AUS* UK US NZ CAN

* 2006Source: OECD Health Data 2009 (June 2009).

Pharmaceutical Spending per Capita, 2007 Adjusted for Differences in Cost of Living

$241

$381$422$431$446$446$454

$518$542$588

$691

$878

0

100

200

300

400

500

600

700

800

900

US CAN FR GER ITA SWITZ SWE OECDMedian

AUS* NETH NOR NZ

* 2006Source: OECD Health Data 2009 (June 2009).

Dollars

Drug Prices for 30 Most Commonly Prescribed Drugs,  2006–07

US is set at 1.0

0.34

0.440.450.490.51

0.63

0.760.77

1.00

0.0

0.2

0.4

0.6

0.8

1.0

US CAN GER SWITZ UK AUS NETH FR NZ

Source: IMS Health.

Drug Prices: Lipitor (atorvastatin), 2006–07 Price for one dose

$0.71

$1.01

$1.35$1.45$1.45$1.46$1.52

$1.83

$2.82

$0

$1

$2

$3

US CAN SWITZ AUS UK NETH GER FR NZ

Source: IMS Health.

Dollars

Drug Prices: Nexium (esomeprazole), 2006–07 Price for one dose

$0.88$1.02

$1.22$1.28$1.32

$1.97$2.15

$3.91

$0

$1

$2

$3

$4

US SWITZ CAN UK NETH FR AUS GER

Source: IMS Health.

Dollars

Magnetic Resonance Imaging (MRI) Machines  per Million Population, 2007

25.9

18.6

14.4

8.8 8.5 8.2 8.26.7 6.6

5.7 5.1

0

10

20

30

US ITA SWITZ NZ OECDMedian

GER UK CAN NETH** FR AUS

** 2005Source: OECD Health Data 2009 (June 2009).

MRI Scan and Imaging Fees, 2009

1,200

839 824

567

436

179

0

200

400

600

800

1,000

1,200

1,400

US GER CAN NETH FR UK

Source: International Federation of Health Plans, 2009 Comparative Price Report.

Dollars

Coronary Bypass Procedures per 100,000 Population,  2007

3132

132

8581

77 76 73 73

59 58 56

45

0

25

50

75

100

125

150

GER US* NOR* NZ AUS* ITA* CAN* OECDMedian

NETH SWE UK FR SWITZ

* 2006Source: OECD Health Data 2009 (June 2009).

A closer look at German health care

THE HEALTH INSURANCE SYSTEM OF GERMANY

A health‐are system with the following features

1.

Mandated, universal health insurance (about 90% in the non‐

profit, private, Statutory Health Insurance  (SHI) system (initiated 

by Chancellor Otto von Bismarck in the late 1880s), and about 10% 

with highly regulated for‐profit private insurers.

2.

A mixed public‐private delivery system with a heavy for‐profit 

component, even among hospitals.

3.

Overall pervasive and tight government regulation at both the 

state and federal levels.

4.

By American standards, relatively low cost.

THE STATUTORY HEALTH INSURANCE SYSTEM OF GERMANY

The system grew out of the self‐help “friendly societies”

established by workers during the industrialized revolution of 

the 1880s.

Became a federal system in 1998 with Bismarck’s RVO – the 

Reichs‐versicherungsverordnung

(Imperial Insurance Decree) 

which survives, after a myriad amendments over time to this 

day.

Originally composed of over 1,000 quasi‐private, non‐profit 

sickness funds with what is called “self‐regulation”, but only 

within the very narrow limits allowed by the RVO. 

THE STATUTORY HEALTH INSURANCE SYSTEM OF GERMANY

Up to an income threshold that has changed over time 

(currently $62,500), all employed Germans were mandated to 

be insured under the SHI. Above the threshold people were 

free to choose private insurance or remain in the SHI or go 

without insurance.

Until very recently (starting in 1992 and fully since 2004) 

people in the SHI did not have a choice of sickness plans, but 

instead were assigned to it on the basis of either craft, 

employer or location.

Until 2004, the payroll contributions to the SHI (shared 50:40 

by employers and employees) varied enormously among 

funds, which brought on the reforms of 2004.

THE STATUTORY HEALTH INSURANCE SYSTEM OF GERMANY

Since 2004, Germans can choose among any of the 200 or so 

surviving sickness funds, at a uniform payroll tax, which 

covers the employee and dependent non‐working spouse, but 

not children, whose premiums are paid by the federal 

government.

Unlike in the US, where patients often are confined to 

networks of providers, Germans have long enjiyed

completely 

free choice of providers.

Premiums paid by the insured now flow through the system 

as follows:

Central health Fund

(Risk Equalization Fund

~ 160 non-profit Sickness Funds

(Insurers)Adult Insured

Providers of Health Care

Federal Government

Uniform payroll contribution of about 15% (and growing) of gross wages shared by employer and employee

Risk adjusted capitation to sickness fund chosen by the insured

DGRs for hospitals; capital from state

FFS for ambulatory physicians

Refrence prices for pharmacies

Premiums for

Children

For unemployed people the Unemployment Insurance fund pays the premiums.

For retired people, their pension fund pays 50% of their premiums; they the rest.

Co-Pays

Federal Ministry of Health

Regulation & supervision

Patient

150,000 physicians and

psychotherapists

Federal Association of SHI Physicians (KBV)

All physiciansGerman Hospital

Federation (DKG)

2,100 hospitals

Federal Association of Sickness Funds

Federal Joint Commitee (G-BA)

Institute for Quality and Efficiency in Healthcare (IQWiG) - technologies

Institute for Quality (focused on providers)

Federal Physicians‘

Chamber (BÄK)

160 sickness funds

Self-Governance under Germany‘s Statutory Health Insurance

Source: Reinhard Busse.

For a more detailed chart on governance, see a separate handout.

THE PRIVATE HEALTH INSURANCE SYSTEM OF GERMANY

Provides full covers less than 10% of the German insurance, but 

supplemental coverage to millions of SHI insured (mainly for 

better amenities).

Premiums at time of enrollment are actuarially fair, but 

thereafter can change by age, regardless of health status.

Pay higher fees to physicians, but also registers higher health 

spending per capita. 

Premiums are per individual, not per family.

People who opt for private insurance cannot ever return to SHI 

unless they are poor.

The industry is heavily regulated by the federal government, 

which sets the fee schedule (e.g., age reserves).

HEALTH‐CARE DELIVERY SYSTEM OF GERMANY

Until very recently, there had been a strict division between 

ambulatory and inpatient care. Hospitals give only limited 

outpatient care.Hospital‐based physicians are (rather poorly paid) salaried 

employees of the hospital whose salary is included in the DRGs.

The insured may voluntarily enroll in GP gatekeeper models at 

favorable premiums.

Ambulatory physicians are self‐employed business people who 

practice in solo (75%) or group (25%) practices.

PAYMENT OF HOSPITALS IN GERMANY

Germany has what is called a “dual hospital financing system.”

The states (Länder) pay for the structures and equipment of 

hospitals, within regional health planning), as role the states 

have jealously preserved for themselves.

The hospital’s operating costs are covered by some 12,00 DRGs

paid by the sickness fund, traditionally within a global budget 

per hospital, but not any more since 2009.

There exists in Germany a new Hospital Payment Institute

that 

updates the DRGs

constantly in light of new medical 

technology.  

Ambulatory‐care physicians are paid on a FFS basis, on a 

schedule of points per service which is then converted to 

monetary units through a conversion factor (€/point). 

Until recently, this system operated within global budgets so 

that the €/point automatically fell if the budget was exceeded.

PAYMENT OF AMBULATORY PHYSICIANS IN GERMANY

The fee schedules now have fixed Euro prices instead of points, but physicians are still subjects to budget caps on an individual basis. Services rendered beyond the cap are reimbursed at a much lower rate.

State-based associations of sickness funds physicians negotiate annually with state-based associations of sickness funds over the overall aggregate payments to the physician sickness fund association (the Kassenärztliche Vereinigungen or KV).

Sickness Funds

Regional Sickness-Fund Physician Associations

(Kassenärztliche Vereinigungen or KV)

GLOBAL BUDGET FOR GPs GLOBAL SPECIALIST BUDGET

General Practitioners Specialists

FFS payment on point system subject to the global budgets.

Aggregate amount, based on risk- adjusted capitation per insured

FFS WITHIN GLOBAL BUDGETS

Since 2009 adjusted for morbidity

Drug manufacturers in Germany can set their own wholesale prices.

The federal government regulates wholesale and retail mark-ups.

PAYMENT FOR PRESCRIPTION DRUGS

Sickness funds pay for prescription drugs on a reference-price system, coupled with rebates for on-patent drugs, which replaced earlier budget caps per prescribing physicians.

From 2011 on, the system is subject to comparative effectiveness analysis.

A closer look at Swiss Health Care

Switzerland 7.5 million people live in 26 cantons, some of which are large cities, other small rural enclaves.

Health insurance is mandated in Switzerland, on a cantonal basis, but within an overarching federal health insurance law passed in 1996. There are few uninsured (about 1.5% of the population).

As in Germany, there are no government-run health insurance programs in Switzerland. All insured purchase coverage from private insurers that cannot earn profits on the mandated benefit package but may earn profits on supplemental insurance.

OVERVIEW

The health-care delivery system is a mixed system, as in Germany.

Governance of the system is highly decentralized, involving federal, cantonal and communal governments.

Mandatory basic health insurance in Switzerland is regulated and supervised by the Federal Office of Public Health under the Federal Health Insurance Act of 1996. It covers about 43% of total national health spending. Long term care is not part of social insurance and is still paid largely privately out of pocket.

For the mandated basic package – which excludes dental care -- insurers can vary the deductible from a minimum of CH300 to a maximum of CH2,500. In addition, a coinsurance rate of 10% applies to all but a few exempt services. Out of pocket spending therefore is very high in Switzerland (30% of total national health spending), although very low-income people receive subsidies from the cantons.

SWITZERLAND’S HEALTH INSURANCE SYSTEM

Nationwide there are over 80 private insurers, although not all of them sell insurance in every canton, and the 10 largest carriers cover 80 percent of the population.

Every insurer is free to set the premium for the mandated basic benefit package, but an insurer’s premium applies to all customers regardless of age or health status.

As a result, individual insurers in Switzerland have an incentive to cherry pick – not to earn profits (which is prohibited on the mandated package), but to be able to compete with lower premiums.

SWITZERLAND’S HEALTH INSURANCE SYSTEM

Because of guaranteed issue and community rated premiums, there is cantonal a risk equalization fund, but it relies on few variables (only age and gender, while Germany’s as well as the Dutch risk adjusters have over 80 morbidity variables) for risk adjustment and is judged far from satisfactory.

Low-income people in Switzerland receive public subsidies toward the purchase of health insurance.

SWITZERLAND’S HEALTH INSURANCE SYSTEM

Because health insurance is decentralized on a cantonal basis, there are significant differences in health insurance premiums for identical benefit packages.

Remarkably, there remain large premium differences even within cantons – see the following slides from Rutten et al.. These variances are thought to reflect risk selection, rather than relative efficiency in purchasing health care and administering claims.

These intra-cantonal variances in premiums suggest that many Swiss citizens do not switch insurers in spite of these large differences. It reflects a bias for the status quo.

PAYMENT OF HOSPITALS IN SWITZERLAND

Hospitals, which can be public, private non-profit or private for profit receive about a third of their financing from the cantons, within a cantonal planning system.

Hospitals are paid by insurers either on a per diem or a DRG basis negotiated at the cantonal level.

As of 2012, hospitals are to be reimbursed on a nationwide DRG basis.

The cantonal governments absorb hospital deficits.

PAYMENT OF PHYSICIANS IN SWITZERLAND

Switzerland has one of the highest physician-population ratios in the OECD (380 per 100,000 population)

As in Germany, hospital-based physicians are usually salaried.

Ambulatory-care physicians are paid on a FFS basis at fees that are negotiated on the cantonal level between associations of insurers and of physicians.

Drug prices are regulated by the federal government in Switzerland. Comparative effectiveness is a factor in setting prices for drugs.

Generics must be sold at 50% of the corresponding brand-name drug; but only about 9% of drugs sold are generics (compared with close to 70% in the US)

PAYMENT FOR PRESCRIPTION DRUGS

Sickness funds pay for prescription drugs on a reference-price system, coupled with rebates for on-patent drugs, which replaced earlier budget caps per prescribing physicians.

From 2011 on, the system is subject to comparative effectiveness analysis.

CONSLUSION ON THE GERMAN AND SWISS HEALTH-CARE SYSTEMS

Both systems slouch in the direction of what we think of as “regulated or ‘managed’ competition” in the U.S.

Allowing citizens a choice among tightly regulated health insurers provides the illusion of competition, but it is just that, an illusion.

It is an illusion because the prices at which insurers buy health care for the insured are typically out of the insurer’s control.

Furthermore, there is virtually no ability to exclude providers with relatively low quality of services.

But perhaps there is value in the eyes of citizens in a system that provides the illusion that it is not a government-run health insurance system.

Of the two systems, Germany’s is by far the more egalitarian system.

Germany’s health system also registers significantly lower costs on a PPP per capita basis.

Overall, though, the Swiss health system is generally viewed as one of the highest-quality health systems in the world – certainly outranking the United States on many dimensions.

THE END