Question

Germany has health insurance coverage approximating 100% of the population and spends far less on health care both in absolute terms and relative to GDP. What lessons, if any, could the US learn from Germany to extend health insurance coverage and lower costs? Use as much economic theory/analysis as possible

Answer 1

In Germany, every German resident must belong to a sickness fund, and in turn the funds must insure all comers. They’re also mandated to cover a standard set of benefits, which includes most procedures and medications. Workers pay half the cost of their sickness fund insurance, and employers pay the rest. The German government foots the bill for the unemployed and for children. There are also limits on out-of-pocket expenses, so it’s rare for a German to go into debt because of medical bills.

Germany is in the middle of the pack among developed countries when it comes to healthcare spending per capita, according to a report released by the Commonwealth Fund last fall.

But of all of the countries studied, Germans were the most likely to be able to get a same-day or next-day appointment and to hear back from a doctor quickly if they had a question. They rarely use emergency rooms, and they can access doctors after-hours with ease.

And Germany manages to put its health-care dollars to relatively good use: For each $100 it spends on healthcare, it extends life by about four months, according to a recent analysis in the American Journal of Public Health. In the U.S., one of the worst-performing nations in the ranking, each $100 spent on healthcare resulted in only a couple of extra weeks of longevity.

Then, of course, there are the drawbacks. Since there are no provider networks in Germany, doctors don’t know what other providers patients have seen, so there are few ways to limit repeat procedures. In fact, Germany is facing quantity-control issues similar to America’s, but the U.S. is more of a vanguard in attempting to limit waste. The ACA created Accountable Care Organizations, voluntary groups of doctors and nurses that can share in the savings if they manage to treat Medicare patients more efficiently.

The German government is similarly trying to push more people into “family physician” programs, in which just one doctor would serve as a gatekeeper. But that’s an idea the Germans borrowed from the American HMO model of the 1980s.

And like the U.S., Germany may see a shortage of primary-care doctors in the near future, both because primary-care doctors there don’t get paid as much as specialists, and because entrenched norms have prevented physician assistants from shouldering more responsibility, Schlette said. There are so few nurses available to provide geriatric care that Germans have started importing their own home health aides from Eastern Europe or the Philippines.

All Americans are now required to have health insurance or to pay a fine, and insurers cannot deny coverage to anyone, regardless of pre-existing conditions. Obamacare has also created subsidies for those who can’t afford to buy health insurance and has implemented limits on out-of-pocket costs.

There are, of course, a few key differences. Co-pays in the German system are minuscule, about 10 euros per visit. Even those for hospital stays are laughably small by American standards: Sam payed 40 euro for a three-day stay for a minor operation a few years ago. Included in that price was the cost of renting the TV remote.

And nearly five million Americans fall into what’s called the “Medicaid gap” in states that aren’t expanding the government health insurance program for the poor. These individuals make too much to qualify for the state’s existing Medicaid program (typically just a few thousand dollars a year for childless adults), yet too little to qualify for the federal government’s subsidies to buy health insurance on the new exchanges, so they will remain uninsured. In Germany, employees' premiums are a percentage of their incomes, so low-wage workers simply pay rock-bottom insurance rates.

The sickness funds are Germany's version of a “public” health insurance system, and it covers nearly everyone. But a small segment (13 percent) of the population, generally the very wealthy, can opt-out and instead go with the private Krankenversicherung, which follows rules more similar the pre-Obamacare U.S. individual insurance market.

But those differences aside, it’s fair to say the U.S. is moving in the direction of systems like Germany’s—multi-payer, compulsory, employer-based, highly regulated, and fee-for-service.

In the U.S., meanwhile, a trip to the doctor or hospital is still a roulette of billing discrepancies and not-covered expenses. Certain U.S. states have tried a more German strategy, attempting to keep costs low by setting prices across the board. Maryland, for example, has been regulating how much all of the state’s hospitals can charge since 1977. A 2009 study published in Health Affairs found that we would have saved $2 trillion if the entire country’s health costs had grown at the same rate as Maryland’s over the past three decades.

Now, Maryland is going a step further still, having just launched a plan to cap the amount each hospital can spend, total, each year. The state's hospital spending growth will be limited to 3.58 percent for the next five years.