A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Siadat, Banafsheh; Stolpe, Michael Working Paper Reforming health care finance: What can Germany learn from other countries? Kiel Economic Policy Papers, No. 5 Provided in Cooperation with: Kiel Institute for the World Economy (IfW) Suggested Citation: Siadat, Banafsheh; Stolpe, Michael (2005) : Reforming health care finance: What can Germany learn from other countries?, Kiel Economic Policy Papers, No. 5, ISBN 3894562765, Kiel Institute for World Economics (IfW), Kiel This Version is available at: http://hdl.handle.net/10419/3771 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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Banafsheh Siadat and Michael Stolpe German health care financing is now at the cross- Drawing upon such cross-national learning, it ap- roads of fundamental reform. The two main pro- pears that the Flat Rate Insurance would produce posals that the new “grand” coalition government the more favorable impact on the labor market, must take as its starting point for compromise while preserving Germany’s long-standing tradition could hardly be more polarized. The proposal of solidarity. The Citizens’ Health Insurance pro- favored by the left, the Bürgerversicherung, a posal would not eliminate and perhaps not even Citizens’ Health Insurance that is compulsory for reduce the marginal burden on producer wages all, would introduce a new system of proportional very much, but would likely succeed in tapping a taxation, based not only on wages, but also on relatively large share of consumers’ aggregate other sources of personal income, whereas the willingness to pay, an important aspect of a dy- proposal favored by the right, the Kopfpauschale, namically efficient health care financing system would equalize per capita contributions for those under conditions of endogenous growth in medical enrolled in the statutory system by introducing a technology. poll tax or Flat Rate Insurance (also advocated as th The rise of modern medicine during the 20 cen- the Gesundheitsprämie— a “health premium”). tury has subtly changed the economic nature of The diverse experiences of other European coun- the statutory health insurance contract—from ac- tries provide interesting lessons on the likely con- tuarial fairness, when the main obligation of sick- sequences of either reform proposal. The intro- ness funds was to replace lost wage income dur- duction of the Citizens’ Health Insurance would ing times of sick leave, towards something like a move the German system towards general tax Ramsey tax scheme for the financing of a public financing of the kind that characterizes Beveridge good: the guaranteed universal access to modern systems, with a single payer funded from general health care and the implicit promise to accom- tax revenue, typically structured as a national health modate the growth of medical technology in the service. German policy makers can therefore learn future. from Spain’s recent shift from a Bismarckian The reform of Germany’s statutory system must system of social health insurance to a Beveridge be consistent with its short- and long-term pur- system and from the introduction of a scheme pose. In addition to demographic changes, the de- similar to the Citizens’ Health Insurance by France sign of a sustainable and efficient health care fi- in the 1990s. The introduction of the Flat Rate nancing system must take the changing role of Insurance would make the German system more medical technology into account. More research similar to the financing of health insurance in will hence be needed to better understand how Switzerland and the Netherlands, where flat rate technological innovation changes the opportuni- premiums are paid by all or parts of the popu- ties and constraints in which health insurance lation, respectively. markets operate. Kiel Institute for World Economics · December 2005 Banafsheh Siadat, MA Department of Social Policy London School of Economics and Political Science Houghton Street London WC2 2AE England Fax ++44-020-7955 7415 E-mail: [email protected] Dr. Michael Stolpe Kiel Institute for World Economics (IfW) Düsternbrooker Weg 120 24105 Kiel Germany Tel: ++49-431-8814-246; Fax ++49-431-8814-500 E-mail: [email protected] Website: http://www.ifw-kiel.de/staff/stolpe.htm KIEL ECONOMIC POLICY PAPERS Kiel Institute for World Economic 24100 Kiel, Germany Tel: ++49-431-8814-1; Website: http://www.ifw-kiel.de Managing editor: Prof. Dr. Harmen Lehment Tel: ++49-431-8814-232; E-mail: [email protected] Bibliographic information published by Die Deutsche Bibliothek Die Deutsche Bibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.ddb.de. ISSN 1860-7322 ISBN 3-89456-276-5 © Institut für Weltwirtschaft an der Universität Kiel 2005. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the prior written permission of the Publisher. Printed in Germany Contents 1 Introduction 3 1.1 Reform Objectives 5 2 Germany’s Current Health Care Financing System 7 2.1 The Public or Statutory Health Insurance Market 8 2.2 The Private Health Insurance Market 9 2.3 The Impetus for Reform 9 3 Other Countries’ Reform Experiences 12 3.1 Spain: “A Shift from Bismarck to Beveridge”—The Path of the Bürgerversicherung? 12 3.2 France: A Hybrid of Beveridge and Bismarck 13 3.3 Switzerland: A Blueprint for Redesigning the German Health Care System? The Path of the Kopfpauschale? 14 3.4 The Netherlands: A Hybrid of Private and Public Financing, with a Significant Role for Private Health Insurance 15 4 Health Care Financing Reform Proposals in Germany 17 4.1 The Bürgerversicherung or Citizens’ Health Insurance 17 4.2 The Kopfpauschale or Flat Rate Health Premiums 23 5 Discussion 28 6 Concluding Remarks 29 References 30 Paper prepared for the Kiel Economic Policy Paper series. We thank the participants of the Kiel Institute’s first European Doctoral Workshop on Health Economics, Social Medicine, and Health Policy, November 24, 2005, for their comments. 1 Introduction from the introduction of a scheme similar to the Citizens’ Health Insurance by France in the 1990s. The introduction of the Flat Rate Insur- After more than two decades of incremental ance would make the German system more simi- tinkering with cost containment, German health lar to the system in Switzerland and the Nether- care financing is now at the crossroads of funda- lands, where flat rate premiums are paid by all or mental reform. It is clear that the impetus for parts of the population, respectively. reform stems from a general effort to restore While such case studies alone cannot replace Germany’s dismal economic growth, and that a general equilibrium analysis of the impact of the two main proposals, claiming to reduce the health care finance reforms on the macroecon- health system’s impact on nonwage labor costs, omy, they can still give us an idea what effect is are primarily motivated by macroeconomic con- likely in relation to specific policy objectives. siderations. We shall argue that a comprehensive For example, the experiences of other European assessment of any proposal must be consistent countries may help us to identify the proposal with all of society’s objectives for health policy most likely to be successful in reducing the excess and seek to combine efficiency with equity. burden associated with increasing health care In light of these more general considerations, revenues or in eliminating inflationary pressure the two main proposals could hardly be more po- on nonwage labor costs, the latter often deemed larized. The proposal favored by the left, the a consequence of Germany’s current payroll-tax- Bürgerversicherung—henceforth Citizens’ Health based health care financing system. Insurance, introduces a new system of propor- Needless to say, labor market conditions tional taxation, not only based on wages, but cannot be the only consideration in health care also on other sources of personal income, where- finance. In the longer term, the primary concern as the proposal favored by the right, the Kopf- must be to endow the health sector with suffi- pauschale—henceforth