Health Care Industry

in Germany

Course: ACTUK4625 Health Insurance

Instructors: Michael L. Frank
Donald J. Rusconi II
Team Members: Qing Fang
Wenchen Li
Pan Tang
Jingyang Zhou

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Table of Contents
Cover Page--------------------------------------------------------------------------------------------1
Table of Contents-------------------------------------------------------------------------------------2
Introduction-------------------------------------------------------------------------------------------3
System-----------------------------------------------------------------------------------------------4-5
Company----------------------------------------------------------------------------------------------5
History-----------------------------------------------------------------------------------------------5-6
Regulators and Regulations----------------------------------------------------------------------6-7
Actuarial Organizations-----------------------------------------------------------------------------8
Premiums----------------------------------------------------------------------------------------------8
Reinsurance-----------------------------------------------------------------------------------------8-9
Current Perceived Problems------------------------------------------------------------------------9
Trend -------------------------------------------------------------------------------------------------10
Summary --------------------------------------------------------------------------------------------10
Works Cited -------------------------------------------------------------------------------------11-12

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German Health Care IndustryIntroduction

Germany, with an area of 357,021 km2 and a population of 81.8 million (Health in
Germany), is one of the most significant members in European Union and has acted as a
leading role in many fields, such as economy, politics, Pharmaceuticals and so on. It also
has a good reputation for its health care system. In 2000, The World Health Organization
released The World Health Report and ranked German health system the 25th (World
Health) among the 191 members, based on disability-adjusted life expectancy, speed of
service, protection of privacy, quality of amenities and financial contribution factors (The
World 185). According to CIA World Factbook (2011 estimates), ten years later,
Germany ranked the 19th in Life Expectancy, with 77.82 years for male and 82.44 years
for female, and the 218th in birth rate, with 8.3 birth per 1000 population (List of
Countries). The Infant mortality rate was 3.54 deaths per 1000 live births (Germany
Demographics).

In year 2009, Germanys health care expenditure was approximately 278 billion
euros, equivalent to 11.6 percent of its gross domestic product, ranked after US,
Netherlands and France. Moreover, the total health expenditure per capita for that year
was 4218 USD, 30% higher than the OECD average. However, the health care spending
stayed very low from 2000 to 2009, which was only around 2% of its gross domestic
product. Actuarially, German maintains a fairly stable spending in both per capita and
percent of GDP from 1980 till now (OECD Health 1).
According to the Statistical Yearbook of German Insurance 2011, published by the
German Insurance Association, the premium income of health insurance was 29,394
EUR million in 2009 and 31,185 EUR million in 2010 (Wolgast 12). Health insurance
Benefit in EUR million achieved 35,191 EUR million in 2009 and 36,000 EUR million
in 2010. In addition, there were 65.7 and 64.8 million health insurance contracts in 2009
and 2010 respectively (Wolgast 17).

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German Health Care IndustrySystem

Germany has the oldest universal health care system in the world. Nowadays,
Germany operates a multi-payer system with two types of providers: the statutory health
insurance and the private health insurance (Geyer). Unlike US, the German government
doesnt provide health care to insure people; instead, it regulates the non-profit
associations with public health funds. Generally, statutory health insurance covers basic
health care include in-patient and out-patient care with registered doctors, hospital care,
medical aid, mental health care and basic dental care, while private health plans have
more additional coverage for medical, dental or private doctor treatment (Health
Insurance Options).
Since the health care reform in 2007, everyone who lives in Germany must get
insured for at least hospital and out-patient medical treatment, but has the freedom to
choose from statutory, private or a combination of both (Health Insurance Options). For
year 2012, employees with gross income less than 50,850 euros per year or 4238 euros
per month are mandated to be enrolled with the statutory system, while employees who
earn more than 50,850 euros per year or self-employed can choose their own providers.
The basic monthly premium of public health insurance is around 15.5 % of the monthly
salary or a maximum 593 Euros. As of 2011, the 15.5% of gross wage is separated into
two parts: the insured employee paid 8.2% and the employer contributed 7.3%
(International 7). The basic rate is the same for all members. However, the private medical

insurance premium is different for each person covered (Health Insurance Options).
About 87.5% residents are covered by statutory system, while the rest 12.5% opt for
private health insurance (Health).
The German public health insurance system also provides limited cover for travel
within the EU. If residents plan to travel to non-EU countries, they can buy travel
insurances (Health Insurance Options).
Another significant sector of the German health care is the aging society. With
very low birth rate and long life expectancy, currently 20.7% of the Germany population
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is over 65 years old, which is one of the highest proportions of elderly in European
(Wolgast 87). Therefore, providing services for the elderly, such as long-term care, is
very indispensable. According to Dr. Busse from Berlin University of Technology &
Charite, since 1995, long-term care is covered by a separate insurance scheme, which is
mandatory for the whole population (Busse 1). The benefit of long-term care limits to
certain maximum amount and depends on individual needs (Busse 1).

German Health Care IndustryCompany

Germany currently has 592 insurance companies in total (Wolgast 13) and
statutory health insurance scheme is operated by 154 associations (International 58).
Some of them are very large and have millions of members, for instance, AOK- Die
Gesundheitskasse and DAK Gesundheit. Other examples of the leading private insurance
players are Allianz Private Krankenversicherung AG and Central Krankenversicherung
AG.

German Health Care IndustryHistory

The earliest German health care system, referred as the Bismarck system, dates
back to 1883, when the Bismarck parliament mandated nationwide statutory health plans
(Porter 56). About two decades later, the private health care plans started to emerge. The
system then underwent some developments and stopped growing during the Second
World War. After the War in 1945, due to the economic booming in Germany (known as
Wirtschaftswunder), the system experienced an enormous expansion: the number of the
health plan providers rose substantially; the specialization of care increased significantly.
In 1955, a fee-for-service reimbursement system was introduced and it incentivized
individual physicians to offer more services (Porter 57).
Along with the expansion of the system, its costs rose dramatically. Thus, the
Health Insurance Cost Containment Law of 1977 and the Hospital Cost Containment Law
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of 1981 were enacted to reduce costs. These two laws also led to a series of later cost
reforms. From year 1977 to year 2011, there were 15 reform bills in total (Porter 60).
Among these reforms, the most influential is the Reform Act of Statutory Health
Insurance 2000. As it is indicated in the journal Integrated primary care in Germany: the
road ahead, it for the first time broke with the strict system of collectively negotiated
contracts and budgets, introducing the possibility for physicians to selectively sign
contracts with health insurance funds for integrated care schemes, gatekeeper models and
disease management program (Schlette). Hence, this reform built the legal foundation
for health insurance fund and providers to enter selective integrated care contracts
(Schlette).

German Health Care IndustryRegulators and Regulations

Law and the Ministry of health establish the legal framework for the German
health care. In Germany, Federal Joint Committee (G-BA) is the highest decision-making
body of the joint self-government of physicians, dentists, hospitals and health insurance
funds. It acts as the Decision Platform for defining the services delivered as public
health care. It consists of Federal Physicians organization, Federal Sickness Fund
Association and Federal Hospital organization (Hess).
The Directives of G-BA are responsible for maintaining adequate, expedient and
cost-effective cares, defining requirements for the qualifications of providers the structure
of delivery of services and the quality of services. They must be presented to the Federal
Ministry for review (Hess).

The decision-making procedures are as follows:

1. Application for Discussion
2. Evaluation
3. Hearing
4. External Scientific expertise
5. Adoption of a decision
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6. Control of Legality

The Code of Procedure of the Federal Joint Committee mainly regulates the
methodological requirements for the scientific evaluation of the benefit, the necessity and
the cost-effectiveness of measures serving as the basis for resolutions.
Reference prices establish the maximum amount to be paid by the statutory health
insurers for a pharmaceutical of a certain group of active ingredients.
Here is a detailed illustration of the German health care governance structure
(Hess):

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German Health Care IndustryActuarial Organizations

There are three major actuarial organizations in Germany:
1. German Actuarial Association (DAV) is the organization that governs actuaries
in Germany. It has around 3,600 well-qualified members and 1,800 candidates who are in
the process of becoming actuaries (Wir).
2. The German Society for Insurance and Financial Mathematics (DGVFM) is an
association pursuing charitable goals such as the promotion of actuarial research or
supporting young actuarial researchers (Einfhrung).
3. German Academy of Actuaries (DAA) aims at using a catalog of tests to
examine the competence of candidates of DAV (Zentrale).

German Health Care IndustryPremiums

There are three important facts about the health insurance premiums in Germany:
1. The individuals premium in statutory health insurance is not a per-capita levy,
as it is in the United States. It is purely income-based (Porter 10).
2. An employees non-working spouse is automatically covered by the
employees premium (Porter 79).
3. The government covers premiums for children, because children are viewed as
national treasures and their health care should be the entire nations fiscal responsibility
(Porter 79).

German Health Care IndustryReinsurance

The first independent German reinsurance company-- the Cologne Reinsurance
Company, was founded in 1846 (Kopf 30). From then on, the reinsurance business in
Germany developed drastically. Recently, German reinsurance companiesMunich Re
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and Hanover Re, ranked among the biggest reinsurers all over the world, due to their
sound reputations and high gross premiums income.

German Health Care IndustryCurrent Perceived Problems

There are three major problems associated with the current German health care
system.
1. High and rising costs
This is the most significant problem for the system. In 2007, Germany spent 3,588
USD per year per capita on health care (Porter 5). In addition, German health care
expenditures have grown faster than GDP and are likely to maintain the similar
increasing pattern consistently. An aging population contributed to this problem.

2. Overcapacity and low reimbursement levels

Although Germany has already spent more than 10% of its GDP on health care,
the money is still not enough (Porter 11). Both health care providers and hospitals
complain about low reimbursement levels. For example, outpatient physicians are
paid only 34 euros per patient per quarter; hospitals are subsidized on average
3000 euros per patient per stay (Porter 11).

3. Inconsistent Quality
In spite of its increasing costs, the quality of care fails to be satisfactory: there
have been many unsuccessful treatments and avoidable errors. For instance, a
2005 Commonwealth Fund study found that 13% of all German patients
experienced a medical mistake in their treatment, and 10% reported a medication
error (Porter 20).

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German Health Care IndustryTrend

Germany is likely to experience a slower economic growth due to an increasingly
challenging global economic environment and the debt crisis that affects the European
society. In addition, declining external demand will limit the net export and lead to a drop
in the growth of GDP and an increase in unemployment rate. Consequently, the
government will make a bigger contribution to statutory health plans.
Knowing that statutory health care system is financed by payroll taxes and
employers contribute to the premiums as well, the government will have to take a
tremendous reform to focus on this system.

German Health Care IndustrySummary

Overall, Germany has a very well-developed health care industry with a rich
history, huge markets, large figures of providers, goal-oriented regulation guidelines and
sound actuarial foundations. However, on the other hand, Germany is facing conundrums
such as an aging population, rising costs, and declining health care quality. Though a
humongous number of reforms have been executed, the problems seem to persist. Hence,
Germany needs to find efficient and innovative ways to solve them.

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Works Cited
Busse, Reinhard. The German Health Care System. < http://www.commonwealthfund.org
/~/media/Files/Resources/2008/Health%20Care%20System%20Profiles
/Germany_Country_Profile_2008_2%20pdf.pdf >. Accessed May 3 2012
Einfhrung in den Verein. <http://aktuar.de/dgvfm/verein_dgvfm/>. Accessed Apr. 13
2012
Germany Demographics Profile 2012. <http://www.indexmundi.com/germany/demographics_
profile.html>. Accessed May 3 2012
Germany Pharmaceuticals and Healthcare Report Q1 2012. Dec. 2011. <http://pdf.mark
etpublishers.com/businessmonitor/germany_pharmaceuticals_n_healthcare_r
eport_q1_2012.pdf>. Accessed Apr. 9 2012
Geyer, Christina. Healthcare in Germany. Aug. 18 2009. <http://www.amiexpat.com
/2009/08/18/health-care-in-germany/>. Accessed May 3 2012
Health in Germany. <en.wikipedia.org/wiki/Health_in_Germany>. Accessed Apr. 9 2012
Health Insurance Options in Germany2012. <http://www.howtogermany.com/pages
/healthinsurance.html >. Accessed May 3 2012
Hess, Rainer. German Federal Joint Committee (G-BA). <http://www.academy
health.org/Programs/content.cfm?ItemNumber=2201>. Accessed Apr. 12 2012
International Profiles on Health Care Systems, 2011. < http://www.commonwealthfund
.org/~/media/Files/Publications/Fund%20Report/2011/Nov/1562_Squires_Intl_
Profiles_2011_11_10.pdf >. Accessed May 3 2012
Kopf, Edwin K.. Notes on the Origin and Development of Reinsurance. <http://www.
casact.org/pubs/proceed/proceed29/29022.pdf>. Accessed Apr. 13 2012
List of Countries by Life Expectancy. <http://en.wikipedia.org/wiki/List_of_countries_by_
life_expectancy#List_by_the_CIA_World_Factbook_.282011_estimates.29>. Accessed
May 3 2012
Mason, Moya K.. Profile on German Insurance Market. <www.moyak.com/papers/germ
any-insurance-market.pdf>. Accessed Apr. 9 2012
OECD Health Data 201How does Germany Compare. < http://www.oecd.org/data
oecd/45/55/38979836.pdf >. Accessed May 3 2012
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Porter, Michael E.. Redefining the German Healthcare System Moving to a Value-Based
System. New York: Springer. Jan. 2012. Accessed Apr. 14 2012
Schlette, Sophia. Integrated Primary Care in Germany: the Road Ahead. <http://www.
ncbi.nlm.nih.gov/pmc/articles/PMC2691944/#r10#r10>. Accessed May 2 2012
The World Health Report 2000Health Systems: Improving Performance.
<http://www.who.int/whr/2000/en/whr00_en.pdf>. Accessed May 3 2012
Wir ber uns. <https://aktuar.de/dav/wir_ueber_uns/>. Accessed Apr. 13 2012
Wolgast, Michael, ed. Statistical Yearbook of German Insurance 2011. Gesamtverband
der Deutschen Versicherswirtschaft. Accessed Apr. 9 2012
World Health Organization Ranking of Health Systems. <http://en.wikipedia.org/wiki/
World_Health_Organization_ranking_of_health_systems>. Accessed May 3 2012
Zentrale Anlaufstelle fr Ihre Fragen und Anregungen. <https://aktuar.de/evewa2.php?d=
1334615889&menu=040103>. Accessed Apr. 13 2012

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