Germany is known for its comprehensive and well-developed healthcare system, supported by a combination of statutory and private health insurers, known as Krankenkassen. Despite the solid foundation of the German healthcare system, both health insurers and hospitals face significant financial and organizational challenges. Rising costs for hospital care and pharmaceuticals, combined with an aging population and an increasing shortage of medical personnel, have led to a loss of financial stability and accessibility of care. This article provides an in-depth analysis of the cost structure and profitability of the Krankenkassen, highlights the challenges and reforms within the hospital system, including the financial health of hospitals and the closure of healthcare facilities, and compares the German healthcare system to the Dutch model.
The German healthcare system: A hybrid model of statutory and private insurance
The German healthcare system is based on a model where both statutory and private health insurers play a role. This combination offers the population a broad range of options and access to high-quality care. The system can be summarized as follows:
- Statutory health insurance (Gesetzliche Krankenversicherung, GKV): These are public health insurers that are mandatory for everyone with an annual income below a set threshold (€66,600 gross per year in 2023). About 90% of the German population is insured through a GKV. Premiums are calculated as a percentage of gross income (average 14.6%), with costs shared equally between employees and employers. GKVs offer a basic package that covers all necessary medical treatments, hospital stays, medications, and preventive care.
- Private health insurance (Private Krankenversicherung, PKV): These are available to self-employed individuals, civil servants, and employees with higher incomes. PKVs offer more comprehensive insurance packages, often with shorter waiting times and access to private healthcare providers. Premiums are based on factors such as age, health, and desired coverage. About 10% of the German population opts for a PKV.
Cost structure of the Krankenkassen: key expenditure categories
The costs of both statutory and private health insurers are dominated by several major expenditure categories. Below we discuss the primary expenses of the Krankenkassen:
- Hospital care: This is the largest cost category, representing more than 35% of total expenditures by health insurers. Hospital care costs have increased in recent years due to a combination of higher tariffs, rising personnel costs, an aging population, and increased treatment complexity. Hospitals often need to invest in expensive medical equipment and technologies, driving up costs further.
- Pharmaceuticals: Medication costs account for approximately 15-20% of total expenditures. These costs have surged due to the introduction of expensive drugs for chronic and rare diseases, such as immunotherapies and biologics. While the use of generic drugs is encouraged, the growing demand for innovative treatments continues to contribute to significant cost increases.
- Outpatient care: Around 16% of expenditures go to general practitioners, specialists, and dentists. These costs have risen due to a shortage of medical personnel in certain regions and the increased demand for care from an aging population.
- Preventive care and sick pay: Statutory insurers pay sick leave to employees who are absent for more than six weeks. This accounts for about 6-8% of total expenditures. Insurers also invest in preventive care, such as screenings and vaccinations, to save on long-term costs.
- Administrative costs: Administrative costs, which include personnel expenses, IT infrastructure, and regulatory compliance, have increased due to digitalization and rising bureaucratic demands. Although this is a smaller expense category (less than 5%), it has a significant impact on the overall operations of the Krankenkassen.
Comparing the German healthcare system with the Dutch model
Although Germany and the Netherlands both have well-developed healthcare systems, there are several important differences in the organization and financing of healthcare:
- Health insurers:
- In Germany, there is a distinction between statutory and private health insurers. In the Netherlands, there is only private health insurance, but it is mandatory for everyone. All Dutch residents must purchase a basic insurance policy, regulated by the government. Supplemental insurance is optional.
- In the Netherlands, premiums are independent of income (except for an income-related contribution for employers), and individuals can choose their insurer and healthcare package. In contrast, in Germany, GKV premiums are income-based, and GKV coverage is largely uniform.
- Financing:
- The German system has a strong component of solidarity through the income-based premiums of the GKVs. In the Netherlands, everyone pays the same premium for basic insurance, and income differences are compensated through employer contributions and subsidies for low incomes.
- Healthcare supply and waiting times:
- In Germany, privately insured patients often have shorter waiting times and access to private hospitals. In the Netherlands, the healthcare supply is more regulated, and there is less distinction between insured individuals based on their insurance type.
- Number of healthcare providers:
- Germany has significantly more hospitals and healthcare providers per capita than the Netherlands. This leads to more choice but also a higher cost structure and less efficiency.
The challenges in the German healthcare system
The German healthcare system faces several structural challenges that threaten the sustainability and efficiency of the system. These challenges can be summarized into the following categories:
- Regional inequality:
- There are large regional differences in the availability and quality of healthcare. In rural areas, there is a shortage of medical personnel, less access to specialized care, and longer travel times to hospitals. This leads to unequal access to care and lower health outcomes in these regions. The current financing system does not adequately address differences in healthcare needs and population density across federal states.
- Financial stability of hospitals:
- Many hospitals, especially smaller institutions in rural areas, struggle financially due to a low number of patients and insufficient funding through the DRG (Diagnosis-Related Group) system. This system encourages hospitals to treat more patients but provides inadequate compensation for complex care. Over the past decade, more than 150 hospitals have closed, further deteriorating access to care.
- Shortage of medical personnel:
- Germany faces a growing shortage of doctors, nurses, and other healthcare professionals. This shortage leads to higher labor costs, longer waiting times, and increased workloads for existing staff. The shortage is especially problematic in hospital care, threatening the quality and availability of services.
- Rising healthcare costs and demographic changes:
- Hospital and pharmaceutical costs are rising faster than premium revenues, primarily due to the aging population and increasing demand for long-term care. This leads to growing financial pressure on health insurers and the risk of premium increases or cutbacks in coverage.
- Need for reforms in the financing system:
- The financing of hospitals and health insurers is not sustainable in the long term. The current risk structure compensation system between health insurers does not adequately account for regional differences in healthcare needs. There is a need for a more equitable distribution of funds and better alignment of compensation based on care intensity and complexity.
Conclusion: The future of German healthcare and Krankenkassen
The German healthcare system offers a high level of quality and access to care but faces significant challenges in terms of financial sustainability, regional equality, and staff shortages. Both statutory and private health insurers are under pressure from rising healthcare costs and increasing demand for services. Without comprehensive reforms in the financing and healthcare infrastructure, the quality of German healthcare may be at risk in the long term. Comparing the German model to the Dutch system provides valuable insights, but each system has its own unique challenges. A future-proof healthcare system requires structural changes, investments in personnel and technology, and a fairer distribution of resources to ensure the continuity of care for all residents of Germany.