Some Key Facts about the German Healthcare System

How is the healthcare system paid for?

Patients in Germany have to pay for their healthcare in the form of welfare contributions. Each month, an earnings-related share of their monthly income must be paid for health insurance. People can opt between statutory or private insurance. Currently, about 90% have statutory insurance and 10% private insurance. However, only better-income earners above a certain income level can access private insurance. (In 2019, the threshold was around 55,000€ per year before taxes and welfare contributions.) Private insurance offers a better quality and wider range of health care services in comparison to statutory insurance. In addition, physicians earn more money with treating and managing private insurance patients, hence their inclination to prefer them over statutory insurance patients. (It is these privileges which caused a number of healthcare pundits to coin the term of a ‚two-tier medical system‘). But patients with private insurance bear the risk that their premiums increase massively with growing age, simply because their disease risk increases as well. Premiums for statutory health insurance, on the other hand, do not depend on the individual disease risk of a patient. In addition and unlike private insurance, patients with statutory insurance can co-insure close family members (spouses, children).


What types of HCPs are there in Germany and what is their role?

Like other countries, Germany has adopted the principle of primary and secondary care (and sometimes even tertiary care). In theory, office-based GPs play the role of primary care physicians, i.e. they are supposed to be the first contact point for patients and gatekeeper for referrals to specialist. However, the reality is that patients can bypass their GPs and can directly visit specialists. This is due to a peculiarity of the German healthcare system: Specialists in Germany do not have necessarily to work in a hospital, they can also run an office-based practice. This makes it easy for patients to contact specialists directly.

A lot of conditions can be classified into three severity levels: mild, moderate and severe. In order to illustrate the roles of the different physician types in Germany and what type of patients they mainly manage, they could be linked to the severity levels as shown below:

·         Office-based GPs: mild patients

·         Office-based specialists: moderate patients

·         Hospital-based specialists: severe patients

Take type-2-diabetes (T2D) as an example: After being diagnosed with T2D, a GP may initiate oral anti-diabetics for this patient. Once this patient is no longer well-controlled and need to be switched to insulin, the GP may refer the patient to an office-based specialist. And when the patient does not respond to insulin anymore, the specialist may refer the patient to a hospital-based specialist. (Of course, this description of the patient pathway and physician’s responsibilities is very simplified.)

Many hospitals have – beside their inpatient wards – an outpatient setting where patients are managed like in office-based practices. This can for example be convenient for patients who have been hospitalized and the ongoing follow-up treatment is continued in the outpatient setting of the same hospital.

Nurses have a less important role compared to the UK or the US. Nurses in Germany are for example not involved in the treatment decision making process. But they may exert an important function in situations where patients have to self-inject a product such as diabetes, multiple sclerosis or rheumatoid arthritis. Here, nurses guide patients in choosing a suitable injection device and instruct them in using the devices.

Pharmacists are not entitled to make therapeutic decisions either. Their role is restricted to dispensing the products which physicians have prescribed. However, they must ensure that the least expensive product is dispensed from the range of available brands.


Who decides which products are reimbursed by the health insurance companies

The Federal Institute for Drugs and Medical Devices (Bundesinstitut für Arzneimittel und Medizinprodukte, BfArM) decides which products are approved in Germany, unless the pharmaceutical manufacturer seeks Europe-wide approval, in such a situation the EMA is the key decision-maker regarding approval.

Once a product has been approved in Germany, the Federal Joint Committee (Gemeinsamer Bundesausschuss, G-BA) decides whether this product can be reimbursed by the statutory health insurance companies or not. The G-BA consists of high-ranking representatives of health insurance companies and physician associations. To support the decision making process, the G-BA often requests the IQWIQ to provide an assessment as to whether a product offers an additional benefit over current products and how cost-efficient it is. The IQWIQ is a scientific institution similar to the British NICE. Their assessments have a big influence on the decision making of the G-BA.

There are only small variations between what types of health care services are reimbursed by different health insurance companies because they typically adopt the decisions of the G-BA.

In hospitals, the hospital formulary committee is the body who discusses and decides which brands of the approved products are used in their hospital. Members of the committee are physicians and hospital pharmacists. The role of physicians is to provide a list of products they prefer or want to have listed in their hospital (for example because a product has a superior efficacy, has a superior safety profile, or because it simplifies working steps, etc), and the role of hospital pharmacists and procurement managers is solely to arrange the purchase of these products


Which measures are in place to curb the increase of health care costs?

Like other countries, Germany faces an increase of health care costs. Therefore a number of measures have been initiated in order to curb the increase.

One of these measures targets the costs for prescription in the office-based sector. To this end, data about prescriptions are collected in order to compare the costs caused by prescriptions of an individual office-based physician with the average prescriptions costs of all office-based physicians. If an individual office-based  physician has significant higher prescription costs compared to the average prescription costs, it may be that the doctor has to pay back some of the difference out of her/his own pocket. Such a back-payment is called ‘Regress’. The enforcement of such a ‚Regress‘ is very unlikely, however, because for one thing physicians are notified of early signs of higher than average prescription costs, so that they can steer in the opposite direction, and for another thing physicians get the opportunity to justify their prescription behaviour (for instance because of untypical patient types or an untypical location of their office).

In the context of the Regress, ‘Kassenärztliche Vereinigungen‘, which is the society of the office-based physicians, have a dual function. On the one hand, they are required by law to collect prescription data and to compare a specific physician’s prescription expenses with the average of all physicians and to inform or warn her/him in case of higher expenses. On the other hand, they protect physicians at risk of a 'Regress' by helping them to justify their prescription costs.

The budget restrictions for GPs are stricter compared to office-based specialists. The latter enjoy a higher degree of freedom in terms of being allowed to prescribe more treatments and more expensive treatments. (This can be a reason why office-based GPs discontinue treatments which have been initiated by a specialist and switch them to less expensive treatments.)

So called Reference Prices (‘Festbetrag’) set an upper limit for drug costs.  A ‘Festbetrag’ is the amount which health insurance companies reimburse for the prescription of a specific treatment. It is the result of negotiations between health insurance companies and drug makers. If they are able to negotiate a consensus (i.e. a price which is acceptable for both sides) the health insurance companies entirely reimburse the prescription costs (or almost fully) and patients do not have to make any co-payment. If they do not come to terms, however, i.e. if the drug maker wants to sell it a price which is above what health insurance companies are willing to accept, the patients have to pay the price difference out of their own pockets (if they insist being prescribed this product rather than a cheaper competitor product).

Another instrument designed to curb prescription costs is the so-called ‚Aut Idem‘ regulation. It defines that retail pharmacists have to dispense always a less expensive generic product instead of a more expensive branded product unless the physician has ruled out such a replacement by crossing out the Aut Idem box on the prescription. (‘Aut Idem’ is latin and means ‚or the same‘).

Rebate agreements between health insurance companies and pharma companies also aim at curbing costs. If a specific health insurance company has negotiated rebates with a specific drug maker its insurance holders are automatically dispensed the products of this drug maker.  


How are physicians and hospitals paid?

Office-based GPs and specialists are paid according to a points system. This system determines how many points physicians get for a specific medical service and how much financial value one point represents. Once per quarter, office-based doctors submit a list of their services rendered at the health insurance companies and then receive according payment.

Hospitals have a different financing system which is called the DRG system. DRG means Disease Related Groups. DRGs are also often called case rates. A DRG or a case rate is the lump sum which hospitals receive for a specific indication, for example treating a stroke or a heart attack. This means: hospitals which work very cost-effective can remain a larger share of this lump sum, and vice versa.