German Health Insurance Funds Face 4-bil.-Euro Deficit in 2010, Contributions to Rise

Germany's Gesetzlichen Krankenkassen (GKV), the country's public health insurance funds, will next year, face a 4-billion-euro (US$5.9-billion) deficit according to a group of experts appointed by the national health insurer.

In 2010, public health insurance fund revenues will reach an estimated 171.1 billion euro while spending will continue to grow to 174.3 billion euro, said the German newspaper Sueddeutsche. The current forecast is similar to a first estimate given by the expert group in October 2009. At that time, GKV's experts estimated a 7.5-billion-euro deficit. In the meantime, the German government granted a 3.9-billion-euro tax subsidy to help the GKV stabilise its financial situation.

The announcement comes as no surprise considering the decline in Germany's economy and the consecutive increase in unemployment in the country leading to a contraction in GKV's revenues. The impact on GKV's financial situation is particularly damaging given that the demand for innovative—and expensive—drugs is on the rise. As a sudden decrease in healthcare spending is rather unlikely, individuals covered by the GKV will probably see their health insurance contributions rise. Health insurance contributions are based on a standardised 14.9% salary-based contribution rate and may be increased by heavily indebted GKV funds. The maximum additional contribution is limited to 1% of household income.

Ongoing Healthcare Reform

Meanwhile, the new German coalition formed between Chancellor Angela Merkel's Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU) and the Free Democratic Party (FDP), is in the process of addressing limitations in its expensive healthcare system. In a bid to overhaul the funding system based on uniform tax contributions set up by the last CDU-SPD coalition, the upcoming healthcare reform will aim at adopting a new funding system based on flat-rate health premiums along with a top-up system. The reform is not expected in the short-term as indicated by the new Health Minister Philip Rösler but will be gradually introduced.

Outlook and Implications

The GKV's deficit comes as no surprise and underlines once again the limitations of the German healthcare system—in line with the situation in other countries—that faces rising healthcare expenditures. Despite the recent reforms introduced under the CDU-SPD coalition—including the GKV Competition Strengthening Law, the 250 public health insurance funds remain under significant financial pressure. The upcoming healthcare reform will therefore play a crucial role in addressing an increasing need for resources as both demographical changes and economic recession put a growing burden on the statutory insurance system.

The introduction of a health premium system will most probably lead to enhanced competition between public and private health insurers, easing the financing of the public health system. However, the announcement of the switch towards a flat-rate health premium system has been met with scepticism as many fear it would highly disadvantage unemployed and vulnerable people and increase inequalities.

Even though the German government's main focus remains the healthcare funding system, more cost-containment measures are likely to be introduced to cut health expenditures since the latter appear to be the main cause of growing deficits in Germany. Rebate contracts, introduced in 2004 and made mandatory in 2007, force generic producers to cut prices and provide important discounts—sometimes up to 50%—to remain entitled to preferential reimbursement status under the statutory health system. These rebate contracts now cover nearly a hundred per cent of all generic products approved in the German market. The AOK, Germany's largest public health insurance fund, recently launched its fourth rebate scheme while the measure is now spreading to the private sector where many private health insurers organise their own rebate contracts schemes or consider doing so.