18 October 2006

EZA 762 Report: Germany – Healthcare Reform

Germany: health care reform agreement marks point of no return

On 12 Oct the health care ministry finalised the draft law for German health care reform, geared at cost control through competition among insurers. Key elements of the law, which meticulously follows the 04Oct and 12 Jul agreements, are the setting up of a health care pool and competition among private insurers. Delaying the health tax pool to 01Jan2009 and restricting portability of “ageing reserves” for private insurers makes it unlikely that the law will achieve its objective of more competition in the insurance market. Although less of a public focus, the law may instil more competition on the supply side, notably on pharmaceuticals and hospitals. The demand side will generally be spared by the reform, since the visibility of health coverage makes it highly sensitive for the coalition parties.

Asset conclusions: disappointing agreement implies continuing rise in health taxes, hence burden for consumption. Good for profits of pharmaceuticals and private health insurers. The third report in our series on German Healthcare provides a recap on the main features of the reform and evaluates the recent modifications agreed both in terms of their economic and political impact.

© Graham Bishop