Accountable Care Organizations — Federal Association of Managed Care (BMC) e. V.

Before the “Crossing Borders: The German Healthcare System”, I believed that effective health care systems varied from place to place but there was one most effective system for each place.  The BMC e.V. speaker prompted me to rethink this belief when he proposed that there is no one best system; to the contrary, all systems need to continually be changing and adapting. He said that developments in the healthcare sphere are not problems unless you fail to adapt to them.  In this way, we should not frame changes as problems and we should expect it.  Moreover, he proposed that when all hospitals or providers are doing well with a given system then it is time to do something else.  This suggests that the shortcomings of any one measurement process or delivery structure can be overcome not by finding some perfect structure but by continually changing structures.  This suggests that we may never be done improving our healthcare system.  Rather, we may need to change it as quickly as care is improving, which we can hope and expect will continue to accelerate.

Charité University Hospital

In a healthcare system that is doing remarkably well and seems quite profitable in almost every area, it was surprising to learn that hospitals have been less profitable. The Charité  University Hospital is one example. Charité today is divided into four campuses. It is one of the largest employers in Berlin with over 12,000 employees, 3000 beds, 103 clinics and institutes, and 7000 students. With three hundred years of tradition and excellence, I was surprised to learn that this academic medical center only become profitable in 2011. Charité has for the most part struggled to break even over the past century. Its recent profitability is due in part to novel partnerships with a number of private companies. These partnerships are built around the principle that the value chain is improved by combining the strengths of pharma in developing and moving forward drugs and the strengths of Charité in basic biological research and patient care. The remarkable ability of these seemingly opposite organizations to align themselves and work together productively suggests that models like this and like ACOs have promise. On the other hand, the energy and persuasiveness of our speaker, the Head of Strategic Corporate Development, reinforced the importance of personalities in the success of any organization or any change.

PKV Verband (Association of Private Health Insurers)

The German system is unique in that it has a public system which one can opt out of entirely by entering the private system.  Other countries which have both public and private systems require individuals who purchase private insurance to also pay into the public system.  In the German health care system, public and private insurance differ by much more than who receives premiums.  The public system is mandatory for individuals earning below a certain income threshold and premiums are a percentage that varies by income.  Those in the public insurance system can choose between 140 odd non-profit sickness funds which offer very similar services and co-payments.  The private system offers additional choices for individuals who earn above the income threshold and is the only option for civil servants.  Those in the private system choose one of the private insurance plans, receive a premium based on their risk on day of intake, and stay with this plan for life (or until their income falls below the threshold).

The principle of the public insurance system is solidarity and the transfer of value from low to high risk and high to low income individuals.  The principle of the private insurance system, on the other hand, is self-reliance and the transfer of value within one individual from their younger, lower risk self to their older, sicker self.  Interestingly, the private system can be described as encouraging solidarity between the generations in a different way.  Each generation pays its own way and does not burden other generations, as can sometimes happen with the pay-as-you-go public system.  The private system has historically been unable to control utilization or negotiate with providers or pharmaceutical companies.  It is now moving from this role of payer to one of ‘player’ as the laws begin to allow this and as increasing costs encourages it.  While having both systems does provide freedom of choice and encourage competition, it also potentially makes the public system more expensive by allowing people who are wealthier and probably lower risk (at least initially) to opt out.  Overall, these concerns were not fully addressed by the presentation.

Barmer Gek — Germany’s largest sickness fund

Barmer Gek is the largest sickness fund (public insurance company) in Germany, insuring 8.6 million of Germany’s 80 million people, or about 10% of the population.  Our speaker gave us many insights into the political situation in Europe and the United States today.  His presentation, which delved into the details of the sickness fund and the insurance markets in Germany, was, by far, the most popular presentation of the week among the exchange participants.

Of Hungarian descent  and having grown up in Scotland, our speaker clearly had an excellent understanding of the current political situation in Europe and the region’s past. In order to understand European politics, as he demonstrated, it is crucial to understand that the European federation of twenty seven sovereign states has significant cultural and linguistic diversity as well as important differences in legal systems and political structures.  Despite many differences, however, all member states have some type of social health care system.

Our speaker also talked about the Euro crisis and the economic challenges that are especially pressing in Southern European countries. He explained the need to gradually improve the situation in the countries that are struggling the most, mainly those in Eastern and Southern Europe.  He explained why returning to former currencies is not realistic for countries like Greece, as the money of the former currency would be worthless. He also explained that if Germany leaves the Euro, the currency will collapse. He believes that a stronger political union is needed in the EU to help align financial policy especially since Germany and France, countries that usually follow similar monetary policy, are no longer doing so.

The financial challenges in many parts of Europe are affecting health care.  For example, Portugal is running out of money for basic supplies and Greek hospitals are only partly performing. Many doctors are leaving their own countries to move to more financially stable countries, which creates a brain drain of talented people from countries that really need them. Our speaker expressed his belief that a strong middle class is the bedrock of a stable democratic society and that health care is a crucial aspect of the social environment of a stable society.

    Our speaker also touched on topics such as the risk of inflation, the beginning of the Euro crisis when EU financial stability rules were violated for political reasons, different models of health care within the European system, the economic crisis of the late 1920s and 1930s and the rise of Nazism, his own family history, and his extensive knowledge of the US. I was especially struck by our speaker’s ability to clearly connect social health care to a democratic society and to frame his arguments within the history of 20th century Europe.

Ministry of Health

The Federal Ministry of Health is responsible for a wide variety of concerns, such as:

• Maintaining the effectiveness and efficiency of the statutory health insurance and long-term care insurance systems
• Enhancing the quality of the health care system
• Maintaining economic viability and stabilization of contribution levels, and
• Influencing European and international health policy.

Health insurance is one of the five pillars of Germany’s strong social protection system. There are three guiding principles in the Statutory Health Insurance: solidarity, self-government, and competition. The government sets the framework of benefits offered by the sickness funds, but the funds themselves determine competencies. The great majority of Germans, 70 million in number, 90% of the total population, have public health insurance through the 154 sickness funds. This framework sets up a great structure for looking at differences between the U.S. and German systems.

Copayments were introduced in 2004 by Ulla Schmidt, the former Minister of Health from a Social Democrat party, and were very unpopular with Germans. This is in stark contrast to the U.S. system in which copayments are commonplace and the government has no role in setting them. In Germany, copayments are limited to 2% of income and to 1% of income for chronically ill patients, whereas they often rocket far above this in the U.S. insurance system. Additionally, these SHI funds have open enrollment, no medical pre-examination, and non-exclusion of pre-existing conditions, all of which are very new experiments for the U.S. market. Remarkably, even without using cost control measures such as significant cost sharing and cherry picking healthier patients, at 11% of the GDP, Germany still spends less than the 16% that U.S. spends on healthcare.

Ministry of Finance

The Federal Ministry of Finance is responsible for all aspects of tax and revenue policy. As such, we met with a few members of the Parliamentary State Secretary staff to discuss the topics of insurance regulation, tax subsidies in the health care system, and the looming impact of the aging population on sickness funds. The discussion was lively and engaged our interest in a variety of important issues for the long-term viability of the German public health insurance system. There were a few interesting contrasts between the United States and Germany that surfaced during our discussion.

• First, social issues of great contention in the U.S., such as abortion and contraception coverage, do not heavily influence health policy in Germany. It seems that, when it comes to population health, controversial social issues take the backseat while health and safety take the driver’s seat.

• Second, in the U.S. the new rate review process for insurers has caused a variety of parties to express opposition and dissatisfaction. In Germany, their process is strictly reviewed and controlled yet there is little pushback on the regulation of private insurers. Whether this forecasts the eventual acceptance of this new process in the U.S. or is an unattainable aspiration for us is a question that can only be answered with time.

• Lastly, the German system has a medical loss ratio system that, while not identical to that in the U.S., contains certain restrictions on the amount of surplus revenue that may be directed to administration of plans. Their limit for administrative spending, at 10%, is significantly more stringent than the 20% recently imposed by PPACA, and gives hope that our insurers may one day also be able to reach those spending limits.

Bundestag

We were very impressed with the deliberateness and thoughtfulness of the German Parliament, the Bundestag, which is housed in the Reichstag building of the old German Empire. It was deliberately relocated back to Berlin after the fall of the Berlin wall; this decision reinforced that the country was really working towards being unified. It also reinforced that the Parliament was building on the history of Germany by locating in a building that was the seat of power for the German Empire. We were also impressed by the care that was put into the building renovation. The government held a contest for architectural designs for the Parliament building. The chosen design consciously kept some pieces of the old Reichstag building (from the German Empire) but at the same time made it substantially new and different. The open balcony and the glass dome especially communicate the transparency of the democratic process and its accountability to the people.

The dome of the Bundestag, as seen from inside the building.