What started the health policy

Health policy

Thomas Gerlinger

Prof. Dr. Dr. Thomas Gerlinger is professor at AG 1: Health Systems, Health Policy and Health Sociology at the Faculty of Health Sciences at Bielefeld University

Thomas Schönwälder


What phases did health policy go through from 1975 to the present day? What features shaped the individual phases of health policy development? What reasons led to the paradigm shift in health policy at the beginning of the 1990s?
Intestinal surgery in Lüdenscheid 1989: In the first phase of the reforms between 1975 and 1992, the historically evolved health care structures remained largely untouched. (& copy picture-alliance, Klaus Rose)

In the first post-war decades and especially in the social liberal reform era at the beginning of the 1970s, health policy was characterized by an expansion of health care. The expansive development of expenditure was generally not considered to be particularly problematic because high economic growth rates led to a strong increase in income for the health insurance companies. This changed with the world economic crisis that began in 1973/74, as a result of which, on average, rather low growth rates and high unemployment figures, which tended to rise, shaped the economic development.

Now cost containment has become an urgent goal of German health policy. The term cost containment stands for the catchy but little questioned notion that health care has become "too expensive". The necessity of such a goal orientation is by no means undisputed. For example, it can be pointed out that statutory health insurance expenditure has hardly increased since the second half of the 1970s, measured in terms of economic value added (GDP). Since then, their share has been between six and seven percent of GDP, with only a slight upward trend. Regardless, the notion of cost explosion remains very popular, and all government coalitions embrace the goal of cost containment.

Cost containment has been the overarching goal of health policy for more than three decades. In pursuing this goal, two phases can be distinguished. In the first phase, which spanned the period between 1975 and 1992, the reforms left the historically evolved health care structures essentially untouched. In the following it will be referred to as traditional or structure-conserving cost-containment policy. In the second phase, which continues to this day, which began in the first half of the 1990s, numerous new control instruments, above all instruments for competitive control of the health care system, were used. Since then, the historically grown structures of the German health care system have been subject to strong pressure to change. This stage can be characterized as a phase of competitive structural reforms.

Traditional (structure-conserving) cost containment policy (1975 to 1992)

The traditional cost containment policy can be narrowed down to the period between the mid-1970s and 1992. It left the structures of the statutory health insurance largely untouched.

Important laws passed at this stage were:
  • the Health Insurance Cost Attenuation Act (KVKG) (1977),
  • the Household Supplementary Act (1982),
  • the Supplementary Cost Control Act (1981),
  • the Hospital Reorganization Act (KHNG) (1984),
  • the law on health insurance requirements planning (1986),
  • the Health Reform Act (GRG) (1988).
This phase is mainly characterized by the following features:

Income-oriented spending policy
The central health policy goal was to adjust SHI expenditure to income. Thus, the contribution rate stability was de facto raised to the rank of a global target value without this term first appearing in the legal provisions. In doing so, additional expenditure was not strictly prevented. If - which happened again and again - there was a disproportionate increase in the amount of work, the parties to the joint self-government often resorted to the means of so-called renegotiations. The service providers (especially the statutory health insurance physicians and the hospitals) often succeeded in subsequently enforcing an increase in the remuneration of the health insurance companies. This practice contributed to the fact that the statutory health insurance expenses and thus mostly also the contribution rates rose in this phase as well. However, the income-oriented spending policy was not unsuccessful in that this increase in spending was slowed down significantly compared to the first half of the 1970s.

Involvement of the actors in joint self-government
The income-oriented spending policy relied heavily on recommendations and appeals and was generally very keen to involve the actors of joint self-government in the cost-containment policy. This was done on the one hand by transferring control competencies to health insurances and associations of service providers (see following sections), on the other hand through the establishment of concerted action in the health care system. The transfer of control competencies to the associations of common self-administration can be described as corporatisation.

Strengthening of the cash registers towards the service providers
The legislature endeavored to cautiously, but noticeably, strengthen the negotiating position of the health insurances with the service providers - in particular with the associations of statutory health insurance physicians (KVs) as collective organizations of statutory health insurance physicians. This objective was based on the assessment that the health insurance funds were structurally inferior to the KVs in the negotiations of joint self-administration. This inferiority resulted mainly from the organizational fragmentation (seven types of funds, various regional structures). In addition, there were differences in performance law and in the remuneration system. The KVs, on the other hand, had a monopoly on negotiating with the health insurance funds because they had the state mandate to guarantee the outpatient care of statutory health insurance patients. This unequal distribution of power to the detriment of the coffers had repeatedly given the KVs the opportunity to obtain concessions from the coffers that were effective in terms of expenditure and in this way to undermine the global goal of income-oriented spending policy.

The strengthening of the health insurances through the interventions of the legislature took place above all by means of the alignment and centralization of the competencies and conditions, some of them very different between the insurers and types of insurers (see section "The organization of the statutory health insurance").

Corrections to incentives for action by the service providers
The vast majority of health care expenditure is provider-induced. In its cost containment efforts, the legislature therefore tried to correct structures and incentives that favored a medically non-indicated expansion of services by the providers. This included the following measures in particular:
  • The introduction of a statutory health insurance requirement planning. It should limit the increase in the number of doctors and the resulting demand for health services.
  • The reform of the fee schedule for statutory health insurance physicians and the uniform assessment standard for statutory health insurance services (EBM). On the one hand, this was intended to reduce the expansion of technical and apparatus-related services. On the other hand, the distribution of fees among general practitioners should be made more equitable.
  • Modifications to the remuneration system in inpatient care. Flexible budgets and the introduction of prospective self-cost coverage should reduce incentives to extend the length of stay.
  • Large equipment planning measures. The aim here was to limit the range of large medical and technical equipment and thus the rapidly increasing volume of technical and equipment services.
Privatization of treatment costs
Individual co-payments were introduced for various services and gradually increased; In isolated cases, services were also excluded from the reimbursement obligation of the health insurances (for example the so-called minor drugs).

The first phase of the cost containment policy was - if you look at the development of expenditure - not unsuccessful, but the effects remained limited. This is mainly due to the fact that under the umbrella of the revenue-oriented expenditure policy, the previous incentives for the actors remained essentially unchanged. They either pointed in the direction of expanding the volume of services or were at least not of such a nature that they would have induced the actors to restrict the provision, financing or use of services in the long term out of their own financial interest. In this respect, the traditional cost containment policy was characterized by the contradiction between the global goal of stable contribution rates and the financial incentives for individual actors:
  • On the part of the service providers, it was the applicable forms of remuneration and financing, in particular the principle of cost recovery in inpatient care and individual service remuneration in the outpatient sector, which provided a strong incentive to increase volumes.
  • The cash registers enjoyed a de facto grandfathering due to the system of largely rigid membership allocation; Their competition for members was limited to the segment of the compulsorily insured with freedom of choice, so above all the employees and the voluntarily insured. Even under these conditions, the funding agencies tried to avoid increases in contribution rates, but foreseeable increases in their negative effects on the fund remained limited and manageable.
  • On the part of the insured, the copayment volume achieved was probably too low to induce them to reduce their use of benefits to any significant extent. At the end of the 1980s and the beginning of the 1990s, co-payments by those insured by statutory health insurance were still very low from today's perspective (see section "Financing statutory health insurance").
Traditional (structure-conserving) cost containment policy (1975 to 1992)