Social Health Protection in Germany – Experiences and Lessons

1. Social Health Protection in Germany – Experiences and Lessons Conference on National Health Insurance: Lessons for South Africa – Johannesburg, 07/12/2011 Dr Matthias Rompel Head of Section Social Protection Deutsche Gesellschaftfür InternationaleZusammenarbeit (GIZ) GmbH

2. Outline of Presentation • Preamble Brokering Know-How from Germany through Internat. Cooperation • Background • The German System • Guiding Principles • Institutional Arrangements, Financing, Governance • Recent & Envisaged Changes • Lessons & Conclusions

3. Brokering Know-How from Germany through International Cooperation • Germany as the country with the longest tradition in social security worldwide • German International Cooperation (GIZ) as the agency of the German government for international cooperation:Capacity Development & Technical Cooperation on Social Health Protection and broader Social Protection issues in some 30 countries worldwide • Approach: No blueprint, advice tailored to the needs and conditions of partner country • Value basis: Universal access, solidarity, fair financing, equity • Strong international partnerships e.g. Providing for Health (P4H) – Social Health Protection Initiative as network incl. WHO, World Bank, ILO, France & others

4. Background • Worldwide more than 150 million individuals per year face financial catastrophe as a result of having to pay for health care out of pocket • About 100 million individuals of these are pushed into poverty each year • In many countries health spending still below requirements to provide access to health care for all - high proportion of the world’s 1.3 billion poor have no access to health services

5. The Challenge • Impoverishment due to accessing health care is strongly linked to OOP payments (user of health services) • People might be too poor to even access services (non-user) Reliance on OOP means: • No risk sharing • The most regressive financing mechanism

6. Sustainable and equitable financing of health systems More resources spent efficiently on health Pre-payment Social Health Protection ReducedOut-of-pocket expenditures Improved health outcomes Risk-pooling Improved access to quality health services Higher utilisation of health services Mechanisms of Social Health Protection P4H impact chain Source: WHO

7. Occupying middle ground between public and private mechanisms of financing and delivering health care Example that adequate and almost equal access to benefits can be achieved within a pluralistic system Free choice of physicians (GP´s & Specialists) and almost free choice of hospital care - regardless of patient´s financial situation Successful cost containment Some reasons to be interested in the German Health Financing System

8. Guiding Principles of the German System • Overarching Goal of nearly all domestic policy: Social Cohesion (reduction of social tension) • amongst various socio-economic classes • amongst various interest groups Also enshrined in German Social Market Economy as model to interrelate social & economic policy • Guiding Principles • Solidarity, Fair Financing & Equity • Subsidiarity • Free choice of providers

9. Solidarity, Fair Financing & Equity • Ethical platform • Everyone should have access to the same benefit package and same quality of care on equal terms • no person or family should be financially burdened by illness • Implications: • the wealthier pay for the poor, the young pay for the old • the healthy pay for the sick, small families/singles pay for large families • Contributions: • fixed % of salary - not related to health status • Government subsidies (tax-based) for persons/families and/or services

10. Subsidiarity • Solve problems at the lowest possible level • higher levels only intervene in case of failure or inability • Central (Federal) Government • has the role of a regulator and supervisor • direct spending on health care is insignificant • is only marginally involved in service provision • delegates state functions to actors of the system Health care sectorgoverns itself within the set federal legal frameworkassessed along impact and process indicators

11. Free choice • Patients have the freedom to choose • providers – ambulatory and hospital care • social health insurance carriers • Unified compensation system for providers (mix of private and public but autonomous providers) • identical, negotiated price schedules • makes providercompetitionpossible based on quality

12. From Supply Side to Demand Financing • Separation of key functions of the health system • Financing of health services • Provision of health services • Accreditation of health care providers • Training of health professionals • Regulation of all actors in the health sector • The legal frameworks determines the structural and institutional arrangement necessary to ensure the above: • Rules for interaction and arbitration to ensure that every citizen can access his/her constitutional rights • and that all actors in the health system can be held accountable for their respective outcomes and goals

13. Long Term Trends

14. Universal Coverage – the Dimensions Source: World Health Report 2010

15. Who is insured? How? • Employees and retirees with a monthly income up to 4,125 Euro (49,500 Euro* p.a.) • Students • Family members (included wife, children) • Unemployed (since 2004: social assistance beneficiaries) Compulsory Private Health Insurance (obligation) Statutory Health Insurance (compulsory / voluntary) Choicebetween • Employees and retirees with monthly income above 4,125 Euro (49.500 Euro* p.a.) • Self employed • Civil servants * Limits 2011

16. contribution according to individual risk (costs) rich poor contribution according to income solidarity principle equivalence principle benefits according to individual contract benefit according to need Healthyyoung childless ill old families Social Health Insurance Private Health Insurance The Solidarity Principle

17. Statutory / Social Health Insurance Private Health insurance Basis: legal requirement • solidarity principle • Payment in kind principle • Capacity on demand Statutory health insurance: • Non-for profit • Insurance regardless of financial means and medical history (obligation to contract) • Pay-as-you-go • Basis: private contract • equivalence principle • cost reimbursement principle • Service as agreed • Private insurance company: • For profit • Tendency to exclusion of the sick, extra corresponding risks (no obligation to contract) • asset management / capital stocks

19. Membership: Statutory / Social Health Insurance 74% compulsory members (including insured‘s relatives) 14% voluntary members (with insured‘s relatives)

20. Equal Access to SHI & Free Choice of Service Provider • SHI carriers have to accept everyone • (exceptions for special funds for farmers, miners, seamen and guild • funds which are not open to the public) • Freedom of choice between all physicians in • ambulatory care (OPD) • Global Co-Payment limits of 2 % of the income for all people / 1 % for people who are chronically ill

21. Case-based payments (DRGs for in-patient care) Co-payments are collected directly by the providers Service-Delivery: Benefits in Kind No cash payment for the patients (exception: co-payments) Comprehensive contracting system to regulate prices, quantities and qualities of products and services implemented through self-administration Provider SHI carrier Patient Associations of SHI carriers Associations of Providers

22. SHI carrier Division of Purchaser & Provider Functions Chip card (licence) Insured Physician benefit contribution membership Chip-card fee Overall remuneration for medical services contracts Association of Physicians costs benefits Budgets

23. SHI carrier Envisaged Contractual Relationships in Future Increasing the indirect contract relations between SHI carriers and the provider Physician / Hospital Insured Contract AssociationofPhysicians / Hospitals

24. Composition of Funding for Healthcare

25. insured personsfreedom of choice Refund If the revenues received bythe health fund exceed the costs of the SHI-carrier (voluntary!) Additionalcontribution If the costsof the SHI- carrier exceed the revenues received by the health fund (mandatory!) SHI carriercompetition between each other uniform lump sums for all insured plus risk supplement Health Fund (2011: ~180 Bill. €) federal subsidyfinanced by taxes(e.g. for the insurance coverage of children) (2011: 14 Bill. €) Payroll contribution (2011: 7,3%) payroll contribution (2011: 8,2%) state insured persons employers Changes in the System: The Health Fund (since 2009) Health Fund

26. Sources of Funding • Contributions • Co-payments • Tax-input • Private Insurance

27. - Contributions - • percentage of wages / salaries / pension (up to the contribution assessment limit of 49.500 Euro per year) • paid-up co-insurance (non-working spouse, children) • parity financing (~ 50% employer, 50% employee) • contributions of the pensioners (each 50% SI-carrier / pensioner at the statutory pension, since 2004: 100% at additional pensions) • contributions at unemployed, people receiving welfare (contribution since 2004: ALG I / II, Social Assistance) • pay-as-you-go financing (permanent coverage of expenditures)

28. Contribution Rate (1980 – 2011) trend * since 1.7.2005 feature of 0,9%

29. - Co-payments - • Pharmaceuticals • Dentures / orthodontic • non-physician treatment (e.g. physiotherapy) • since 2004: ambulatory treatment - OPD (consultation fee) • hospital stay (lodging) • transportation to and from medical facility • preventive spa / inpatient rehabilitation • Exemptions: critical loads / hardship (children and general max. 2% of the household income p.a. respectively 1% of the income for chronically ill)

30. - Taxes - • coverage of contributions or absorption of costs for people receiving welfare benefits (statutory intergation since 2004) • investment costs of hospitals • public health service (immunization, control of epidemics) • governmental coverage (soldiers, civil servants) • Partial coverage of private expenditures on health for civil servants („Beihilfe“) • subsidies for the agricultural sickness funds • since 2004: subsidy for benefits not directly belonging to health / sickness (e.g. maternity) -> 2011: 14 Billion €

31. Lessons & Conclusions (I) Systems matter: coherence in the “broader picture” is important Access Efficiency Equity Objectives Context Political and economic environment Social Health Protection Quality Rights Social Perspective Social Protection Social Capital Health Perspective Health Systems Development Perspective Pro-poor orientation Process – values – holistic approach Focus: Health Financing, Financial Protection Sustainability Social Justice Good Governance Participation Solidarity Values Source: GIZ / P4H

32. Lessons & Conclusions (II) Systems matter: health financing relates to other health system functions Source: WHO

33. Lessons & Conclusions (III) • Vision matters: Build consensus on where you want to go: in terms of population coverage, in terms of service coverage, in terms of support value • Political economy matters: Find mechanisms to dialogue on interests, create checks and balances to balance power relationships (private providers, pharmaceutical industry, independency from political day-to-day business etc) • Regulation matters: Patients need protection from the inefficiencies of providers and cost pressures of the industry in all health care markets • More health for the money: Efficiency needs to be build in the system. Improving efficiency in the given health care system is more important than generating additional resources • Effective mechanisms matter: provider-payment (e.g. DRGs), contracting, ICT capacities and systems, strategic purchasing etc are necessary to ensure good outcomes

34. Thank you very much for your attention ! Contact: Matthias.Rompel@giz.de www.giz.de