Demographic Change Propels German Health Insurance Reforms

By: Mark Lauterwein

The burden on the German health care system has increased, and is set to increase still more in decades to come due to an aging population and plunging birth rate. Long accustomed to affordable health care of a high standard Germans are facing something of a reality check as their high expectations flounder on the rocks of the new demographic.

There is already a creeping perception that standards are declining in the gesetzliche Krankenversicherung (GKV) and this perception is the catalyst for a drift towards private cover.

Analysts maintain that Germany's two tier health system has resulted in the 15% who shell out for private Krankenversicherung acting as unwitting benefactors for the other 85% of the population. They are subsidizing the entire system since contributions to the state scheme cannot recoup spiralling costs. Politically, there has been a lack of volition in addressing this issue hands on. The root of the problem can be traced to the contrasting ways in which private and public institutions handle their customer's money. Private insurance firms put money aside for long term care (AltersrÃ?ckstellung, literally putting something back for retirement). But the state systems do not do this - the system is geared to spending all contributions within the calendar year. The consequences of this misguided policy are not difficult to imagine in the longer term.

However, recently the government of the Federal Republic has proposed the creation of a centralised government "health fund" in 2009. All contributions would be paid into this and the money would then be doled out to individual Krankenkassen at the same percentage rate per customer. This would effectively end the effective autonomy currently enjoyed by the Krankenkassen (state insurance administration authorities).

It is hoped that by allowing the Krankenkassen to give a small refund in the event of their making a profit and by introducing a right of cancellation for the customer an element of competition will be introduced into the process. However, it should not be understood that this constitutes a real free market since the individual Krankenkassen will still have no say in selecting their members or, for example, rejecting those with unfavourable medical histories.

For the time being anybody considering investing in a private Krankenversicherung (PKV) would be well advised to seek independent advice (Beratung) to ensure they but appropriate cover. There are many providers offering a great many products.

Health Insurance
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