Very soon after the German reunification in 1990, the structures of the West German statutory health insurance system were transferred to the former East Germany.In addition to merging the health systems of the west and east, Germany faced the challenge of rising health-care costs due to the ageing population, growing health-care demand, and progress in medical technology. These challenges led to recurrent deficits and increasing debts in the statutory health insurance, even as sickness funds increased their contribution rates. In 1992, €108 billion in statutory health insurance expenditures stood in contrast with €105 billion in revenues.Calls for improvements in efficiency and transparency of service provision were made. Some of the reforms that have taken place in the past 25 years marked strategic new directions, whereas others were readjustments of existing trajectories ( figure 2 ).

The main thrust of legislation reform after Germany's reunification was to foster competition, initially with the goal of controlling expenditure and enhancing technical efficiency. Any new initiatives toward that goal were strictly regulated to avoid risk-selection and other adverse effects of competition.Rationalisation was given priority over rationing, and only a few items were removed from the statutory health insurance benefits package.Many new drugs and technologies were added to the benefits package during this period, and the service profile pivoted towards long-term and palliative care as well as towards prevention. From 2000, the emphasis on cost containment weakened (although the law still includes cost containment as an overall objective), and efficiency and quality—initially considered secondary issues—became core values. The shift in priorities was a response to a growing dissatisfaction among providers with crude cost-containment measures and the recognition of serious quality problems, especially with the coordination of care for patients who are chronically ill.

In 2007, sickness funds began offering a choice of tariffs—a feature previously reserved for private health insurance companies. Different benefits packages and pricing allowed the funds to adapt to the individual needs of their members, for example through plans with a higher-than-standard cost-sharing requirement, which makes statutory health insurance more attractive to people with high incomes and low service use. Tiered rates in statutory health insurance can both strengthen competition between sickness funds and prevent the opting out of low-risk members from the solidarity system. In 2015, 3·5% of the 53·7 million statutory health insurance members (about 1·9 million people) claimed at least one such plan—considerably fewer than the number of members who enrolled in disease management programmes. Most people (60%) who chose a tariff opted for monetary reimbursement, which replaces the traditional benefit-in-kind system. 27% of members chose plans with deductibles, and 20% of members chose no-claim bonuses, which refer to the refunding of contributions in case no service is used ( appendix p 6 ).

In the mid-2000s, sickness funds gained the right to negotiate discounts with pharmaceutical drug manufacturers. The system is mainly used for generics; once such discount agreements have been reached, pharmacies are obliged to dispense the respective products and, because the discounts are confidential, the manufacturer retrospectively reimburses the sickness fund. By 2015, the proportion of total discounts surpassed 10% of total statutory health insurance expenditure on pharmaceutical products and amounted to more than €3 billion ( appendix p 6 ).

The step towards integrated care enabled sickness funds to compete over more than price and to differentiate themselves in a competitive environment. Selective contracting was carefully extended in subsequent years after both a broad discussion of the legislative framework and an examination of the share of statutory health insurance expenditures involved in these contracts. By way of comparison, only 0·02% (€31 million) of total expenditures for statutory health insurance services had been linked to selective contracts between sickness funds and providers in 2002, whereas in 2015, this share increased to 1·5%, equalling €3·13 billion ( appendix p 6 ).Between 2009 and 2010, as a result of the introduction of family doctor care models in 2009, expenditure for services based on selective contracts increased from 0·75% to 1·61%. Sickness funds are legally obliged to offer their members the option to enrol in such a programme. In doing so, members accept to comply with gate-keeping rules before seeing a specialist and, in return, receive certain privileges such as exemption from copayments or shorter waiting times.

With the implementation of the risk-adjustment scheme, the only leverage the sickness funds had to compete for members was on the basis of changes to the contribution. The decision to incorporate market regulation mechanisms into the statutory health insurance entailed a number of other important reforms. Competition for service provision or benefits was still severely restricted since individual selective contracts between sickness funds and providers, which overruled the existing system of collective agreement, were only possible in exceptional cases. This restriction was removed in 2000, allowing sickness funds and providers to engage in selective contractual arrangements, often in the form of integrated care, which meant that a group of providers could be contracted by a sickness fund to provide services across sectoral boundaries.

As an assurance that all sickness funds would compete on equal grounds, their opening to individuals of all occupations was accompanied by the implementation of a risk-adjustment scheme that was designed to minimise incentives for risk selection and reduce extreme differences in statutory health insurance contributions between the sickness funds.Previously, because membership in the funds depended on regional and occupational criteria, there were large differences in the contribution rates due to the varying income and risk profiles of the members. For example, the average contribution in 1992 was 12·7% of an individual's income, but that contribution varied from 11·2% for the group of substitute funds traditionally insuring white-collar workers to 13·3% for the regional funds insuring mainly blue-collar workers. Even more striking were the differences in contributions between individual sickness funds, which ranged between 9% and 18%. The risk-adjustment scheme redistributed fund contributions to ensure that members with low income and high disease risk were as attractive to the sickness funds as people with high income and low disease risk. The scheme underwent several improvements with time; by 2009, it had changed from retrospective redistribution (based only on sex, age, and invalidity status) to using measures of morbidity to capture disease-risk differentials. As a testament to the success of the risk-adjustment scheme, the proportion of individuals paying highly variable rates decreased to 7% in 1999 (in 1994, 27% of all members had paid a contribution differing by more than 1 percentage point from the average).However, the remaining differences in contribution did not decrease to below 1 percentage point until the introduction of a uniform contribution for all members in 2009 ( appendix p 5 ).

With people choosing a sickness fund irrespective of their occupation, the funds had to market themselves to attract new members and retain existing ones, part of which included reducing their contribution rates.In response to the new freedom and growing willingness of members to switch between sickness funds, the sickness funds also began merging, which reduced the number of funds by 70% between 2000 and 2015 ( appendix p 5 ); however, the market share of the three biggest sickness funds did not increase by much, unlike in the Netherlands.To be a member once carried a political connotation rooted in the history of statutory health insurance and the workers' movement, but the option to choose where to make one's insurance contribution reframed the relationship between insured people and the sickness funds—a member is now more likely to be treated as a customer. This, however, has not led to any legislative changes as far as the make-up of self-governing boards, and customers still vote to select their representatives.

Competition among providers in the statutory health insurance system had been strengthened by granting patients a free choice of office-based doctors and hospitals. However, competition among payers was lacking because people were mostly assigned to a particular sickness fund. Giving insured individuals the option to choose their sickness fund and to change funds on a yearly basis (with 3 months' notice as of 1996) was the first essential initiative to strengthen competition in the provision of statutory health insurance. The Health Care Structure Act marked the most important paradigm shift in the history of statutory health insurance, since it not only eliminated the century-old occupational classification and the privileges that white-collar workers had compared with blue-collar workers, but also provided a new regulatory basis for competition among sickness funds and contracts between sickness funds and providers.

The first major reform, the Health Care Structure Act, took place in the early 1990s. This politically driven compromise combined seemingly contradictory elements, namely the introduction of fixed budgets or spending caps for most health-care sectors and the introduction of competition between sickness funds to improve efficiency, all under the watchful eye of regulators and while maintaining the principle of solidarity.

From cost containment to quality (and achieving universal coverage along the way)

34 Bundesministerium für Gesundheit

Endgültige Rechnungsergebnisse der GKV 2000–2015. Apart from the increased management of competition among sickness funds, the 1990s and 2000s were times of many cost-containment interventions. Some interventions, such as the exclusion of certain rehabilitative benefits in 1996–97 and, controversially, of dentures for people born after 1978 (denture coverage was reintroduced in 1998), were unpopular. In 2004, a second wave of cost-containment measures removed insurance coverage for drugs sold over the counter and prescription eyeglasses, which reduced statutory health insurance expenditures for pharmacies from €22·9 billion in 2003 to €20·5 billion in 2004.

18 Busse R

Blümel M 38 Nolte E

Knai C

Hofmarcher M

et al. Overcoming fragmentation in health care: chronic care in Austria, Germany and the Netherlands. , 39 Stock S Integrated ambulatory specialist care—Germany's new health care sector. 40 Busse R Disease management programs in Germany's statutory health insurance system—a Gordian solution to the adverse selection of chronically ill in competitive markets?. 41 Fuchs S

Henschke C

Blümel M

Busse R Disease management programs for type 2 diabetes in Germany—a systematic literature review evaluating effectiveness. Rather than remove benefits, legislators preferred a cost-containment approach that set budgets or spending caps for entire sectors such as hospitals, ambulatory care, and pharmaceutical products. Budgets helped to keep statutory health insurance expenditure slightly above 6% of GDP, whereas overall expenditures increased moderately from 9·0% in 1992 to 10·3% in 2003.These crude budgetary restrictions were politically unwise and impractical in the long term, and the government tried to replace them with alternatives that would also tackle some of the weaknesses of the German system. A primary concern was, and still is, the fragmentation of health-care provision, especially between primary and specialised services in the ambulatory care sector and inpatient services in the hospital sector. Fragmentation of care sectors has led to discontinuities in the provision of health services, reduced effectiveness of interventions, and increased costs. To address this reduced cost-effectiveness, sickness funds were given additional autonomy in 2000 to explore new and innovative ways to provide services.Within this policy context, disease management programmes were introduced for patients with chronic disorders in 2002. The primary policy objective of these programmes was to improve the quality of care by overcoming fragmentation, but the programmes also had a competition-related objective: as patients enrolled in these programmes were factored in separately in the risk-structure compensation scheme of the statutory health insurance, it reduced the chance of adverse selection by the sickness funds.Although disease management programmes can be considered a success in terms of securing participation ( appendix p 6 ), the official evaluation of their clinical effectiveness by the Federal Insurance Authority uses a weak intervention-only design, and results of control-group-design studies are inconsistent.

42 Geissler A

Scheller-Kreinsen D

Quentin W

Busse R Germany: understanding G-DRGs. 46 WHO Regional Office for Europe

European health for all database (HFA-DB). , 47 Statistisches Bundesamt

Grunddaten der Krankenhäuser 2015. Wiesbaden. 48 Danish Ministry of Health

Healthcare in Denmark—an overview. Copenhagen. Figure 3 43 Statistisches Bundesamt

Fallpauschalenbezogene Krankenhausstatistik (DRG-Statistik) 2015. Wiesbaden. , 44 Statistisches Bundesamt

Gesundheitsausgaben 1995–2015. Fachserie 12 Reihe 7.1.2. Wiesbaden. , 45 Organisation for Economic Co-operation and Development

OECD Health Statistics. Expenditures, human resources, and use of hospital care, 2003–14 Show full caption GDP=gross domestic product. The political shift away from cost containment to efficiency-enhancing policies was most visible with the introduction of diagnosis-related groups in 2004 as a basis for reimbursing hospitals for inpatient services. As the relative cost weights for the diagnosis-related groups are based on actual resource use, they served as a benchmark for spurring competition between providers (ie, hospitals) to increase the efficiency of health service provision.These incentives were effective: hospitals reacted by adjusting the composition of clinical personnel assigned to inpatient cases—increasing the ratio of doctors to nurses because it was doctors who provide the coding-relevant procedures—and thereby achieved a stable cost-per-inpatient case measured against GDP during a period of considerable technological progress ( figure 3 ). With the introduction of diagnosis-related groups, policy makers had expected that inefficient hospitals would cease to provide such services, or even cease to provide services altogether and close. The reduction in hospital capacities was, however, modest, leaving Germany with a bed capacity of 65% above the average EU15 average. The number of inpatients increased by 17% between 2005 and 2015 and was 50% higher than the EU15 average in 2015.In other words, beds that had been emptied because of improved efficiency were filled by the increase in patient admissions, resulting in a stable but high mean duration of hospital stay per person (around 1·74 days per person; appendix p 7 ). By comparison, the mean duration of hospital stay in Denmark was 0·71 days per person in 2014.

49 Busse R

Nimptsch U

Mansky T Measuring, monitoring, and managing quality in Germany's hospitals. , 50 Pross C

Geissler A

Busse R Measuring, reporting, and rewarding quality of care in five nations: five policy levers to enhance hospital quality accountability. 51 Deutscher Bundestag

Gesetz zur Reform der Strukturen der Krankenhausversorgung. Krankenhausstrukturgesetz - KHSG. Legislators were not oblivious to the potentially negative effects of diagnosis-related groups on quality that would be caused by the potential underprovision of services to individual patients on the one hand and by the unnecessary admissions leading to an overprovision of care on the other hand. Hospitals are now required to provide annual quality reports documenting structural, process, and outcome indicators at the hospital level and medical department level for 30 tracer diagnoses and procedures, covering 25% of inpatient cases across the country's 1600 acute care hospitals. 434 process and outcome indicators are collected at present, which include evidence-based care compliance, readmission, infection, and mortality. Increasingly, the reporting outcomes of these indicators must be made public by the hospitals.The Hospital Structure Reform Act of 2016 defined the next steps for improving quality, which are to select four areas of selective contracting between sickness funds and hospitals and to initiate pay for performance reimbursements for a limited number of indications or disease areas, but the specific indications are yet to be defined by the Federal Joint Committee.

Ensuring quality in pharmaceutical care was less straightforward. The 1993 Health Care Structures Act announced the creation of a positive list of all pharmaceutical products that would be covered by statutory health insurance, but this regulation was later cancelled. Instead, all prescription drugs remained covered, and pharmaceutical cost-containment policies relied on spending caps, discounts mandated by the government, and reference prices that were set for groups of comparable drugs. This incentive-based system was used for older drugs for which generics were filling a growing market share because of their low prices.

52 Deutscher Bundestag

Gesetz zur Neuordnung des Arzneimittelmarktes in der gesetzlichen Krankenversicherung. Arzneimittelneuordnungsgesetz—AMNOG. 53 von Stackelberg JM

Haas A

Tebinka-Olbrich A

Zentner A Ergebnisse des AMNOG-Erstattungsbetragsverfahrens. These quality and cost-containment incentives in the pharmaceutical sector left the issue of new and often prohibitively expensive and clinically unproven drugs untouched for a long time. Only in 2011, with legislation referred to as the Pharmaceutical Market Reform Act, did the government require that manufacturers of newly licensed pharmaceutical products submit a dossier with sufficient data to assess the drug's added benefit relative to existing products. If a drug had no additional benefit, it would be placed in a reference price group and the cost would be reimbursed at the same rate as existing drugs. For drugs with an added benefit, the Federal Association of Sickness Funds would negotiate a reimbursement amount with the manufacturer.Until August, 2016, 319 drugs (excluding orphan drugs) had been assessed, 102 (32%) of which were found to have an added benefit.

54 Schwabe U

Paffrath D Arzneiverordnungen 2015 im Überblick. A trend that has yet to be publicly acknowledged in the German debate is the increase in consumption of medicines, or defined daily doses, by more than 50% between 2004 and 2015 ( appendix p 8 ).This trend should raise concern about potential patterns of overprescribing.

In line with the international debate and developments since 2010, the focus of health reforms in Germany has also brought attention to health service access, especially as a function of geography. Various interventions aim to encourage doctors to work in rural areas or in deprived urban neighbourhoods.

Panel 4 Long-term care insurance 55 Evers A Social care services for children and older people in Germany: distinct and separate histories. 56 Campbell JC

Ikegami N

Gibson MJ Lessons from public long-term care insurance in Germany and Japan. Municipalities have supported the health needs of an ageing population through taxes, and after years of discussion at the political level, the federal government introduced statutory long-term health insurance in 1994. Fully operational in 1996, statutory long-term health insurance closed a gap in the system of social security and is often denoted as its fifth pillar of social security.Long-term care insurance is based on the same organisational principles that define German statutory health insurance: insurance is mandatory and usually provided by the same insurer as health insurance, which means that statutory health insurance members and privately insured individuals are both automatically covered by long-term care insurance, comprising a similar public–private insurance mix. Long-term care funds are affiliated with sickness funds, which handle all administrative tasks; however, financing pools and management are strictly separated. 57 Bundesministerium für Gesundheit

Zahlen und Fakten zur Pflegeversicherung. Like statutory health insurance, long-term care insurance is financed by contributions that are levied on wages up to a certain limit (in 2017, up to €3938 per month). Contributions were initially set to 1·7% of gross wages and shared between employers and employees. Today, the contribution has increased to 2·55% of gross wages. Since 2005, people who are 23 years or older and do not have children must pay a 0·25 percentage point increased contribution. 58 Blümel M

Busse R The German health care system, 2015. By contrast with statutory health insurance, benefits provided through long-term care insurance are only available by application and for persons who have contributed for at least 2 years. Entitlement to benefits is assessed by the Medical Review Board, which can issue a denial or assign the applicant to one of five levels of care. Beneficiaries can choose between in-kind benefits and cash payments; the latter account for about a quarter of all long-term care insurance expenditures. Both home care and institutional care are provided almost exclusively by private, not-for-profit, and for-profit providers. 59 Auth D Ökonomisierung von Pflege in Großbritannien, Schweden und Deutschland. 60 Nadash P

Cuellar AE The emerging market for supplemental long term care insurance in Germany in the context of the 2013 Pflege-Bahr Reform. The most important difference between statutory health insurance and long-term care insurance is that for long-term care insurance, like in the British model, benefits do not cover the full costs of care, and copayments are standard.As benefits usually cover only about 50% of institutional care costs, people are often advised to buy supplementary private long-term care insurance. In 2013, with the aim of encouraging the development of private insurance to close gaps in the financing of social long-term care insurance, the German Government began offering subsidies for the voluntary purchase of qualified, private long-term care insurance. This type of coverage is known as “Pflege-Bahr,” named after the Minister of Health at the time, Daniel Bahr. 5 Knieps F

Reiners H A reform of long-term health insurance was soon needed to redefine the concept of long-term care. The original interpretation of long-term care had been rather narrow and strongly related to somatic illnesses and restrictions of so-called functions; it also excluded dementia and other cognitive impairments, which affected patients who had slight physical impairment.The impending underfunding of long-term care insurance was also subject to intense controversy between different stakeholders. As a result, several reforms have been implemented since 2008, particularly between 2013 and 2016. To meet new needs and to ensure equal access to services on the basis of solidarity, the benefits package was expanded even during phases of cost containment. For example, palliative care and hospice services were included in 2000, at about the same time as integrated care was introduced in an attempt to reduce fragmentation and restrain associated costs. The most important expansion of benefits, however, came with the introduction of long-term care insurance in 1994 ( panel 4 ).