Last fall, Sam, an American woman who lives in Berlin, began to experience stomach pain while eating and drinking. She visited her general practitioner, who wrote her a prescription.
The problem hadn't gone away several days later, so the doctor referred her to a specialist for a gastroscopy. Her issue wasn’t deemed an emergency, though, so she had to wait about two weeks for an appointment.
“But man, was I impressed with the exam itself!” she later told me in an email. “Went to the hospital, filled out a few papers, was knocked out for a bit while they looked in my stomach, and was home again a few hours later. Everything was very efficient.”
The best part: Sam paid exactly nothing for the experience.
Instead, the bill was paid by the Barmer GEK sickness fund, one of about 160 such nonprofit insurance collectives in the country. Every German resident must belong to a sickness fund, and in turn the funds must insure all comers.
They’re also mandated to cover a standard set of benefits, which includes most procedures and medications. Workers pay half the cost of their sickness fund insurance, and employers pay the rest. The German government foots the bill for the unemployed and for children. There are also limits on out-of-pocket expenses, so it’s rare for a German to go into debt because of medical bills.
It should, since this is very similar to the health-insurance regime that Americans are now living under, now that the Affordable Care Act is four years old and a few days past its first enrollment deadline.
All Americans are now required to have health insurance or to pay a fine, and insurers cannot deny coverage to anyone, regardless of pre-existing conditions. Obamacare has also created subsidies for those who can’t afford to buy health insurance and has implemented limits on out-of-pocket costs.
There are, of course, a few key differences. Co-pays in the German system are minuscule, about 10 euros per visit. Even those for hospital stays are laughably small by American standards: Sam payed 40 euro for a three-day stay for a minor operation a few years ago. Included in that price was the cost of renting the TV remote.
And nearly five million Americans fall into what’s called the “Medicaid gap” in states that aren’t expanding the government health insurance program for the poor. These individuals make too much to qualify for the state’s existing Medicaid program (typically just a few thousand dollars a year for childless adults), yet too little to qualify for the federal government’s subsidies to buy health insurance on the new exchanges, so they will remain uninsured. In Germany, employees' premiums are a percentage of their incomes, so low-wage workers simply pay rock-bottom insurance rates.
The sickness funds are Germany's version of a “public” health insurance system, and it covers nearly everyone. But a small segment (13 percent) of the population, generally the very wealthy, can opt-out and instead go with the private Krankenversicherung, which follows rules more similar the pre-Obamacare U.S. individual insurance market.
But those differences aside, it’s fair to say the U.S. is moving in the direction of systems like Germany’s—multi-payer, compulsory, employer-based, highly regulated, and fee-for-service.
You can think of this setup as the Goldilocks option among all of the possible ways governments can insure health. It's not as radical as single-payer models like the U.K.’s, where the government covers everyone. And it's also not as brutal as the less-regulated version of the insurance market we had before the ACA.
“I think you’re moving more in the direction of international standards,” Dirk Göpffarth, head of risk adjustment at the German Federal Social Insurance Office, told me. “The U.S. was always the odd one out with not regulating healthcare until everyone goes into Medicare.”
Germany actually pioneered this type of insurance—it all started when Otto von Bismarck signed his Health Insurance Bill of 1883 into law. (It’s still known as the “Bismarck model” because of his legacy, and other parts of Europe and Asia have adopted it over the years.)
But that’s not to say that the Bismarck model is without its problems. In fact, Germany shares many healthcare woes with the U.S., and it’s tried some intriguing solutions that Americans might look to, as well.
So, with our healthcare system looking decidedly more German, here’s what we have to look forward to.
All things considered, it’s good to be a sick German. There are no network limitations, so people can see any doctor they want. There are no deductibles, so Germans have no fear of spending hundreds before their insurance ever kicks in.
There’s also no money that changes hands during a medical appointment. Patients show their insurance card at the doctor’s office, and the doctors' association pays the doctor using money from the sickness funds. "You don’t have to sit at home and sort through invoices or wonder if you overlooked fine print,” Sophia Schlette, a public health expert and a former senior advisor at Berlin’s National Statutory Health Insurance Physicians Association, told me. That insurance card, by the way, is good for hospital visits anywhere in Europe.
Germany is in the middle of the pack among developed countries when it comes to healthcare spending per capita, according to a report released by the Commonwealth Fund last fall.
But of all of the countries studied, Germans were the most likely to be able to get a same-day or next-day appointment and to hear back from a doctor quickly if they had a question. They rarely use emergency rooms, and they can access doctors after-hours with ease.
And Germany manages to put its health-care dollars to relatively good use: For each $100 it spends on healthcare, it extends life by about four months, according to a recent analysis in the American Journal of Public Health. In the U.S., one of the worst-performing nations in the ranking, each $100 spent on healthcare resulted in only a couple of extra weeks of longevity.
Then, of course, there are the drawbacks. Since there are no provider networks in Germany, doctors don’t know what other providers patients have seen, so there are few ways to limit repeat procedures. In fact, Germany is facing quantity-control issues similar to America’s, but the U.S. is more of a vanguard in attempting to limit waste. The ACA created Accountable Care Organizations, voluntary groups of doctors and nurses that can share in the savings if they manage to treat Medicare patients more efficiently.
The German government is similarly trying to push more people into “family physician” programs, in which just one doctor would serve as a gatekeeper. But that’s an idea the Germans borrowed from the American HMO model of the 1980s.
And like the U.S., Germany may see a shortage of primary-care doctors in the near future, both because primary-care doctors there don’t get paid as much as specialists, and because entrenched norms have prevented physician assistants from shouldering more responsibility, Schlette said. There are so few nurses available to provide geriatric care that Germans have started importing their own home health aides from Eastern Europe or the Philippines.
The German government is also currently trying to lure more primary care doctors to rural areas, where staffing issues are much worse than in affluent towns and cities—just like in, well, you guessed it.
The mandatory German insurance can also get rather expensive. Sam pays 355 euros a month for her sickness fund because as a freelancer, she’s responsible for both the employer- and employee-paid portions. And in one 2010 survey, nearly as many Germans (16 percent) as Americans (17 percent) said they spent a lot of time on medical paperwork or disputes.
With limitations on how much they can charge, German doctors and hospitals instead try to pump up their earnings by performing as many procedures as possible, just like American providers do.
“Is the system good?” Schlette said. “Well, maybe, but there is a lot of oversupply of care and poor care coordination.”
With few resource constraints, healthcare systems like America's and Germany's tend to go with the most expensive treatment option possible. An American might find himself in an MRI machine for a headache that a British doctor would have treated with an aspirin and a smile.
Similarly, “In Germany, it will always be an operation,” Göpffarth said. “Meanwhile, France and the U.K. tend to try drugs first and operations later.”
Perhaps the biggest difference between our two approaches is the extent to which Germany has managed to rein in the cost of healthcare for consumers. Prices for procedures there are lower and more uniform because doctors’ associations negotiate their fees directly with all of the sickness funds in each state. That's part of the reason why an appendectomy costs $3,093 in Germany, but $13,000 in the U.S.
“In Germany, there is a uniform fee schedule for all physicians that work under the social code,” Schlette said. “There’s a huge catalogue where they determine meticulously how much is billed for each procedure. That’s like the Bible.”
In the U.S., meanwhile, a trip to the doctor or hospital is still a roulette of billing discrepancies and not-covered expenses.
Obamacare, meanwhile, has tried to cut healthcare costs primarily by taking aim at the number of unnecessary procedures. Medicare’s payments to hospitals are now partly tied to readmission rates, and last year Medicare punished more than 2,000 hospitals for not doing a better job of keeping patients out of the ER. There have also been 114 Accountable Care Organizations created, but so far only 29 have saved enough money to qualify for bonus payments.
And there are still more cost-cutting measures to come, like taxes on “Cadillac,” or very generous, health plans. Some experts think American customers might become more cost-conscious as they move onto stingier healthcare plans.
And certain U.S. states have tried a more German strategy, attempting to keep costs low by setting prices across the board. Maryland, for example, has been regulating how much all of the state’s hospitals can charge since 1977. A 2009 study published in Health Affairs found that we would have saved $2 trillion if the entire country’s health costs had grown at the same rate as Maryland’s over the past three decades.
Now, Maryland is going a step further still, having just launched a plan to cap the amount each hospital can spend, total, each year. The state's hospital spending growth will be limited to 3.58 percent for the next five years.
“We know that right now, the more [doctors] do, the more they get paid,” John Colmers, executive director of Maryland’s Health Services Cost Review Commission, told me. “We want to say, ‘The better you do, the better you get paid.’”
Two other small, left-leaning states, Vermont and Massachusetts, are experimenting with similar measures, but some experts doubt that this sort of top-down thriftiness can be imposed in every state, or even in most states. As we’ve seen from the bitter fight over Medicaid expansion, conservative states tend to balk at government directives.
“These states are all unabashedly in the new (or rediscovered) category of states who recognize that the authority of government is an essential ingredient to finding a sustainable level of total health spending,” John McDonough, a professor at the Harvard School of Public Health, told me. “The red states are unlikely to follow their lead. The notion that government may be a big part of the solution, instead of the problem, is anathema, and Republican controlled legislatures, and their governors, would find it too substantial a conflict to pursue with any vigor.”
What’s more, no other state has Maryland’s uniform, German-style payment system in place, “so Maryland starts the race nine paces ahead of the other 46 states,” McDonough said.
In a 2012 report on the German and American healthcare systems, Göpffarth pointed out that though the U.S. and Germany are both desperately trying to make healthcare less expensive, the unique spirit of each country is what ultimately gets in its way. Germany’s more orderly system can be too rigid for experimentation. And America’s free-for-all, where hospitals and doctors all charge different amounts, is great for innovation but too chaotic to make payment reforms stick.
In fact, Göpffarth thinks rising health costs will continue to be the main problem for Americans as we launch into our more Bismarckian system.
“The main challenge you’ll have is price control,” he said. “You have subsidies in health exchanges now, so for the first time, the federal budget is really involved in health expenditure increases in the commercial market. In order to keep your federal budget under control, you’ll have to control prices.”
And though we’ve followed the lead of Germany and other European systems to get where we are now, no country has quite figured out that last part yet.
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