HCD 303 Module 2 Comparative Health System Analysis: Germany and the United States Example

Competing Insurers, Different Results: A Comparative Analysis of the German and U.S. Health Care Systems

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BS in Health Care Administration and Policy, Arizona State University

HCD 303: Global Health Care Systems

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Month Day, Year

Competing Insurers, Different Results: A Comparative Analysis of the German and U.S. Health Care Systems

Introduction

Germany and the United States both organize health care around multiple insurers and private providers, unlike countries with a single national health service. Yet Germany covers virtually its entire population while spending a smaller share of its economy on health care. This paper compares the two systems across five dimensions, structure, financing, access, quality and outcomes, and evaluates what each system does well and what the United States might learn.

Structure

Germany's system is built on statutory health insurance, provided by competing nonprofit sickness funds that cover most of the population, with higher-income residents able to choose private insurance instead (Busse et al., 2017). Self-governing bodies of payers and providers set the benefit package and fee schedules within a federal legal framework. Ambulatory care is delivered mainly by physicians in private practice, and hospitals are a mix of public, nonprofit and private ownership.

The United States combines employer-sponsored private insurance, individual marketplace plans, Medicare for older adults, Medicaid for low-income people and military and veterans' programs. Each segment has its own rules, eligibility and payment rates.

Financing

German statutory insurance is financed mainly by income-related contributions shared by employers and employees, pooled in a central health fund and redistributed to sickness funds according to the health risk of their members, a risk-structure compensation that discourages funds from seeking only healthy members (Busse et al., 2017).

U.S. financing is fragmented: employers and employees pay premiums, governments fund Medicare and Medicaid through taxes and patients pay significant out-of-pocket costs. The United States spent about 17.8% of its gross domestic product on health care in 2016, far more than other high-income countries (Papanicolas et al., 2018).

Access

Germany's mandate and income-related contributions produce near-universal coverage, with low cost sharing and free choice of physician. Waiting times for elective specialist care are a frequent complaint, especially for publicly insured patients. In the United States, coverage expanded after the Affordable Care Act, but millions remain uninsured and many insured people face high deductibles that deter care.

Quality and Outcomes

Both systems deliver high-quality hospital care in many areas. The United States performs well on some measures, such as cancer survival for certain conditions, but has lower life expectancy and higher rates of avoidable mortality than most peer countries. Germany has relatively high hospital use and long lengths of stay, which critics see as a sign of inefficiency.

Why U.S. Spending Is Higher

Side-by-side data on eleven rich countries show U.S. utilization close to the average while unit prices, for clinician pay, drugs, devices and administration, run far above it (Papanicolas et al., 2018). The price explanation, first argued two decades ago, has held up in later work (Anderson et al., 2003; Anderson et al., 2019). Germany's negotiated fee schedules and uniform rules across sickness funds keep both prices and administrative complexity lower.

Policy Implications and Innovations

Lessons the United States could adapt include risk adjustment across competing insurers, which already exists in parts of the marketplace and Medicare Advantage; uniform, negotiated fee schedules for providers; and simpler, standardized benefit packages. Germany's innovations also include digital health applications that can be prescribed and reimbursed after review.

Challenges and Limits of Transfer

Germany's model depends on a long tradition of solidarity and self-governance by payers and providers that the United States lacks. Its income-related contributions require broad political agreement to pool risk, and its high hospital use and specialist waits show that universal coverage does not solve every problem.

Critical Evaluation

Conclusion

Germany shows that a system of competing insurers can achieve universal coverage at lower cost when insurers compete on service rather than on avoiding sick people and when prices are negotiated collectively. The United States cannot import Germany's history, but it can borrow specific mechanisms, especially risk adjustment and collective price setting, to make its own multi-payer system fairer and less costly.

References

Anderson, G. F., Hussey, P., & Petrosyan, V. (2019). It's still the prices, stupid: Why the US spends so much on health care, and a tribute to Uwe Reinhardt. Health Affairs, 38(1), 87-95. https://doi.org/10.1377/hlthaff.2018.05144

Anderson, G. F., Reinhardt, U. E., Hussey, P. S., & Petrosyan, V. (2003). It's the prices, stupid: Why the United States is so different from other countries. Health Affairs, 22(3), 89-105. https://doi.org/10.1377/hlthaff.22.3.89

Busse, R., Blumel, M., Knieps, F., & Barnighausen, T. (2017). Statutory health insurance in Germany: A health system shaped by 135 years of solidarity, self-governance, and competition. The Lancet, 390(10097), 882-897. https://doi.org/10.1016/S0140-6736(17)31280-1

Papanicolas, I., Woskie, L. R., & Jha, A. K. (2018). Health care spending in the United States and other high-income countries. JAMA, 319(10), 1024-1039. https://doi.org/10.1001/jama.2018.1150