The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.”

What Will Replace Obamacare?

As the Republicans search for a new healthcare system to replace the deficient ACA, they might want to look at how Germany does it. I have mentioned that system for many years.

Germany’s healthcare insurance system is reportedly the oldest in the world. It was started by statesman Otto von Bismark, who in 1883 created the “Health Insurance Bill”, in 1884, the “Accident Insurance Bill,” and in 1889 the “Disability Insurance Bill.”

Imagine, that was about 130 years ago. You would think that something that still works after so much time should be looked at by the US.

As I remember it, you can opt in the general insurance and have a very low co-payer contribution when you go to a doctor or hospital. If you want more coverage and possibly 100% payment, you can buy the “Krankenversicherung”, i.e. private insurance at a somewhat higher price.

The health insurers and health care providers sit down every few years and negotiate reimbursement rates for every procedure, visit, hospital costs, etc. No government involved. In the US, the providers charge whatever they can and the government or insurance pays.

Here is an older article on the subject from The Atlantic on the subject:

What American Healthcare Can Learn From Germany

By Olga Khazan The Atlantic

Under Obamacare, the U.S. healthcare system is starting to look more like Germany’s. Here’s what Germans do right—and how Americans could do even better.

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.

“I think you’re moving more in the direction of international standards. The U.S. was always the odd one out.”

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.

Sound familiar?

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.)