History Of Tinkering Helps German System Endure

Chancellor Otto von Bismarck, seen here in his study in 1886,

Chancellor Otto von Bismarck, seen here in his study in 1886, nationalized health care in Germany — but he was no lefty. Wikipedia Creative Commons hide caption

itoggle caption Wikipedia Creative Commons
A baker prepares organic bread in Berlin.

Germany's modern health care system has its roots in medieval guilds of bakers and carpenters who banded together to take care of each other in times of illness. Here, a baker prepares organic bread in Berlin. Sean Gallup/Getty Images hide caption

itoggle caption Sean Gallup/Getty Images

Like most Americans, most Germans are covered through group health insurance sponsored by their employers.

The concept of employer-sponsored coverage took hold in the United States in the 1930s and then took off after World War II as a way for labor-starved companies to attract and keep workers.

But in Germany, the idea that employment and health care costs should be linked goes back centuries.

It originated in medieval craft guilds. Groups of blacksmiths, goldsmiths, carpenters and bakers banded together to make rules on who could practice their crafts. They also evolved a response to illness and injury — something that threatened every member's livelihood.

Each guild member paid into a fund to support the families of those who became sick or were injured and paid funeral expenses for those who died. These death benefits existed until 1989, when they were dropped much to the consternation of German undertakers.

Such early "sickness funds" gave rise to the nonprofit health insurers that today cover 88 percent of all Germans from childhood through their working lives and into retirement.

Iron Chancellor Offers A Carrot

The country's heath care system dates to 1883 — only a dozen years after Otto von Bismarck melded a disparate collection of kingdoms and duchies into the German Empire. The "Iron Chancellor," as Bismarck was known, persuaded the country's parliament to enact a national system of health insurance based on the guilds' sickness funds.

Bismarck was no leftist. In fact, he got the Reichstag to pass laws against socialism, trade unions and the Social Democratic Party. But he realized the government needed carrots as well as sticks to win Germans' loyalty to the new state. The 1883 statute was Bismarck's first big carrot, followed by disability coverage and then old-age pensions.

While this speaks to the deep roots of Germany's system of job-related health insurance, it doesn't explain how the system has endured for nearly 13 decades surviving world wars, political upheaval, demographic challenges and spiraling medical costs.

Penchant For Perpetual Reform

To understand its longevity, one must appreciate Germans' penchant for perpetual health care reform. This constant tinkering represents the country's effort to keep its health system fair and affordable. To an impressive extent, it's worked.

In the past 20 years, Germany has enacted no fewer than six health care reform laws — one about every three years.

These reforms have required Germans to pay modest out-of-pocket copayments for doctor visits, hospital care and drugs. They've put doctors on budgets and told them where they may set up practice.

Major Reforms

In 1995, Germany introduced mandatory long-term care insurance to provide for its burgeoning elderly population. The following year, it began allowing citizens to choose from among sickness funds, opening them to competition.

Six years ago, Germany started programs to manage care of diabetes, breast cancer, asthma and coronary heart disease — and give sickness funds a financial incentive to enroll people with these chronic diseases.

The country's most sweeping health reform was enacted last year. Among other things it:

  • Requires every German to have health insurance and requires insurers to provide it
  • Mandates that children's care be funded by taxes rather than by employee premiums
  • Requires new drugs to be cost-effective and bans direct-to-consumer advertising of prescription drugs
  • Sets up a mechanism to evaluate new medical technologies and decide whether they should be covered
  • Equalizes payments among sickness funds so younger, healthier people don't flock to lower-cost insurers

These changes have been controversial and often politically wrenching. But Germany's ability to adapt its 125-year-old health system is a testament to the abiding consensus that every citizen should be covered for all necessary care.

Richard Knox is author of a 1993 book, Germany's Health System: One Nation, United with Health Care for All, published by Faulkner and Gray.

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