A Vacation in Germany: What’s Health Insurance Like Here?

In Germany, when the “Ampel Mann,” or traffic man, is red, the culture is to stop and wait. When I studied in Berlin in 2014, I did not realize this until I crossed the street and an older woman chastised me, “Den Kindern ein Vorbild!” (Be a role model for the children!).

So, what happens if someone ignores the Ampel Mann? Perhaps they would start to cross, see cars coming and run across the street. They might lose their footing, trip and injure their knee. If I fell crossing the street in the United States, the likely response would be: a Good Samaritan calls for help, an ambulance arrives, and I go to the hospital where my knee is treated. A few weeks later, the medical bills would start to arrive.

What’s so different in Germany?

I chatted with my host Johannes about this theoretical knee injury. I asked him how much it would cost for someone to go to the hospital.

He looked at me, puzzled: Nichts (Nothing).

In the United States, an ambulance ride alone can cost $3,600 to over $8,000, and a visit to the emergency room for a sprain averages around $1,000. That means that falling in the United States without insurance could cost me almost $10,000. Even with insurance, depending on my deductible or other cost-sharing requirements, I could still be responsible for a large portion of the costs. On top of that, I could be hit with a surprise bill from an out-of-network emergency room doctor or radiologist. If I’m taken to the hospital in an ambulance, those companies are increasingly owned by private firms subject to few consumer protection regulations, which mean extremely high bills that are difficult to predict.

The German health care system is like the United States in many ways, but with one big difference: everyone is covered. Today, the uninsured rate for legal residents in Germany is 0 percent, while the uninsured rate in the United States stands at 12.2 percent (one of the lowest in U.S. history).

A Universal System

Germany has a public-private health care system that mandates universal coverage for legal residents. That means people can access health insurance in two main ways: through not-for-profit, nongovernmental sickness funds or by substituted private health insurance. Sickness funds are most like traditional commercial insurance in the U.S., with some exceptions. German citizens and legal residents participate by paying a certain percentage of their income each paycheck to cover their half of the contribution to the sickness fund, while their employer pays the rest. For those who make under a certain income per year, or for children under eighteen years old, the government fronts the entire bill. Roughly 86 percent of the population maintains coverage through these sickness funds. Those whose gross income surpasses a certain threshold can choose to remain in the publicly financed system or they can opt for substituted private coverage, which tends to offer more extensive services.

The German health care system also benefits from cost regulation. Sickness funds are private, but highly regulated. For example, a key feature of their benefit design includes a cap on cost sharing set at two percent of household income or 1 percent of income for those considered chronically ill. The German government then helps regulate prices through Diagnosis-Related-Groups, or DRGs, which set a base price for 18 different categories of injury and illness. DRGs were introduced with the intent of helping hospitals increase efficiencies, control costs and predict prices, and are used in the U.S. Medicare program as well, though their effectiveness in recent decades has shown mixed results.

A Culture of Insurance

What stands out most from conversations with the people I met during my vacation in Germany is the culture of social insurance. When it comes to paying a percentage of income into the sickness fund, most people don’t mind, even if they’re healthy and have little immediate need for services. For example, Johannes says he pays about 15 percent of his income for his health insurance with cost-sharing set at 2 percent of household income. When I asked him how he felt about that, he said “Well, at least everybody has something.” He added that although he hopes he stays healthy, he knows that he is covered whether he has a job or not.

Meanwhile, in the United States, the “individual shared responsibility requirement” was the most hated provision of the Affordable Care Act, and was repealed by Congress in late 2017. Americans also pay the highest prices in the world for health care services, spending anywhere from about 10 percent to just under 25 percent of their income on health insurance and expenses. Medical debt is the leading cause of personal bankruptcies in the U.S.

Does the German system have challenges? 

It’s not all sunshine and strudel for the German Health Care System. In 2012, two German health experts published a brief detailing challenges for healthcare in Germany. Without managed provider networks, providers have difficulty knowing exactly where a patient has previously gone, leaving little control over repeat and unnecessary procedures. The experts suggest utilizing an electronic card system to identify overused procedures and charge higher copayments for them. Further, those same experts note that Germany faces an aging population with more expensive health needs, while wealth amongst the general population is not growing at the same pace.  As with the U.S., Germany is facing the necessity and difficulty of reining in costs. Other remaining challenges are common among many health care systems around the world: primary care physician shortages, systematic quality assurance, and rural disparities.

For a more in-depth look into the German health care system and how it’s financed, you can read this comprehensive overview from the Commonwealth Fund.

One thought on “A Vacation in Germany: What’s Health Insurance Like Here?

  1. Great article, thanks.

    Germany considers hospitals to be a part of infrastructure, not unlike police and fire departments. The concept of ambulance service being charged to the hapless patient is not comprehensible to them.

    Getting to a 15 per cent payroll tax would be an uphill battle in the USA though. Millions of Americans do not pay 15 per cent of income right now. This ranges from well off employees in government plans, veterans on Tricare or the VA, and many recipients of ACA subsidies.

    Bernie Sanders’ plans really need a 15% tax, but he has been afraid to propose it.

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