Germany: #3 in the 2024 World Index of Healthcare Innovation

Introduction

Germany secured the 3rd spot in the 2024 World Index of Healthcare Innovation, achieving an overall score of 58.54, an improvement from its 4th place position in 2022.

The German healthcare system excels in several key areas. It ranks 1st in Choice and 5th in Fiscal Sustainability, bolstered by a diverse array of private-sector payers and providers, along with a balanced budget amendment. These strong performances are augmented by Germany’s leading scores in the provision of innovative and affordable drug treatments (2nd). Additionally, Germany holds a solid 7th place in Science & Technology. However, there has been a notable decline in its Quality ranking, dropping to 21st.

Background

Germany’s healthcare system, established under Chancellor Otto von Bismarck in 1883, was the first to offer a modern-style, subsidized health insurance. This initiative, aligned with the policy goals of Emperor Wilhelm I, aimed to expand health coverage and stabilize the political environment by addressing the concerns of the Social Democrats in the newly unified German Empire, which was formed in 1871 after the Franco-Prussian War.

The “Bismarckian” model, characterized by its foundation in employer and employee contributions, has influenced the healthcare frameworks of several central European nations, notably those once part of the Austro-Hungarian Empire, such as Austria, Hungary, the Czech Republic, and Slovakia. Despite Germany’s turbulent history in the 20th century, its healthcare system has remained notably stable.

Initially, the Bismarck system required that employers pay one-third and employees pay two-thirds of the insurance premiums. Coverage expanded from 10 percent of the population in 1885 to 51 percent in 1925, and finally to nearly universal coverage (90 percent) by the 1980s. The system was first tailored for industrial workers and skilled craftsmen and eventually extended to include all citizens. After the reunification in 1990, East Germans were reintegrated from a socialist system to the traditional Bismarckian scheme.

A pivotal reform in 1993 allowed individuals the freedom to choose among competing Krankenkassen (“sickness funds”)—privately managed, self-governing insurance companies—rather than being assigned one by their employer. This led to heightened competition and significant consolidation among insurers, with the number of sickness funds dropping to just under 100 by 2022, down from 420 in 2000 and from a historical high of over 20,000 before World War I.

In recent years, Germany has maintained a cutting-edge healthcare sector led by giants such as Bayer, Merck KGaA, Boehringer Ingelheim, Fresenius, and Siemens, along with the German divisions of Sanofi. BioNTech, a German enterprise, made groundbreaking advancements by developing the first approved mRNA vaccine against SARS-CoV-2, which has been instrumental in the global battle against the COVID-19 pandemic.

Germany operates a dual health insurance system that ensures universal coverage. The system is split between statutory health insurance (Gesetzliche Krankenversicherung, GKV) covering about 87 percent of the population, and private health insurance (Private Krankenversicherung, PKV), chosen by approximately 11 percent of residents, typically those with higher incomes or self-employed individuals. The GKV is primarily funded through income-based contributions shared between employees and employers, currently set at 14.6 percent of gross wages, with employers contributing 7.3 percent. 

In response to growing healthcare demands, particularly from an aging population, Germany allocated approximately 11.7 percent of its GDP to healthcare expenditures in 2023, a slight increase from 11.2 percent in the previous years. The government has also been proactive in advancing digital health solutions, aiming to improve efficiency and patient outcomes.

Dimension Performance

Quality

Germany’s Quality dimension has experienced a decline, falling from 13th to 21st, marking it as the lowest relative to its performance in other dimensions. Its ranking in disease prevention is also lower-than-desired at 25th, and its pandemic response, ranked 14th, faced challenges due to a slow vaccine rollout and extensive lockdowns. Despite these setbacks, Germany boasts a robust network of private doctors and hospitals, securing an infrastructure ranking of 10th. However, it still lags behind most countries in the Index in patient-centered care, where it is ranked 24th.

Choice

Germany sits atop the Index in Choice. As the largest healthcare market in Europe, Germany often gains access to new treatments (1st) faster than its neighbors and is among the elite countries in the Index’s access to biosimilars. That Germany outpaces the United States in access to new treatments is notable, given Germany’s relative effectiveness at reining in drug costs. In Germany, drug companies enjoy free monopoly pricing in the first year after marketing approval. Subsequently, they must negotiate prices with the National Association of Statutory Health Insurance Funds (Gesetzliche Krankenversicherung Spitzenverband). In other words, the monopoly pricing power of the drug company is balanced by the ability of insurers to negotiate jointly.

While health insurance is more expensive than most countries in the Index (30th), Germany prioritizes personal choice among a wide range of insurers and providers, and its citizens are able to make informed choices with their out-of-pocket healthcare expenditures, contributing to a high ranking in freedom to choose healthcare services (5th).

Science and Technology

Germany ranks 7th in Science and Technology, reflecting its prominence in academic research driven by its universities and the prestigious Max Planck Institute. The country excels in scientific discoveries, ranking 4th, thanks to recent Nobel laureates in chemistry and medicine/physiology and its widely cited research. Germany is also notable in medical advances, ranked 8th, supported by a regulatory framework that facilitates the approval of innovative drugs. However, despite a strong adoption of electronic medical records, Germany’s rank in IT and communications development is relatively low at 10th, which limits the full utilization of digital health tools by its population.

Fiscal Sustainability

Germany once again excels in the Index, ranking 5th in Fiscal Sustainability. The country boasts the lowest public healthcare spending as a percentage of GDP among all indexed countries, recorded at 1.27 percent in 2022. This achievement is largely attributable to Germany’s universal private health insurance system and its overall fiscal discipline. Additionally, the growth in public healthcare spending has been relatively stable over the last decade, placing Germany at 23rd in this category. However, there has been a decline in Germany’s rating for national solvency (18th) post-pandemic.