Germany: #4 in the 2022 World Index of Healthcare Innovation

Introduction

Germany 4th in the 2022 World Index of Healthcare Innovation with an overall score of 58.42, slightly dropping from 3rd in 2021 and 2nd in 2020.

Germany’s healthcare system excels in several dimensions. Germany shined most in the categories of Choice (1st, 69.33) and Fiscal Sustainability (2nd, 70.22), thanks to its wide range of private-sector payers and providers and its balanced budget amendment. These scores complement Germany’s Index-best score for innovative and affordable drug treatments. Germany also ranked 6th in Science & Technology (47.16), but experienced a major decline to 25th in Quality (46.98).

Background

The German healthcare system was the first to provide widely subsidized modern-style health insurance, at the initiative of Chancellor Otto von Bismarck in 1883. Along with the policy goal of expanding health coverage, Bismarck and Emperor Wilhelm I sought to placate restive Social Democrats and strengthen solidarity within the recently unified German Empire, which had been established in 1871 after the end of the Franco-Prussian War.

Many other countries in central Europe — most notably the descendants of the Austro-Hungarian Empire such as Austria, Hungary, the Czech Republic, and Slovakia — also derive their healthcare systems from this “Bismarckian” model. Indeed, the stability of the German healthcare system is remarkable when one considers Germany’s turbulent 20th century history.

Under the original Bismarck system, employers contributed one-third of the insurance premiums and employees contributed two-thirds. Enrollment was mandatory. In 1885, 10 percent of the population had health insurance; this rose to 51 percent in 1925, and began approaching 90 percent in the 1980s. The 1883 system began with industrial workers and skilled craftsmen, and over decades gradually extended to all Germans. Former East Germans reintegrated into the traditional Bismarckian scheme from the socialist system after reunification in 1990.

An important reform took place in 1993, when the federal government gave individuals the right to choose among competing Krankenkassen (“sickness funds”) — private, self-governing insurance companies — instead of being assigned a fund by one’s employer.

Vigorous competition among insurers led to consolidation, due to the imperative for insurers to achieve economies of scale. However, in 2022, the number of sickness funds dropped below 100 for the first time, down from 420 in 2000 and well below the historical peak of over 20,000 before World War I.

Germany also has a robust, innovative healthcare sector, led by Bayer, Merck KGaA, Boehringer Ingelheim, Fresenius, Siemens, and the German units of Sanofi, a large Franco-German pharmaceutical company. In addition, German-based BioNTech developed the world’s first approved mRNA vaccine against SARS-CoV-2, a key weapon in the fight against the COVID-19 pandemic.

Quality

Dropping from 13th to 25th, Germany’s Quality rating has declined and is the lowest relative to its performance on other dimensions. While its ranking in disease prevention could be improved (24th) and its pandemic response (24th) was hindered by a slow vaccine rollout and heavier lockdowns, Germany features a robust array of private doctors and hospitals, constituting a world-class health infrastructure (8th). Still, Germany lags behind most countries in the Index on patient-centered care (28th), struggling particularly with patient safety (30th) and physician consultation time (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 the 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 (2nd).

Science & Technology

Germany’s ranking of 6th overall in Science and Technology largely reflects its leading role in academic research, fueled by its university system and the world-renowned Max Planck Institute. In addition, Germany ranks among the elite in scientific discoveries (4th), based on recent Nobel laureates in chemistry and medicine/physiology as well as a high degree of oft-cited research. In addition, Germany ranks highly in medical advances (9th), based largely on a regulatory environment conducive to approving innovative drugs. Despite a high rate of electronic medical record adoption, Germany’s 15th-ranked IT and communications development falls short of expectations, preventing its citizens from fully taking advantage of digital health tools.

Fiscal Sustainability

Germany stands out again in the Index in 2nd place for Fiscal Sustainability. Germany has the lowest public healthcare spending as a percentage of GDP of all countries in the Index (1.15 percent in 2020), a direct result of the nation’s universal private health insurance system and the country’s overall fiscal restraint. In addition, the growth in public healthcare spending (12th) has remained relatively steady over the last 10 years. However, Germany’s rating on national solvency has slipped in recent years (17th), with a 2020 debt-to-GDP ratio increasing from about 59.5 percent to 69.1 percent in one year.