Germany: #2 in the 2020 World Index of Healthcare Innovation

Introduction

Germany ranks #2 in the World Index of Healthcare Innovation with an overall score of 59.28, just a hair below top-ranked Switzerland (59.56) and slightly above the Netherlands (#3, 59.14). Germany performed well across the board, but most excelled in the categories of Fiscal Sustainability (#1, 81.28) and Choice (#3, 47.95), aided by its balanced budget amendment and its wide range of private-sector payers and providers. Germany also ranked 8th in Science & Technology (46.90) and 13th in Quality (60.99).

Background

The German health care 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 were seeking to placate restive Social Democrats, thereby strengthening 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 health care systems from this “Bismarckian” model. Indeed, the stability of the German health care 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% of the population had health insurance; this rose to 51% in 1925, and began approaching 90% in the 1980s. The 1883 system began with industrial workers and skilled craftsmen, and over decades was gradually extended to all Germans. East Germans were migrated back into the traditional Bismarckian scheme from the East German socialist system after reunification in 1990.

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

Vigorous competition among insurers has led to consolidation, due to the imperative for insurers to achieve economies of scale. In 2019, there were 109 sickness funds in the country, down from 420 in 2000 and well below the historical peak of over 20,000 prior to World War I.

Germany also has a robust innovative health care sector, led by Bayer, Merck KGaA, Boehringer Ingelheim, Fresenius, Siemens, and the German units of Sanofi, a large Franco-German pharmaceutical company.

Quality

At #10, Germany’s Quality, while very good, ranks lowest relative to its performance on other dimensions. While its ranking in measures of preventable disease could be improved (#26), Germany features a robust array of private doctors and hospitals, constituting a world-class health infrastructure (#5) that also scores well on patient-centered customer service (#6).

Choice

At #3, Germany sits among the elite countries in Choice. As the largest health care market in Europe, Germany ranks second only to the United States in access to new treatments. While health insurance is somewhat more expensive than other countries in the Index (#11), Germans value personal choice among a wide range of insurers and providers, and are able to make informed choices with their out-of-pocket health care dollars, contributing to a high ranking in freedom to choose health care services (#8).

Science & Technology

Germany’s ranking of #6 overall in Science and Technology largely reflects its role as a world leader in academic research, fueled by its university system and the world-renowned Max Planck Institute. In addition, Germany ranks among the elite in scientific innovation (#5), 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 (#7), based largely on a regulatory environment conducive to approval of innovative drugs. Finally, health digitization is respectable in Germany (#10), though it still has room to grow.

Fiscal Sustainability

Germany leads all nations in the Index in Fiscal Sustainability. Germany has the lowest public health spending as a percentage of GDP of all countries in the Index (0.74% in 2018), a direct result of the nation’s universal private health insurance system. In addition, the growth in public health spending (#12) has remained relatively steady over the last 10 years. Finally, Germany is rated well in national solvency (#13), with a debt-to GDP ratio just over 40% in 2018.