Socialized Medicine. Part 1: Germany

In this series of blog posts, we will look at socialized medicine systems in a number of countries that are usually held up as “models” to the USA. To kick off the series, we will start off with the granddaddy of all socialized medicine systems: Germany’s.

The German word  itself, “Krankenkasse” (sick fund), reveals the historical origins of German health insurance organizations in the mutual aid-based sick funds maintained by members of guilds and professional associations.

As summarized well here (caveat lector always applies with Wikipedia), Germany’s universal healthcare system started with the Health Insurance Bill of 1883, Accident Insurance Bill of 1884, and Old Age and Disability Insurance Bill of 1889, all pushed through by Wilhelm I’s “Iron Chancellor”, Otto von Bismarck. Originally only certain low-income groups were covered, but the income threshold kept being raised. According to several expat websites (here, there, and yet elsewhere), everybody with an income below the Versicherungspflichtgrenze (mandatory insurance threshold, which seems to sit somewhere between the 85th and 90th income percentile) has statutory public coverage: everybody above may opt for either public or private insurance. [Update: the self-employed, people in the “liberal professions” (as medicine, law,… are known in continental Europe), and civil servants may opt for private insurance regardless of income.]

As explained here, post-WW II, East Germany had full-bore state-run medicine, while West Germany had a system that was state-supervised and state-regulated, but not state-run. The latter system prevailed after reunification. Deductibles and mandatory coverage are set by the government: the over 200 Krankenkasse primarily compete on the basis of service quality.

Since a recent reform, all health insurance taxes collected are pooled in a single “risk pool”. As much bad blood as the concept of forcing otherwise healthy people to buy health insurance has caused in the USA, the fact of the matter is that systems like the German one can only be solvent (or approaching solvency) at all thanks to many young and healthy people paying much more into the system than they take out of it.

Somewhere between 8 and 15 percent of the population (depending on the source) opt for private insurance through one of about forty for-profit insurers: broadly speaking, about one in ten Germans has primary coverage of this type, while another percentage has private supplemental insurance that covers treatments and amenities over and above those covered by the statutory insurance. These include private or semi-private rooms (rather than “sickbays”), treatment by doctors and surgeons of one’s choice,…

In recent years, financial pressures, and especially an aging population, have led to various cost-cutting measures, with no end in sight. Expect the “statutory” care to become ever more bare-bones, and the gap between public and private care quality to widen.

In two future installments, we will cover the systems of Israel and Belgium. Some general observations will be offered in a fourth installment.

11 thoughts on “Socialized Medicine. Part 1: Germany

  1. Interesting read:

    Tough Task Ahead for Germany’s First Asian Minister: Health Care Reform


    Merkel has said that health-care reform will be one of her new government’s top priorities. Although medical treatment in Germany is among the best in the world, the country’s health-care system faces an uncertain future due to exploding costs, a rapidly aging population and a burdensome bureaucracy. About 90% of Germany’s 82 million people are covered by the country’s public health insurance companies, which are currently funded by contributions from employers and employees. Merkel’s reform plan is expected to include a freeze on employer contributions — shifting the burden to individuals — and the creation of a government commission to study the possibility of moving from income-based contributions to a flat-rate health insurance charge. Union leaders say the unemployed and pensioners would suffer the most under such a system. “There’ll be plenty of bitter conflicts over tax and health reform once [Merkel’s] policies are implemented,” Niedermayer predicts.


  2. If you are trying to point out something wrong with the German health care system, that point is lost on me.

    Some minor additions. The same recent reform that created the “risk pools” that you referred to, also require that, beginning this year, 2009, all German citizens resident in Germany are required to carry health insurance. There is no more Versicherungspflichtgrenze.

    It is interesting to note that it took the Germans 100+ years to bring everyone into their system. Although unlike the US, their requirements moved up the income ladder.

    Another feature of the German system worth emulating is that a health care provider is not paid differently based on who they treat. In the US, a physician or hospital is reimbursed differently for treating poor people (Medicaid), old people (Medicare), or employed people.

    Another minor correction. Bismark imposed regulations on a system that already existed and thereby sanctioned it. The legislation was part of a package of laws that outlawed the socialist parties and attempted to undermine their support.

    Lastly, Germany’s demographic issues are no different than the US. I would much rather deal with the same problems from a point 40% lower.

    So please explain why you are calling this “socialist”? It is less socialist than say, the US army?

  3. please explain why you are calling this “socialist”?
    He did. It’s right here:
    many young and healthy people paying much more into the system than they take out of it.

    Germany’s demographic issues are no different than the US
    They are vastly different. The US baby-boomers had kids (we call them “Millennials”), no one else in that generation elsewhere in the world did.

    The first site that popped up searching:

    Note that the grouping is bad. 25-54 is five years broader than the other categories. This cuts that group in half: Note that they are older.

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