Expenditures and Revenues in Germany’s Statutory Health Insurance

While the political debate has concentrated on reforms that aim to generate additional revenues, an empirical diagnosis suggests that a reform strategy directed towards reducing expenditures would be more effective. Whether calculated per contributor, per person insured (a contributor’s spouse and children are co-insured) or as an aggregate, for the past two decades health spending has risen by an annual average of over 1 percentage point more than income subject to contributions. Yet while a comparison with the change in national per capita income confirms the picture of disproportionately strong expenditure growth, incomes subject to contributions have not been eroded. Indeed, on a per capita basis they have grown at almost the same rate as average employee pay. Though a revenue-neutral expansion of the contribution base could thus make possible a one-off reduction in the contribution rate, empirical evidence suggests that such a move would not be a long-term answer to disproportionately strong growth in expenditures. What is really needed are remedies that decelerate the increase in health spending. This requires pricing which accurately reflects scarcity and competition to motivate the insured, the statutory health insurers and the care providers to adopt more efficient behaviour.