Germany's Health Insurance System


 Germany's Health Insurance System

The German health insurance system, also known as sickness funds or statutory health insurance, is a type of social security system in which the insured pay a compulsory insurance fee to support qualifying members who are too ill or have an accident that prevents them from working. It was designed to be comprehensive, paying for most medical care and providing income-related sickness benefits.

This blog post will explore German's health insurance system and why this might be the best choice for those seeking affordable healthcare with guaranteed access. It will go through some of the basics of the system and how it differs from the US healthcare system.

There are two types of health insurance in Germany:
1. The standard health plan, also known as "Krankenversicherung" or "KV" which is offered by private insurers or  public authorities (including local governments). Many people have their own KV, where they pay a monthly premium. For those who don't, the state subsidizes their premium via taxes paid annually.
2. The statutory health insurance ("Gesetzliche Krankenversicherung" or "GKV") is mandatory for every German citizen and is available to those who are not eligible for private health care.  This system is subsidized via the taxation of their employer to a certain percentage (as illustrated in the chart below), and also from state coffers. The percentage depends on the income of the individual. For 2013, it was 7% for singles (less than 24,000 Euros) and 15% (more than 24,000 Euros).
The difference between GKV and KV? In Germany, employers have to pay a large percentage of employees' premiums into the GKV. This means that the German government subsidizes employers to provide German citizens with health insurance. The government then allows everyone who is registered in the system to enroll into a private insurer with KV, which they can freely choose.  Although the employer premium for GKV depends on income (as explained above), it is stated in law that employers have to pay at least 50% of their gross salary to their employees as KV.
1.) Taxation
With regards to taxation, Germany has a progressive tax system. So what does this mean?  Simply put, the higher your tax bracket, the more you have to pay owing to taxes payable on your income and other allowances you may have missed out. To put it in perspective, the following chart shows the tax brackets for 2013:
This means that those earning over 1,000,000 Euros will pay 50% of their gross salary for health insurance.  Those who earn between 600,000 to 1million Euros however pay 20%. Those earning 400,000 to 600,000 Euros pay 10%, and those between 100,00 and 400,000 euros pay 0%. This obviously varies depending on your profession.
2.) Private Health Insurance
Although Germany has a compulsory health insurance system offered by KV (similar to what happens in the US), there are some restrictions. In Germany you must have private medical insurance for certain procedures. For example, if you injure yourself skiing, the public insurance will pay for all expenses incurred to treat the injury such as physical therapy. However, if you need an operation to fix it, you have to pay for it privately. Conversely in the US, unless you are in a state where "no-fault" system is in place (known as "Med-Pay"), that's a different story. Even though it is not required to have private medical insurance in Germany and some Germans choose to be registered on KV only, for most German citizens private medical insurance is a must.
3. Health Insurance Costs
Health care in Germany is not cheap. In fact, it is one of the most expensive systems in the world. Compared to the US, Germany's healthcare premiums are 7% to 8% of GDP while the US's premiums are 17% of its GDP. 47 million Germans are registered in private health insurance (or approximately 70%) and will pay anywhere from 50 per cent to about 80 percent of their gross salary as premium for their health insurance. However, that's still lower than the private insurance premiums paid by German citizens who earn 100,000 Euros or above (10%, 15%, 20%).
4. Long-term care
After reaching the age of 20, Germans have to be insured by KV. If you do not have your own KV and are not registered in GKV (the public option) then you will need to purchase a private KV. It is expected that in the future GKV will be left with the high-risk patients - the ones who are most likely to get sick - while everyone else will rely on private insurance. This is because it is believed that over time, funding for long-term care in Germany will be left to private insurers and those who need it the most will be covered by the state.
5. Gap Feasibility
Germany's health insurance system is not perfect. There are numerous issues that may arise in the future that may cause problems for German citizens and their employers:
a.) High Cost of Care  - This will become an issue as the population ages. Germany has the highest ratio of retirees to working-age population in Europe and this will require a large portion of money from taxpayers to provide long-term care. In fact, it is estimated that by 2060 over 11% of GDP will go towards healthcare costs for future retirees. These costs will be created by the number of retirees and the age at which Germans retire.
b.) Private Insurance - As stated before, Germans must choose whether they will be insured by public or private medical insurance. Given the nature of German economy, this choice is not an easy one to make. Private insurers may have different opinion about what kind of care to provide - for example they may cover treatments that are non-reimbursable by KV or vice versa. This can pose a problem because if your treatment cannot be reimbursed, you could have to spend thousands of Euros just for doing it (think: bypass surgery or knee replacement ).

Conclusion: Like it or not, Germany's health care system is pretty good. But like it or not, it is old and may need to be updated to meet the needs of the present and future generations.  I personally think that GKV in the West should also be available, but it's something that will need to be looked at in the future.
What do you think? Is Germany doing a good job with its healthcare system? Let us know in the comments below!
In my last post , I discussed how Healthcare in Germany differs from other countries. Now I would like to compare this socialized system with another European country - France .

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