European Observatory on Health Systems and Policies


Health Systems in Transition (HiT) profile of Germany

3.4 Out of pocket payments

Between 1996 and 2011, out-of-pocket expenditure as a share of total expenditure increased from 11.3% to 13.7% (Table3.3). Table3.5 shows out-of-pocket payments according to sector and service.

In terms of sector, the largest category of expenditure in 2011 was associated with pharmacies (€8.0 billion), followed by hospital/day care (€7.2 billion), health trade professions and retail (€7.2 billion) and physician practices (€3.9 billion). Out-of-pocket expenditure associated with physician practices has increased four-fold since 2000, especially because of the introduction of co-payments for physician visits in 2004, whereas expenditure associated with pharmacies increased by 27%. Overall, there has been a shift from co-payments for goods (especially pharmaceuticals and medical aids) to those for physician and nursing services, as well as for residential services (especially in nursing homes), despite the introduction of long-term care insurance, which initially led to a decrease in out-of-pocket payments for ambulatory care.

Out-of-pocket payments relate to (1) co-payments for benefits partly covered by prepaid schemes and (2) direct payments for benefits not reimbursed by a person’s prepaid scheme.

Co-payments made by SHI-covered patients amounted to less than €5 billion, which was only approximately one-seventh of all out-of-pocket payments. Only for physician practices (€1.5 billion in 2010) did the share – in the form of the co-payment for physician visits – account for just under half; for pharmacies it account for a quarter, at €1.7 billion in 2010. The major share was, therefore, attributable to pharmaceuticals purchased on an out-of-pocket basis. Other relevant co-payment amounts in 2010 were for hospital treatment (€0.7 billion), treatment by allied health professionals (€0.7 billion) and dental treatment (€0.4 billion).

Despite accounting for only a relatively small share (i.e. approximately 2%) of total health expenditure, or 3% of SHI expenditure (including co-payments), public debate has focused more on co-payments than on other types of out-of-pocket spending, perhaps because co-payments and corresponding exemption mechanisms have a long tradition in the German health care system, most traditionally in pharmaceuticals, for which cost-sharing was introduced in 1923 and has existed ever since (Gericke et al., 2009).

In the Health Care Reform Act of 1989, cost-sharing was advocated for two purposes: to raise revenue (by reducing expenditure for dental care, physiotherapy and transportation and making patients liable for pharmaceutical costs above reference prices) and to reward “responsible behaviour” and good preventive practice (dental treatment) with lower co-payments. These cost-sharing regulations were part of a complete restructuring of co-payments, resulting in generally higher cost-sharing.

Between 1989 and 1992, no co-payment had to be paid for reference-priced drugs except for the price differential between the reference price and the actual price (see section 5.6.4). Since 1993, flat-rate co-payments have to be paid again for all drugs – in addition to the differential between the actual and reference prices. It is noteworthy that very few drugs now exceed the reference price, because of competition within the reference-price groups and the legal obligation for physicians to inform patients that they are liable for the price difference for reference-priced drugs. In 1993, the co-payment amount was linked to the price of the drug sold – an idea reintroduced from 2004 (Table3.6) in a modified form. From 1994 until 2003, it was linked to package size as providing an incentive to patients to ask for larger package sizes. The graded scheme was meant to provide an incentive for physicians to prescribe larger package sizes with lower average costs-per-dose, resulting in overall cost savings per patient treated.

The overall amount of SHI pharmaceutical co-payments continuously increased from €0.6 billion in 1991 to €2.7 billion in 1998. The then newly elected Social Democratic/Green Coalition Government lowered nominal co-payment rates immediately after the 1998 elections. As a consequence, aggregate co-payments for pharmaceuticals decreased to €2 billion in 1999 and remained stable at €1.8 billion in the following years. The SHI Modernization Act of 2004 had a substantial impact on trends in the co-payments made by patients. Despite a marked reduction in the number of prescriptions in 2004, for example, aggregate co-payments increased to €2.4 billion. In the following years, however, this amount decreased again, reaching €1.7 billion in 2010; this resulted, in particular, from changes generated by the Act to Improve Efficiency in Pharmaceutical Care (Gesetz zur Verbesserung der Wirtschaftlichkeit in der Arzneimittelversorgung) of 2006, which allowed pharmaceuticals to be sold without a co-payment if their price was at least 30% lower than the reference price (see section 5.6.4).

In 1997, cost-sharing was notably increased for drugs, preventive spa treatments and rehabilitation. Crown and denture treatments were completely removed from the benefit package for everyone born after 1978 (Table3.6). For those born before 1979, prosthetic treatment was no longer directly reimbursed through the sickness funds but patients were required to obtain private treatment and receive a fixed reimbursement from the sickness fund. Through this regulation, prosthetic treatment became the first area in German SHI to use “contracts” between patients and providers. While the law had established limits for private billing, the ministry estimated that at least one-third of dentists overcharged. Accordingly, the regulation was abolished late in 1998 in favour of the former co-insurance regulation (Table3.6).

In 2004, co-payments and other out-of-pocket payments increased substantially for SHI-covered patients since the bulk of expected savings through the SHI Modernization Act (4% of current expenditure) was to be achieved by shifting costs to users via increased co-payments or the exclusion of benefits (e.g. eye glasses, transport to ambulatory care and OTC medications). Co-payment amounts were increased and standardized to €10 per inpatient day and to €5–€10 for services and products in ambulatory care. Until the end of 2012, co-payments of €10 per quarter also applied to the first contact at a physician’s (not necessarily a GP) or dentist’s office and when other physicians were seen without referral during the same quarter.

Table3.6 gives an overview of these co-payment regulations since 1994 in the various sectors of the SHI system.

Exemptions from co-payments have a long tradition in Germany, being granted to specific population subgroups, to the poor or to people with substantial health care needs. Population subgroups that have usually been exempt from user charges were children and adolescents up to the age of 18 years (except for dentures, orthodontic treatment and transportation) and pregnant women. According to studies of differing methodologies, the number of people fully exempt from co-payments tripled between 1993 and 2000: from 10% to about 30% of the SHI-covered population. In 2003, about 48% of prescriptions were exempted from co-payments (Gericke, Wismar & Busse, 2004). The share decreased to 29% in 2004 because the general exemption linked to poverty or other reasons had been abolished and the regulations for partial exemption had been tightened. According to the new definition, an SHI-covered person is eligible for exemption from user charges for benefits covered by SHI once more than 2% of the gross household income per annum has been spent on co-payments, or 1% of the gross household income for a sufferer from a serious chronic illness, defined as one that has been treated at least once per quarter for at least a year and is associated with at least one of the following additional characteristics:

  • a need for long-term care grade II or III;
  • a severe disability of at least 60% or incapacity to work of at least 60%; or
  • a certificate from the treating physician that the omission of continuous health care (at least one physician contact per quarter for the same disease) would cause a life-threatening aggravation, a reduction of life expectancy or a long-term reduction in the quality of life.

The number of people possibly targeted by these exemption rules is difficult to estimate. There is probably substantial overlap between the following relevant groups. About 1.1 million received long-term care benefits grade II or grade III in 2009 and about 3 million (of a total of 6.8 million) had a level of 60% severe disability in 2007 (Statistisches Bundesamt, 2013f). Moreover, about 1.6 million people received disability benefits from statutory retirement insurance through incapacity to work in 2007 (Statistisches Bundesamt, 2008b).

With the goal of increasing personal responsibility among the insured, the Act to Strengthen Competition in SHI introduced new rules to qualify for the lower 1% exemption limit as of early 2008. Men born after 1 April 1962 and women born after 1 April 1987 who present for the first time with a disease that is screened for as part of regular health care check-ups or cancer screening must prove that they took part regularly in these preventive measures or have signed up for the respective DMP.

The exemption rules do not apply to benefits that are not covered by the SHI package, or to price differentials for reference-priced pharmaceuticals (see section 5.6). In addition to the SHI exemption mechanism, relief from income tax is granted for “extraordinary” out-of-pocket health care spending above a “reasonable” percentage of the annual household income (1% to 7%).