New financial institutions in German Statutory Health Insurance (SHI): are they consistent with its overall goal?

Thomas NeblingDepartment of Strategic Contract- and Healthcare-Management, Techniker Krankenkasse, Hamburg, Germany

EHMA Annual Conference 2008 – „The Politics of Health“

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Agenda

1 Some basic facts about German SHI

2 How do sickness funds invest in health?

3 New financial institutions in German SHI

4 Conclusions

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The overall goal of SHI is defined in § 1 Social Code Book V as

"to maintain, recover or improve people's health"

1 Some basic facts about German SHIOverall goal

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SHI is covered by about 210 sickness funds

Sickness funds are public bodies with self-government

Competition in SHI-market as insurants can choose freely

1 Some basic facts about German SHIOrganization

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Financing based on income of SHI-members

Each sickness fund raises its own individual contribution rate (average at 14.0 per cent)

Contribution covered by both employer and employee each with 50 per cent

Members pay additional contribution rate of 0.9 per cent

1 Some basic facts about German SHI Financing Old World until 31.12.2008

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Agenda

1 Some basic facts about German SHI

2 How do sickness funds invest in health?

3 New financial institutions in German SHI

4 Conclusions

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2 How do sickness funds invest in health? Investments in health (intangible assets)

A Bgood state of health low morbidity level poor state of health

high morbidity level

Moving from (B) to (A) (Improving state of health / Reduction of morbidity level) Outcome

= intangible asset

In economics, assets are generally everything that generates return/gain/value in future

Assumption: the higher this intangible asset, the better the profit margin for the sickness fund (= return on investment, ROI)

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2 How do sickness funds invest in health? System theoretical model of the healthcare system

InputThroughput

StructuresProcesses

Technologies

in Healthcare

Output Outcome

Result

Effect

Individual healthcare management contracts

Individual disease management programmes

State of health

Quality of life

Resources of sickness fund

Intangible asset

Investments

Management of investments

Surgeries

Prescribed drugs

etc.

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Agenda

1 Some basic facts about German SHI

2 How do sickness funds invest in health?

3 New financial institutions in German SHI

4 Conclusions

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4 New financial institutions in German SHICentral Health Fund

Central Health Fund

Employers Employees State/Taxes

government-fixed central contribution rate

Sickness fund A Sickness fund B Sickness fund C

morbidity-adjusted, per capita lump sums (capitation payment)

New World beginning 2009

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4 New financial institutions in German SHIMorbidity-adjusted financing

Woman, age 62 520 EUR

Woman, age 62 520 EUR

Drug prescription2,400 EUR

Inpatient treatment300 EUR

Total:3,220 EUR

healthy sick

Example

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4 New financial institutions in German SHICentral Health Fund

Central Health Fund

Employers Employees State/Taxes

government-fixed central contribution rate

Sickness fund A Sickness fund B Sickness fund C

morbidity-adjusted, per capita lump sums (capitation payment)

capitation = expenditure

capitation > expenditurerepayment to members

capitation < expenditureadditional premium by members

New World beginning 2009

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4 New financial institutions in German SHIExternal effects

Sickness fundIntangible Asset

(= Reduction of morbidity level)

Investment

(based on individual contracts/DMP)

Return on Investment

(Central Health Fund pays less to sickness fund)

Central Health Fund

SHI-System

External Effect

(improving financial position of central health fund)

Potential Loss

(Sickness fund receives less payments from central health fund)

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4 New financial institutions in German SHIFinancial effects of investing in health

Woman, age 62 520 EUR

Woman, age 62 520 EUR

Drug prescription2,400 EUR

Inpatient treatment300 EUR

healthy sick

Woman, age 62 520 EUR

healthy

Investing in prevention:Avoiding diseases

Investing in cure:Making people healthy again

Not getting additional 2,700 EUR

Loss of additional 2,700 EUR

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Sickness funds get paid according to the status quo of morbidity level

No consideration of improvement of morbidity or state of health

No consideration of efforts needed for improving health

Calculation of capitation payment with average SHI-data inhibits individual financing of investemts

4 New financial institutions in German SHIResults for investing in health

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Agenda

1 Some basic facts about German SHI

2 How do sickness funds invest in health?

3 New financial institutions in German SHI

4 Conclusions

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Successful investments in maintaining, recovering or improving health result in lower payments from the central health fund

New financial institutions pay for status quo of high morbidity levels, not taking into account enormous efforts needed to maintain, recover or improve health

Very doubtful, if that‘s the right incentive to follow the overall goal of SHI

ROI can be expected to be very low or even impossible

There should be financial institutions established, rewarding investments in health: the more the morbidity level of insurees decreases, the more payments a sickness fund should receive and not the other way round

5 Conclusions

Thank you for your attention!

Contact: thomas.nebling@tk-online.de

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Back-up...

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Example:

Salary: 2,000 EUR x 14.0 per cent = 280 EUR 50 per cent = 140 EUR

Additional contribution: 2,000 EUR x 0.9 per cent = 18 EUR

Contribution employer: 140 EUR

Contribution employee: 140 EUR + 18 EUR = 158 EUR

1 Some basic facts about German SHI Financing

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1 Some basic facts about German SHI Financing Old World until 31.12.2008

Financial compensation (risk-structure adjustment)

Compensation criteria: age, sex, income

Comparrison of defined basic premium (BP) with real financial power (FP)

Sickness funds with BP < FP pay compensation to sickness funds with BP > FP