IHS Global Insight Perspective | |
Significance | Germany's Ministry of Health and its public health insurance funds are expecting a full-year GKV deficit in the range of 1-2 billion euro. |
Implications | Less revenue from insured patients and higher spending on drugs, doctors, and clinics are combining to squeeze GKV funding more tightly than anticipated earlier this year. State funding of 167 billion euro is expected to be insufficient, although there remains the possibility of a government loan later this year. |
Outlook | Cost-containment efforts may be aimed at reducing levels of in-patient care, switching more off-patent drugs from prescription-only status to over-the-counter, or implementing selective rises in patient co-payments for specialised services. |
Directors of Germany's public health insurance funds (the GKV) have warned that soaring medical expenses and a complex new financing model could prompt a return to serious financial deficit for the sector. The DPA press agency has reported comments made by Doris Pfeiffer, head of the central association of GKV health insurance funds, warning that the economic crisis was having a more serious impact than first anticipated on public health spending. Ahead of a new forecast due by the end of the month on the GKV's collective annual revenue, the Ministry of Health is reportedly anticipating a full-year GKV deficit of more than 1 billion euro (US$1.3 billion), despite the funds managing to claw back a surplus in 2008 (see Germany: 4 March 2009: Germany's GKV Health Insurers Finish 2008 in the Black Despite 5% Y/Y Rise in Drug Spending).
Higher wages for doctors, rising prices for new medicines, and growing costs for clinics are the main factors expected to drive a sudden surge in GKV spending this year. According to the Chairman of the AOK Rheinland/Hamburg fund, Wilfried Jacobs, the GKV's initial expectations of 167 billion euro in financing from Germany's new central healthcare fund have long been surpassed, and total spending requirements are likely to be nearer 172 billion euro. This is 2.9% higher than the anticipated 2009 funding, and some 7% more than the amount spent during 2008. Jacobs also said that the Ministry's estimate of the GKV's full-year deficit was conservative, and that the funds could actually come closer to being 2 billion euro in the red by the end of 2009. The Ministry, for its part, has called for the GKV funds to implement stricter cost-containment measures where possible.
At the same time as expenditure is predicted to rise, GKV revenues are beginning to decline. There are several reasons for this, including a drop in premiums paid by employees and employers as the recession creates more unemployment. Additionally, the money diverted to create a 750-million-euro reserve fund and the new central fund has all come from the GKV's traditional budget, leaving its more than 200 funds with less state financing in reserve. Earlier this year, the Ministry announced that loans offered to the GKV funds would not need to be repaid until 2011, as a method of coping with the effects of the recession (see Germany: 26 January 2009: Recession Prompts Minister to Plan Bail-Out for German Health Insurance System). Meanwhile, following the imposition of a uniform national rate for patient premiums at the start of the year, this rate is set to be lowered across the board from July, as a means of relieving financial pressure on contributors (see Germany: 15 January 2009: GKV Contributions Lowered Under Germany's US$65.9-bil. Fiscal Stimulus Package).
Outlook and Implications
The GKV funds spent much of 2008 running a collective deficit, but were able to turn this around in the fourth quarter due to a scheduled injection of government funding. In 2009, despite the possibility of government loans, the combination of higher expenses and less revenue means that this situation is unlikely to repeat itself. Beneficial effects from measures such as the generic rebate scheme—which has brought important efficiencies to Germany's public drugs budget—are being swallowed up by the higher spending required for expensive innovative medicines. Additionally, GKV funds will be allocated on a monthly rather than annual basis for the first time this year, giving the funds even less flexibility on spending. To avoid state-imposed cuts later, the GKV funds will need to make some tough decisions about what services to reduce or cut entirely. With generics already being promoted heavily, efforts may be focused on reducing levels of in-patient care, switching more off-patent drugs from prescription-only status to over-the-counter, or implementing selective rises in patient co-payments for specific, specialised services.