Thomas Nebling Department of Strategic Contract- and Healthcare-Management,

1. New financial institutions in German Statutory Health Insurance (SHI): are they consistent with its overall goal? Thomas Nebling Department of Strategic Contract- and Healthcare-Management, Techniker Krankenkasse, Hamburg, Germany EHMA Annual Conference 2008 – „The Politics of Health“

2. Agenda • Some basic facts about German SHI • How do sickness funds invest in health? • New financial institutions in German SHI • Conclusions

3. 1 Some basic facts about German SHIOverall goal The overall goal of SHI is defined in § 1 Social Code Book V as "to maintain, recover or improve people's health"

4. 1 Some basic facts about German SHIOrganization • 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

5. 1 Some basic facts about German SHI Financing Old World until 31.12.2008 • 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

6. Agenda • Some basic facts about German SHI • How do sickness funds invest in health? • New financial institutions in German SHI • Conclusions

7. 2 How do sickness funds invest in health? Investments in health (intangible assets) • In economics, assets are generally everything that generates return/gain/value in future good state of health low morbidity level A B poor state of health high morbidity level Moving from (B) to (A) (Improving state of health / Reduction of morbidity level)  Outcome = intangible asset • Assumption: the higher this intangible asset, the better the profit margin for the sickness fund (= return on investment, ROI)

8. 2 How do sickness funds invest in health? System theoretical model of the healthcare system Resources of sickness fund Throughput Structures Processes Technologies in Healthcare Input Output Outcome Investments Result Effect Surgeries Prescribed drugs etc. State of health Quality of life Individual healthcare management contracts Individual disease management programmes Intangible asset Management of investments

9. Agenda • Some basic facts about German SHI • How do sickness funds invest in health? • New financial institutions in German SHI • Conclusions

10. 4 New financial institutions in German SHICentral Health Fund New World beginning 2009 Employers Employees State/Taxes government-fixed central contribution rate Central Health Fund morbidity-adjusted, per capita lump sums (capitation payment) Sickness fund A Sickness fund B Sickness fund C

11. 4 New financial institutions in German SHIMorbidity-adjusted financing Example Inpatient treatment 300 EUR Drug prescription 2,400 EUR Total: 3,220 EUR Woman, age 62 520 EUR Woman, age 62 520 EUR healthy sick

12. 4 New financial institutions in German SHICentral Health Fund New World beginning 2009 Employers Employees State/Taxes government-fixed central contribution rate Central Health Fund morbidity-adjusted, per capita lump sums (capitation payment) Sickness fund A Sickness fund B Sickness fund C capitation < expenditure additional premium by members  capitation = expenditure  capitation > expenditure repayment to members 

13. 4 New financial institutions in German SHIExternal effects Investment (based on individual contracts/DMP) Intangible Asset (= Reduction of morbidity level) Sickness fund Return on Investment (Central Health Fund pays less to sickness fund) Potential Loss (Sickness fund receives less payments from central health fund) SHI-System Central Health Fund External Effect (improving financial position of central health fund)

14. 4 New financial institutions in German SHIFinancial effects of investing in health Investing in prevention: Avoiding diseases Investing in cure: Making people healthy again Inpatient treatment 300 EUR Not getting additional 2,700 EUR Loss of additional 2,700 EUR Drug prescription 2,400 EUR Woman, age 62 520 EUR Woman, age 62 520 EUR Woman, age 62 520 EUR healthy sick healthy

15. 4 New financial institutions in German SHIResults for investing in health • 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

16. Agenda • Some basic facts about German SHI • How do sickness funds invest in health? • New financial institutions in German SHI • Conclusions

17. 5 Conclusions • 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

18. Thank you for your attention! Contact: thomas.nebling@tk-online.de

19. Back-up...

20. 1 Some basic facts about German SHI Financing • 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

21. 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