Germany: Merz hails 'historic' health care reform

Chancellor Friedrich Merz, under pressure to deliver reforms to Germany's costly health care system, has announced that what he called a "historic" health care draft law had been agreed by his Cabinet on Wednesday morning.

The package, designed to stop spiraling health insurance premiums, must still pass through the German Bundestag, where it is expected to come under some intense scrutiny from parliamentarians.

Merz's center-right Christian Democratic Union (CDU) is governing the country in a fraught alliance with the center-left Social Democratic Party (SPD), and there have been reports of angry altercations in coalition meetings (which Merz denies). Merz is also struggling with historically bad approval ratings, with one recent poll suggesting he is the most unpopular democratically elected leader anywhere in the world.

But presenting the new law on Wednesday, Merz insisted that the deal struck that morning showed "we're capable of compromise, and we negotiate them, even if things get a little shaky at times."

SPD leader and finance minister, Lars Klingbeil, struck a similar note: "Of course, we have discussions from time to time — even heated ones," he said at his own press conference. "But as today's example shows, we are willing and able to take action."

"This health insurance reform represents one of the most significant welfare state reforms of recent decades," Merz added. "By saving more than €16 billion, we are preventing premiums for those with state health insurance from having to rise."

Main elements of the reform

"The government showed today that it can get bring in necessary reforms in quick-time," Health Minister Nina Warken said on Wednesday. "It was a very ambitious plan, it was a very big packet. But the effort was worth it." The new draft law has been agreed just a month after a commission of experts presented 66 money-saving proposals for health care insurers.

Despite ever-rising health insurance contributions (Germans have seen a 3% rise this year alone), Germany's state health insurances companies are seeing spiralling deficits: At the current rates of income and expenses, the shortfall between state insurers' income and expenses would increase from €15.3 billion ($17.9 billion) in 2027 to €40.4 billion in 2030. The new law would attempt to rein in expenses by tying them to the actual income of the state insurers.

Sugar tax: The plan foresees a new tax on sugary drinks from 2028. The estimated yearly income, some €450 million per year, is to be reserved for prevention programs in the health care system, rather than simply folded into the federal budget.

Drugs to become more expensive: Prescription drugs are currently subsidized by insurers — in future, those with health insurance will have to contribute more for prescribed medication.

State to take over health insurance for the unemployed: Up until now, state insurers have covered the health care costs of people living on unemployment benefit. In future, these costs, some €12 billion a year, will gradually be covered directly by the federal government.

Partial elimination of premium-free insurance for domestic partners: A 2.5% premium is to be introduced for non-working partners. Exceptions include families with children under the age of seven and parents of children with severe disabilities, as well as family caregivers, retirees, spouses, and domestic partners with a full loss of earning capacity.

Cannabis and homeopathy no longer covered: The draft law specified that "cannabis flowers" and homeopathic remedies will be excluded from health insurance coverage.

Extras cut: Administrative and advertising expenses for the statutory health insurance companies are to be cut. In addition, compensation for executives at health insurance companies, state associations, medical services, and physicians' associations is to be capped.

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A reform or an austerity program?

But though the government insisted that the proposals agreed in the draft law had been arrived at following consultations with experts from various economic and medical fields, the announcement of the plans met with some criticism this week.

Speaking at a press conference on Tuesday, Klaus Reinhardt, president of the German Medical Association, said that the package was not quite the historic reform plan Merz claimed, but rather a series of savings measures. "It's the biggest savings package of the last few decades, that's true," he said. "These are burdens that are very one-sidedly being taken on by the insured." At the same time, Reinhardt accepted what he called the urgent need for reforms and the reality of the economic conditions that make them necessary.

Other reactions have been equally harsh. "The federal government is selling this reform as a way to stabilize premiums," said Verena Bentele, president of the VdK association, which lobbies for a stronger welfare state. "In reality, it is an austerity program at the expense of the insured. To achieve this, benefits are being cut and the insured are being burdened even more."

"The real scandal of this reform is that it does not distribute resources fairly," Bentele added. "It redistributes them downward. This is a predictable step backward in social policy."

Eugen Brysch, chair of the German Foundation for Patient Protection (DSP), an organization that protects patients' rights, was particularly critical of the federal government's reluctance to step in to help state insurers.

"Federal funding is being cut, and only a small portion of the costs for basic income recipients is being covered," he told DW in an email. "Therefore, there is no question of a balanced package or a fair distribution of the burden. This imbalance falls entirely on the shoulders of patients."