Global budgeting in Germany: lessons for the United States.

In 1993 Germany implemented significant health reform legislation that, among other things, strengthened the global budgeting of physicians and instituted global budgeting of pharmaceutical expenditures. German physician expenditures are now capped at the growth in income of members of the sickness funds, in contrast to prior years, in which some growth above a targeted level was allowed. For the first time, dental services also are subject to the budget cap. The new reform legislation also limits growth in pharmaceutical expenditures by increasing the level of copayments and by placing physicians as a group at financial risk for growth over the limit. This paper examines the effect of these reforms during the first year and offers lessons for reform of the U.S. system.

Health reform in Germany. An American assesses the new operating efficiencies.

In 1993, responding to a $5.7 billion deficit among the country's third-party payers, the German parliament imposed mandatory global budgets for physician, hospital, dental, and pharmaceutical services. Although Germany had been able to maintain health spending at a lower rate than the United States, an excessive supply of health resources was beginning to drive prices higher. During the three years the global budgets are in place, German third-party payers (the "sickness funds") and providers will implement several fundamental reforms. These include: Reducing excessive supply of specialists Constraining the acquisition and utilization of expensive medical technologies Reducing the annual number of physician visits per person Reducing average hospital length of stay Integrating community- and hospital-based physician services Reducing payroll deductions for mandated benefits The 1993 reforms also impose a budgetary cap at the 1991 expenditure level for drugs prescribed by community-based physicians. In addition, the reforms call for the implementation of community-rated premiums and stipulate that Germans be able to select their sickness fund each year. Although the reforms make important changes, they leave the basic German healthcare system intact. It is difficult to imagine, moreover, that any of the reforms being implemented will in the foreseeable future place any major element of the health system in serious financial peril; in fact, they will help preserve the system.