Abstract
For more than 20 years, the main motivation of government interventions in the German health care system has been to contain the growth of nonwage labor costs. Rising payroll taxes for Germany’s statutory sickness funds had become a major policy issue amid the country’s rising unemployment until 2005. Although total health care spending was not the direct target, the government’s main achievement has been to keep this aggregate at a relatively stable proportion of GDP, except for a one-time upward move after Germany’s unification in 1990. This long experience with reform illustrates a variety of policy approaches, as the German government has gradually shifted away from its initial recourse to global budgets and replaced these with market mechanisms and pecuniary incentives designed to steer providers’ and payers’ behavior within an increasingly competitive environment.
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