The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care

by T.R. Reid

private health insurance plan, funded by payroll withholding, that pays doctors and hospitals directly on a fee-for-service basis—that’s the classic Bismarck Model, and it sounds very much like American-style employer-based medical insurance. But the German version of Bismarck is different in three fundamental ways: 1. First and foremost, the sickness funds are nonprofit entities; they exist to pay people’s medical bills, not to pay dividends to shareholders. Thus, they don’t have the same incentive that the U.S. insurance industry has to limit the people they cover or to deny claims; in fact, the German insurance plans are required to accept all applicants and to pay any claims submitted by a recognized doctor or hospital. They don’t have to pad their premiums to pay for a claims-review bureaucracy or to allow for profit. The result: The sickness funds have about one-third the administrative expenses that are normal in American health insurance. That makes the whole German insurance system much cheaper. 2. While insurance is purchased and paid for through payroll deduction, Germans don’t lose their coverage when they lose their jobs. Government unemployment benefits automatically cover the insurance premium, so the worker has the same insurance coverage while he looks for a new job—no matter how long it takes to find one. 3. Unlike American workers, who are restricted to the limited selection of insurance plans offered by their employers, Germans can sign up with any sick...