Caught between rising expenditure, suspected room for improved efficiency and dwindling availability of public funds, Germany’s health care system is now in the forefront of public debate. In 1989 and 1993, two major legislative attempts to reform the German health sector brought home the futility of seeking to solve its problems unless the underlying structures are first reshaped. Even with the most recent health care reform, passed in July 1997, the basic characteristics of the German health care system remain largely unchanged.

Demographic trends in particular, linked to the ageing of the population, will hit Germany hardest of all the OECD countries and make thoroughgoing structural reform of the health care system inevitable. Worth canvassing as a possible model for reform are certain concepts that, in some sectors of American health care, have led to a complete revamping of service provision as well as the funding and insurance of health services, including tighter control of costs. Not unjustly, the structural changes in the United States which continue and which Germany may one day employ have been termed a ‘managed care revolution’.

In Germany’s debate over its future health policy, while reform proposals along managed care lines have attracted great attention, they have also encountered a barrage of criticism. Opponents of the managed care approach primarily argue that it vitiates the social-political assumptions underpinning Germany’s health care system. Indeed, some of the cu r rent problems dogging America’s health care system – particularly the large numbers of uninsured or underinsured American citizens – would appear to back up this critique. This would be to ignore the fact, however, that Germany in taking steps towards managed care would have restrictions derived from the solidarity principle, which – after all – is a prominent part of most other western European social systems too. However, service provision and insurance could be so co-ordinated under the banner of ‘managed competition’ that the health care system can be subsumed under the general category of managed care and yet still be deemed capable of accommodating the exigencies to which Germany’s social-welfare-based health care system is subject.

This paper is structured along the following lines. Along with a brief description of the German health care system including a ‘journey’ of a German patient through the system, we offer an analysis of the factors driving expenditure and contribution increases in Germany in particular and in terms of international cross-comparison. Previous attempts to contain rising costs and contribution rates in the German system are then reviewed. A comprehensive definition of managed care paves the way for a detailed depiction of the various types encountered plus the instruments these deploy. Finally, the question of the transferability of managed care to a German context is addressed from various angles. Are, in point of fact, the historically evolved structures of the German health care system such as to preclude managed care being grafted onto them? If this is not so, then what would be the gains and drawbacks of introducing managed care to the German system? Here particular weight is attached to the experience of Switzerland, so far the only western European country with an insurance-based health care system to have incorporated wide-ranging managed care elements into its health care landscape. An account of already operational managed care elements in the German system (which in part are similar to the UK GP fundholding scheme), together with a summary of existing German legal constraints relevant to any possible future introduction of salient managed care elements, round off the main body of this paper. In a concluding section, we exemplify the managed competition model by looking at the case of CalPERS (California Public Employees’ Retirement Scheme) and we attempt a final answer to the question whether managed competition can be deemed a viable option for Germany’s social health insurance in its further evolution.