Innovationen

2004-01: Financing Innovations in the German Healthcare System

by Joachim M. Schmitt, Director General & Member of the Board, BVMed, Berlin/Germany, January 2004

Introduction: Health is people's most valued possession

Health is people's greatest good and essential for the national economy. A healthy and vital society is one requirement for prosperity and economic power. This insight leads to the phrase expressed by European Commissioner for Health David Byrne: "Health equals Wealth".

Medical technologies are indispensable for people's health and quality of life. They save lives. They help heal. They see to it that millions of patients regain their vitality and mobility. Medical technologies play an important role in all areas of healthcare: in prevention, diagnostics, therapy and rehabilitation. They see us through all stages of life and help us recuperate from the most diverse conditions.

Medical technologies are a significant economic factor. Medical technology companies provide more than 100,000 jobs in Germany alone. They invest some 7 % of their turnover in research and development, so that new treatment methods for ill people can be developed. Medical technology companies provide people with innovative cost-efficient healthcare for every stage of life.

National economy too benefits from faster healing processes and reduced hospital stays

Innovative medical technologies are an investment in people's health and productive efficiency. Innovations should be better supported, sooner applied, and more strongly appreciated as an opportunity. To consider expenditure on medical technologies a pure cost factor is too short-term an approach. In the medium and long term, they lead to cost savings. Because new medical technologies allow people to live longer, healthier and more independently, with less medical complications and reduced rates of disability.

These technological advancements reduce the length of hospital and nursing home stays and thereby make our healthcare system more efficient and productive. This constitutes a benefit for the national economy as a whole.

Therefore, innovative medical technologies must be made available to all patients who require them without delay.

Innovations are “at the top of the agenda”

Innovations are the major issue in Germany at the beginning of 2004 - raised for example by Chancellor Schroeder. Innovations are the driving force of the economy. They lead to new jobs, higher income and an increased gross domestic income. Innovations are therefore a "must" for the German economy and generally positive.

This is also true for the medical technology sector. What we need is therefore an innovation-friendly climate – which we lack at the moment. As a result of more and more obstacles to innovation in Germany, we have observed a decrease of investment into research and development from 10 % to 7 % of a company's turnover. We will address these obstacles at the end of this article.

Coming back to innovations in medical technology: Both the German Ministry of Economy and the German Ministry of Research and Development are likely to be in favor of innovations. However, the Ministry of Health as well as the sickness funds (SHI - Statutory Health Insurance) have problems to share this appreciation. The reason for this is the German healthcare system. There are tremendous problems within an income-oriented expenditure policy, when the income is stagnating or even decreasing and the expenditures are increasing.

Financial problems of the SHI system

Innovations lead - in a first step - to increased expenditure and are therefore considered as threat by the SHI - particularly in the present situation, when the solidarity-financed SHI system suffers from financial troubles - with a deficit of billions of Euros. The financial crisis of the SHI system is due to

- high unemployment rate;
- poor economic development (the German GDP had a minus in 2003!);
- dependency of SHI income on the development of wages;
- government policy of SHI contribution rates' stability;
- demographic changes.

The German SHI system did not experience a cost explosion but rather an explosion of contribution rates in the past years. We treated more and more patients in this system, which is a result of a tremendous medical progress. However, reimbursed prices for medical technologies decreased further and further but were over-compensated by the numbers of cases treated. This resulted in increased expenses causing higher contribution rates of the sickness funds.

Ever increasing contribution rates are now no longer possible, as the dependency on salaries aggravates wage costs and thus hinders the creation of new jobs. The SHI income's dependency on salaries is therefore the biggest impediment for the German healthcare sector in times of economic problems and high unemployment.

This impediment led, a couple of years ago, to a strict budget policy. These budgets are an enormous obstacle for the introduction of innovations into the system, as innovations lead to increased expenditure in the short term. In the long term they will lead to cost-efficiency and lower costs per case. But SHI schemes' approach to costs is only a short-term one.

What we lack is a consideration of the

- life saving
- live prolonging and
- quality of life increasing

aspects of innovative medical technologies! These factors should become the focus of attention, but are difficult to measure.

What we need and what BVMed demands is

- a new health economy with more competitive elements,
- increased individual responsibility for the patients and
- more competition between health insurance funds.

A new way of financing innovations: The Delta Financing Model

In order to exploit the outstanding advantages of medical technologies for the German healthcare sector, among other things, more flexible financing models as well as increased freedom of choice and responsibility for the medically-insured are required.

To address the financing issue, BVMed recently suggested the so-called “Delta Financing Model” to speed up the introduction of medical technology innovations. It is a model for a flexible introduction of innovative medical technologies in special healthcare areas. It would fill the gap until the Federal Committee assessed the technology. And it would allow for more competition between the sickness funds. The health insurance funds would reimburse the “basic value” of the conventional method or device. The “additional value” or benefit of the innovation – referred to as the Delta – would be covered by the patients. However, an "innovative" sickness fund can reimburse more than the basic value to get a competition advantage.

However, the implementation of the “Delta Financing Model” requires an appropriate modification of the German Social Security Law.

Creating an innovation-friendly climate

Without these new and flexible ways of financing innovations, we run the risk that patients no longer have timely access to innovative medical technologies. Even at present there is a danger and, in numerous individual cases, the reality, that new treatment methods are withheld from patients.

BVMed demands the removal of existing obstacles to innovation, such as the non-transparent decision-making procedures of the Joint Federal Committees concerning new diagnosis and treatment methods, sectoral budgeting and the present lack of quality standards in treatment. We present the following seven points, which are aimed at creating a more innovation-friendly climate in Germany:

1. All partners in healthcare, particularly industry and businesses, require planning security through continuity. This means that the time for hectic individual measures to suppress costs must now be at an end. We need a long-term, broad-based reform concept that encompasses all stakeholders including industry.

2. In the case of the prospective health reform, the question of finance must no longer be ignored. The expenditure policy based on income while simultaneously attempting to maintain contribution rate levels has failed. Medical advancement and demographic development have made it exceptionally necessary to introduce optional financing possibilities if the emphasis is on maintaining the solidarity system.

3. Sectoral budgeting must be dispensed with. It hinders innovation and leads to a rationing of healthcare procedures. The health service must orient itself according to people’s medical requirements.

4. The new DRG reimbursement system for hospitals must remain accessible to medical technology. What is required is a range of flexible solutions between contractual partners at a local level, in order to allow for the adoption of innovations outside of the annually revised DRG catalogue.

5. The relative weights in the DRG catalogue must not be allowed to become a disadvantage for innovative medical technological procedures. In the existing DRG catalogue numerous relative weights for DRGs involving high-cost equipment are still seriously undervalued. The individual healthcare partners are therefore called upon to agree on appropriate relative weights for high-value medical technology procedures or to further differentiate the DRGs. Only in this manner will it be possible to guarantee future patient care with innovative medical technologies in hospitals.

6. The decision-making process of the joint federal committee concerning new diagnosis and treatment methods (technology evaluation – Health Technology Assessment, HTA) must be more transparent and faster. A binding clause requiring a decision-making time limit of six months at the most must be included in the Federal Committee's rules of procedure. In addition, the manufacturer must be given the opportunity to be present at the session. BVMed has proposed the appointment of an expert based on the procedure under discussion.

7. Bureaucracy within the procedure required to adopt innovative products into the medical technical aids register must be reduced and the process must be sped up. A binding clause requiring a maximum decision-making process of two months must be introduced. In addition, it is important to develop quality standards for the medical technical aids sector and for homecare therapy that incorporates innovative products and procedures. The manufacturer must be involved in the development of these quality standards.

With these suggestions, we want to enhance health and make sure that all patients get optimum treatment with innovative medical technologies.

 


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