Chancellor Friedrich Merz, under pressure to rein in Germany’s costly health care system, announced that what he called a “historic” health care draft law was agreed by his Cabinet on Wednesday morning.
The package, aimed at stopping spiraling health insurance premiums, must still pass the Bundestag, where it is expected to face intense scrutiny from parliamentarians.
Merz’s center-right Christian Democratic Union (CDU) governs in a fraught alliance with the center-left Social Democratic Party (SPD), and reports of angry altercations in coalition meetings (which Merz denies) have surfaced. Merz is also struggling with historically poor approval ratings, with one recent poll suggesting he is the most unpopular democratically elected leader anywhere in the world.
Presenting the new law, Merz said the deal showed “we’re capable of compromises, and we negotiate them, even if things get a little shaky at times.”
SPD leader and finance minister Lars Klingbeil struck a similar note. “Of course, we have discussions from time to time — even heated ones,” he said. “But as today’s example shows, we are willing and able to take action.”
“This health insurance reform represents one of the most significant welfare state reforms of recent decades,” Merz added. “By saving more than €16 billion, we are preventing premiums for those with state health insurance from having to rise.”
Main elements of the reform
Health Minister Nina Warken said the government had shown it could “bring in necessary reforms in quick-time” and called the package ambitious and worth the effort. The draft law follows a commission of experts that earlier presented 66 money-saving proposals for health insurers.
Despite rising health insurance contributions — a 3% rise this year alone — state health insurers face growing deficits: the shortfall between income and expenses would climb from €15.3 billion in 2027 to €40.4 billion in 2030 at current rates. The law aims to rein in expenses by tying them to insurers’ actual income.
Key measures in the draft include:
– Sugar tax: A new tax on sugary drinks from 2028, expected to bring in about €450 million a year, earmarked for prevention programs rather than the federal budget.
– Drugs to become more expensive: Prescription medicines, currently subsidized by insurers, will require higher contributions from insured patients.
– State to take over health insurance for the unemployed: Costs currently borne by state insurers for people on unemployment benefit — roughly €12 billion a year — will be gradually covered directly by the federal government.
– Partial elimination of premium-free insurance for domestic partners: A 2.5% premium will be introduced for non-working partners, with exceptions for families with children under seven, parents of children with severe disabilities, family caregivers, retirees, and spouses or partners with a full loss of earning capacity.
– Cannabis and homeopathy no longer covered: “Cannabis flowers” and homeopathic remedies will be excluded from insurance coverage.
– Extras cut: Administrative and advertising expenses for statutory health insurance companies are to be reduced, and compensation for executives at insurers, state associations, medical services and physicians’ associations will be capped.
Health care reform or austerity program?
Although the government says the proposals reflect expert consultation, the announcement drew criticism.
Klaus Reinhardt, president of the German Medical Association, said the package was less a historic reform than “the biggest savings package of the last few decades” and warned the burdens were being placed very one-sidedly on the insured. He nonetheless acknowledged the urgent need for reform given economic realities.
Verena Bentele, president of the VdK association, called the measures an austerity program that cuts benefits and burdens the insured, arguing resources are not being distributed fairly and the move amounts to a step backward in social policy.
Eugen Brysch, chair of the German Foundation for Patient Protection (DSP), criticized the federal government’s reluctance to step in to help state insurers, saying federal funding was being cut and only a small portion of costs for basic income recipients covered, leaving an unbalanced burden on patients.
Edited by Kyra Levine